cti2015header-morning comments web

Market Update

US tsys reversing earlier gains, trading near the lows, US 10Y 2.43 (+2.4bps), pre auction shorts going into 1PM $24bln 3Y auction.  European govt bonds mixed,  bunds lower despite very weak Dec Ind Prod (-3.0% vs 0.3% exp). Gilts lower, disappointing BRC retail sales, short end underperforming in weak 2019 Gilt reopening. Greece wider, 2Y approaching 10%  on ongoing tensions with EU over bailout targets. In Canada, GOCs lower, slightly underperforming as the curve steepens , 10Y 1.72%. Trade surplus showed surprising strength for the second month in a row, $923mln in Dec after $1.01bln (revised higher) in Nov. Energy exports surged 16% on rising WTI yet non energy exports were down 5.2% which is sure to attract attention from the BOC. Provis openign unch, Ontario issued a new 10Y bond yest  – $1bln June 27s @ 78.5 over the current 10Y which looked expensive @ 7.7 vs Ont 26s, the roll widening to 8.3/8.0 this morn.

News headlines 

Dollar Jumps, Gold Falls as Demand for Havens Ebbs: Markets Wrap (Bloomberg) The dollar strengthened against all of its major peers on the prospect of a U.S. interest rate increase as soon as March. Weakness in the euro helped European stocks shrug off some disappointing corporate results. The Bloomberg Dollar Spot Index rose the most in almost two weeks after a member of the Federal Reserve indicated the first rate increase of Donald Trump’s presidency remains “on the table” this quarter. Europe’s main equities gauge rose even as bellwethers BP Plc and BNP Paribas SA reported earnings that missed estimates. Gold slipped from the highest since November.

China Jan FX reserves fall below $3 trillion for first time in nearly 6 years (Reuters) China’s foreign exchange reserves unexpectedly fell below the closely watched $3 trillion level in January for the first time in nearly six years, though tighter regulatory curbs appeared to making some progress in slowing capital outflows. China has taken a raft of steps in recent months to make it harder to move money out of the country and reassert a firmer grip on its faltering currency, even as U.S. President Donald Trump steps up accusations that Beijing is keeping the yuan too cheap.

IMF says Greece should meet lower fiscal surplus target (Reuters) The International Monetary Fund said on Monday that Greece’s economy would only grow by just under 1.0 percent in the long run given the constraints of its bailout program, but should meet the fiscal surplus target preferred by most IMF directors. In its annual review of Greece’s economic policies, the IMF said most of its board directors favor a Greek fiscal surplus target of 1.5 percent of gross domestic product by 2018, while some directors favor the higher 3.5 percent target sought by Greece’s European lender group.

OPEC Output Cuts End Big Oil’s Trading Bonanza (Bloomberg) The oil-trading boom that cushioned the profits of Royal Dutch Shell Plc and BP Plc through the price slump of 2015 and early 2016 is over. BP said on Tuesday it made a « small » loss trading oil in the fourth quarter, while Shell last week said trading profits « flattened » in late 2016. The fall off in trading contributed to worse-than-expected fourth-quarter profits at Europe’s largest oil and gas producers.

Goldman Sachs Economists Are Starting to Worry About President Trump (Bloomberg) Just a few weeks ago, Wall Street analysts were busy boosting their economic forecasts on the expectation that President Trump would implement sweeping corporate-tax reform, a rollback of regulations, and new fiscal stimulus. Two weeks into his term and the president has been focused primarily on immigration and trade, causing a reevaluation among analysts at some banks that harks back to pre-election concerns about Trump’s uncertain effect on markets and U.S. economic growth.

Trump’s Dodd-Frank Do-Over Diverted to Slow Lane With Obamacare (Bloomberg) President Donald Trump’s pledge to dismantle the Dodd-Frank financial overhaul is colliding with the same reality as his pledge to gut Obamacare: The Republican majority in Congress can’t decide how to make it happen and Democrats are vowing to fight.

Overnight markets 

Overview: US 10yr note futures are down -0.075% at 124-27, S&P 500 futures are up 0.24% at 2292, Crude oil futures are down -0.66% at $52.66, Gold futures are down -0.19% at $1229.8, DXY is up 0.72% at 100.63, CAD/USD is up 0.63% at 0.7595.

US Economic Data

8:30 AM Trade Balance, Dec, -$44.3b, est. -$45.0b (prior -$45.2b, revised -$45.7b))
10:00 AM JOLTS Job Openings, Dec. est. 5580 (prior 5522)
15:00 AM Consumer Credit, Dec, est. $20.0b (prior  $24.5b)

Canadian Economic Data

8:30 AM Int’l Merchandise Trade, Dec, 0.92b, est. 0.20b, (prior 0.53b,  revised 1.01b)
  Building Permits, m/m, Dec, -6.6%, est. -3.5% (prior -0.1%, revised -1.2%)
10:00 AM Ivey Purchasing Managers Index, Jan,  (prior 60.8)


Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230