Market Update

Sharp risk-off/safe-haven bid to Iran retaliatory missile strikes on US air bases in Iraq late Tuesday have evaporated amid miraculous reports of zero casualties. Pres Trump postponed address to nation from last night to sometime this morning. Tsy futures trading marginally higher, well off overnight highs/near lows on very heavy volumes, TYH already over 1.36M futures; 10YY fell to 1.7065% low on early overnight action, currently back to 1.8060%. Overnight trade included prop, fast- and real$ buying cross the curve early on, turning two-way as retaliatory strikes deemed more measured than escalatory, real$ sellers with prop accts in long end, swap-tied selling in 5s and 7s, pre-auction short sets ahead 10Y auction R/O.  The 2-Yr yield is down 0.4bps at 1.5363%, 5-Yr is down 0.5bps at 1.6073%, 10-Yr is down 0.3bps at 1.8143%, and 30-Yr is down 0.5bps at 2.3001%.

News headlines

U.S. Stock Futures Lead Rebound as Iran Jolt Fades: Markets Wrap (Bloomberg) Futures on the benchmark U.S. stock gauge turned positive on Wednesday, recovering from a plunge after Iranian missiles struck American military bases in Iraq. Gold, Treasuries and oil all pared earlier out-sized gains as Iran stressed it didn’t seek a war.

TSX futures rise as Middle East worries ease (Reuters) Canada’s main stock index futures rose on Wednesday as fears of escalation in Middle East conflict after Iran’s attack on U.S. forces in Iraq ebbed, and as oil prices rose.

Iran Retaliates With Missile Strike on U.S.-Iraqi Bases (Bloomberg) Iran fired more than a dozen missiles at U.S.-Iraqi airbases in retaliation for an American airstrike that killed a top Iranian general, yet the potential for a dramatic escalation was mitigated by the fact that there were no U.S. casualties.

Oil Rally Cools as Iranian Strike Causes No U.S. Casualties (Bloomberg) Oil’s rally faded as the U.S said Iranian airstrikes on military bases in Iraq didn’t cause any casualties, reinforcing speculation that Tehran is opting for limited retaliation over the killing of a top general.

Investors pause equity selling as fears of immediate Iran-U.S. escalation fade (Reuters) Global equities fell on Wednesday and Wall Street was set for a weaker open after Iran’s attack on U.S.-led forces in Iraq, but earlier sharp market moves faded as fears abated that the raid would lead to an immediate military escalation.

Futures steady as Iran retaliation seen as contained (Reuters) U.S. stock index futures turned higher on Wednesday after Iran signaled no further escalation in military strikes following its attack on U.S.-led forces in Iraq, allaying investor worries of a wider war in the Middle East.

Exclusive: China suspends national rollout of ethanol mandate – sources (Reuters) China has suspended its plan to implement a nationwide gasoline blend containing 10% ethanol this year, three sources briefed on the matter said, following a sharp decline in the country’s corn stocks and limited production capacity of the biofuel.

European shares dip on Iran missile strike, weak German factory data (Reuters) European shares dropped on Wednesday after an Iranian missile strike on U.S. forces in Iraq prompted moves out of risk assets, while signs of a sustained manufacturing slump in Germany spelt further gloom for the region.

Market Overview: US 10yr note futures are up 0.048% at 129-07, S&P 500 futures are up 0.22% at 3242.25, Crude oil futures are down -1.02% at $62.06, Gold futures are up 0.04% at $1574.9, DXY is up 0.23% at 97.226, CAD/USD is up 0.1% at 0.7683.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.637% 2 Year 1.536%
5 Year 1.579% 5 Year 1.611%
10 Year 1.576% 10 Year 1.816%
30 Year 1.688% 30 Year 2.299%

US Economic Data

07:00 AM MBA Mortgage Applications, Jan 3  Survey: —  Actual: 13.50% Prior: -13.20%
08:15 AM ADP Employment Change, Dec  Survey: 160k Actual: 202k Prior: 67k Revised 124k
03:00 PM Consumer Credit, Nov  Survey: $16.000b  Prior: $18.908b

Canadian Economic Data

There is no Canadian economic data for today.

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, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

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