Market update
US tsys lower curve steeper led by 5s (+3.5bps) after much stronger than expected non-farm payrolls (275k vs 201k exp), US 10Y 2.185 (+4bps). European stocks mixed, but CSI Comp +2.0% on state buying according to story in FT (see below)& PBOC setting higher yuan fix for the first time in nine sessions. Euro bonds higher, 10Y bund/tsy spd ~4bps higher @ 164. Dovish comments from ECB talking about more QE if needed. GOCs lower, employment +22.8k in Dec vs 8k exp., but building permits -19.6% vs -2.9%. Provis trading up after payrolls Ont 25s @ 98 after closing 1.5-2 bps wider yest.
News headlines
- Chinese Markets Rise After Volatile Opening (NYTimes) With Beijing’s grip slightly looser, Chinese markets steadied on Friday. Exchanges in Europe also rose modestly at the start, and futures trading indicated that Wall Street would open higher. Friday’s market action followed a Thursday-night decision by the Chinese government to stop using “circuit breakers” that were supposed to keep China’s markets from dropping disastrously over the course of a single trading day.
- German Industrial Output Drops Unexpectedly (WSJ) German industrial production declined unexpectedly in November and the trade surplus was below forecasts for that month, official data showed Friday, a sign that Europe’s largest economy is struggling to gain momentum after a weak third quarter.
- Apple shares fall to lowest level since October 2014 (FT) Apple’s share price fell to its lowest level since October 2014, as concerns about slowing growth in iPhone sales outweighed news of strong performance in the App Store last year. Shares in the world’s most valuable company fell close to $100 on Wednesday, compounding Tuesday’s falls after the Nikkei Asian Review wrote Apple had cut iPhone orders by as much as 30 per cent with suppliers.
- Retail investors pull billions out of global equity funds (FT) The amount of money retail investors pulled out of global equity funds hit a five-month high this week, as wild gyrations in mainland Chinese stock markets sent financial shockwaves around the world.
- Saudi Arabia is considering an IPO of Aramco, probably the world’s most valuable company (TheEconomist) Saudi Arabia is thinking about listing shares in Saudi Aramco, the state-owned company that is the world’s biggest oil producer and almost certainly the world’s most valuable company. Muhammad bin Salman, the kingdom’s deputy crown prince and power behind the throne of his father, King Salman, has told The Economist that a decision will be taken in the next few months. “Personally I’m enthusiastic about this step,” he said. “I believe it is in the interest of the Saudi market, and it is in the interest of Aramco.”
- Japan earnings fall for first time in 5 months (FT) Bad news for wages and consumption in Japan: in November real earnings slipped for the first time in five months, dashing hopes that modest rises during early autumn may be sustained. Real cash earnings – wages adjusted for inflation – fell 0.4 per cent year-on-year in November, figures from the ministry of health, labour and welfare show. This was the first contraction since June when they declined 3 per cent. Earnings had risen 0.4 per cent in October and in July they rose 0.5 per cent – the highest since late 2010.
Overnight markets
- Overview: IG25 5Y 93.096/93.663 (-2.63), US 10yr note futures are down -0.16% at 126-29, S&P 500 futures are up +1.09% at 1954, Crude oil futures are up +0.42% at 33.41$, Gold futures are down -1.00% at $1096.90, DXY is up +0.72% at 98.928.
US Economic Data
- US created 292,000 jobs in December; unemployment rate stays unchanged at 5.0%
- Manufacturing added 8,000 jobs last month. Unusually warm weather boosted construction payrolls, which increased 45,000.
- Retail payrolls rose only 4,300 as mild temperatures hurt sales of winter apparel.
- United States Average Hourly Earnings (MoM) below forecasts (0.2%) in December: Actual (0%)
- Data on wholesale inventories for November will be released at 10h00am
- Consumer credit data for November will be released at 15h00.
Canadian Economic Data
- The value of Canadian building permits issued in November fell 19.6 per cent on widespread declines in the energy-producing province of Alberta, which had seen a boom in October
- Canada Net Change in Employment came in at 22.8K, above forecasts (10K) in December
- Canada national unemployment rate for December remained unchanged at 7.1 per cent.
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
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230