cti2015header-morning comments web

Market update

US tsys trading lower, US 10Y 2.16 (+4.3bps) as European equities reverse losses despite a ~6% plunge in China stocks & lower crude. Tsys were weaker o/n with German bunds before rebounding somewhat in European trading. Some concession building in front of this week’s 3/10/30Y US tsy supply. Also some talk of richness of 5Y note in view of rapid 2/5Y flattening on Fed repricing, as well as cheapness of long end after last week’s ~11bp steepening in 5/30 govt curve. Latest CFTC COT report (Jan 8)showed large specs reducing net longs in the 10Y note while adding to shorts in longs & ultras. In Canada, GOCs opening lower , lagging the tsy decline by ~1bp in longs. In Fridays’s rally, GOCs were not able to keep pace with tsys despite a relatively downbeat Cdn employment report – shows the extent to which Cda/US is relatively stretched with little movement this morning despite another lurch lower in crude. Provis hammered on Friday (+4bps), actually weaker to start this morning, Ont 46 113/112.5, Ont 25s 102.5/102.


News headlines

  • Oil Seen Heading to $20 by Morgan Stanley on Dollar Strength (Bloomberg) A rapid appreciation of the U.S. dollar may send Brent oil to as low as $20 a barrel, according to Morgan Stanley.Oil is particularly leveraged to the dollar and may fall between 10 to 25 percent if the currency gains 5 percent, Morgan Stanley analysts including Adam Longson said in a research note dated Jan. 11.
  • Big five US investment banks hurt by China and oil (FT) Wall Street banks are poised to unveil another batch of lacklustre profits after the run-up to the Federal Reserve’s historic interest rate rise failed to boost their crucial trading businesses.
  • Shell boss bets oil price will double (TheSundayTimes) The boss of Royal Dutch Shell has predicted the oil price will more than double as he makes a final push to convince investors to back his $51bn (£35bn) takeover of rival BG. Shareholders of the two companies will vote at the end of the month on a takeover that has sharply divided City opinion.
  • CMHC says annual pace of housing starts slows in December to 172,965 (CTV) Canada Mortgage and Housing Corp. says housing starts in December came in at a seasonally adjusted annual rate of 172,965 homes, down from 212,028 in November, mainly because of fewer multiple-unit projects. Economists had expected an annual pace of 200,000, according to Thomson Reuters.
  • Alcoa’s Q4 Preview: Productivity Improvements To Partially Offset Impact Of Weak Aluminum Prices (Forbes) Alcoa will release its fourth quarter results and conduct a conference call with analysts on Monday, January 11. The weak prevailing aluminum pricing environment is expected to negatively impact the company’s results. However, the combined impact of the closure of high-cost smelting capacity and the company’s efforts to increase the productivity of its operations will, at least partially, offset the impact of subdued aluminum prices on its results.


Overnight markets

  • Overview: US 10yr note futures are down -0.21% at 127-05, S&P 500 futures are up +0.68% at 1924.75, Crude oil futures are down +1.84% at 32.55$, Gold futures are up +0.27% at $1100.90, DXY is up +0.08% at 98.613.

US Economic Data

  • December Labour Market Conditions Index will be released at 10ham, will offer additional perspective on last week’s surprisingly strong update on US payrolls in December.

Canadian Economic Data

  • The Canadian Mortgage and Housing Corp indicated the seasonally adjusted annualized rate of housing starts dropped to 172,965 units in December from an upwardly revised 212,028 units in November. Forecasters expected 200,000 starts.
  • The Bloomberg Nanos Canadian Confidence Index will be released at 10am
  • Business Outlook Survey Future Sales Growth  Balance will be released at 10h30. TD expects the Future Sales Growth balance of opinion to fall to +10 from +16 in Q3 due to the continued push lower in commodity prices over the survey period.
  • Bank of Canada Senior Loan Officer Survey for fourth quarter will also be released at 10h30.


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