Market Update
US tsys opening weaker,US 10Y above 2.50% with prices accelerating downwards after 8:30 data : CPI came in double exp , the largest m/m increase since Feb 2013 at 0.6% vs 0.3% exp. Empire also much stronger 18.7 vs 7.0 – prices paid rose to 37.8 the highest since May 2012. Retail Sales 0.4% vs 0.1% – broad based advance as ex-auto sales were up 0.8% vs 0.4%. EGBs lower, gilts outperforming as UK labor data mixed with Jan weekly earnings dropping to 2.6% from 2.8% but employment coming in 37k vs 22k exp. UK infl linkers underperforming after weak 10Y IL gilt reopening drew lower bid-cover 1.88 vs 2.09 prev. GOCs lower , spds ~1bp tighter vs tsys , Manufacturing Sales rose 2.3% in Dec vs 0.3% exp the largest gain since March 2015 – another strong month esp with Nov revised higher to 2.3% vs 1.5%. Provis trading up this morning after closing 1.5bps tighter yest. CMB 10Y & 5Y FRN this morning, 10Y WI 47.5 bid.
News headlines
World stocks head towards record high on Yellen, U.S. outlook (Reuters) World stocks rose to a whisker off all-time highs on Wednesday and the dollar rose for the 11th straight day following Federal Reserve Chair Janet Yellen’s flagging of a possible interest rate rise next month.
Milestones on the oil market’s road to rebalancing (Reuters) Crude oil stockpiles are expected to empty significantly during the third quarter as continued production restraint from OPEC interacts with the seasonal increase in consumption. OPEC and non-OPEC countries are committed to reducing production by an average of nearly 1.8 million barrels per day in the first six months of 2017, with an option to extend cuts for a further six months.
EU-Canada Trade Agreement Wins European Parliament Green Light (Bloomberg) The European Parliament approved a landmark free-trade agreement with Canada, shoring up Europe’s market-opening clout in the face of a populist surge across the continent and U.S. President Donald Trump’s protectionist tilt.
UK wage growth slows in late 2016, employment picks up (Reuters) British workers saw their pay grow more slowly than expected at the end of last year, official data showed on Wednesday, ahead of a likely squeeze on their living standards from higher inflation in 2017.
China Mulls Resuming Coal Output Curbs for Six Months (Bloomberg) China, the world’s biggest producer and consumer of coal, is considering reinstating output restrictions to avoid the return of a glut after easing limits during winter. Shares in the country’s coal miners jumped along with futures prices.
Air Canada’s Plan of Attack Flies Over America (Bloomberg) When it comes to maintaining domestic air superiority, U.S. carriers have been shaking their fists at Persian Gulf airlines that have rapidly increased their American presence. Yet there’s another threat that may be growing in their own backyard—or more precisely, just north of it.
Overnight markets
Overview: US 10yr note futures are down -0.3396% at 123-26, S&P 500 futures are down -0.21% at 2332, Crude oil futures are down -0.53% at $52.92, Gold futures are down -0.61% at $1217.9, DXY is up 0.48% at 101.74, CAD/USD is up 0.31% at 0.7626.
US Economic Data
| 8:30 AM | Empire Manufacturing, Feb, 18.7, est. 7.0 (prior 6.5) |
| CPI, m/m, Jan, 0.6%, est. 0.3% (prior 0.3%) | |
| CPI Ex Food and Energy, m/m, Jan, 0.3%, est. 0.2% (prior 0.2%) | |
| CPI, y/y, Jan, 2.5%, est. 2.4% (prior 2.1%) | |
| CPI Ex Food and Energy, y/y, Jan, 2.3%, est. 2.1% (prior 2.2%) | |
| Real Avg Weekly Earnings, y/y, Jan, -0.6%, (prior 0.2%, revised 0.4%) | |
| Real Avg Hourly Earnings, y/y, Jan, 0.0%, (prior 0.8%) | |
| Retail Sales Advance, m/m, Jan, 0.4%, est. 0.1% (prior 0.6%, revised 1.0%) | |
| Retail Sales Ex Auto, m/m, Jan, 0.8%, est. 0.4% (prior 0.2%, revised 0.4%) | |
| Retail Sales Ex Auto and Gas, Jan, 0.7%, est. 0.3% (prior 0.0%, revised 0.1%) | |
| 9:15 AM | Industrial Production, m/m, Jan, est. 0.0 % (prior 0.8%) |
| Capacity Utilization, Jan, est. 75.4% (prior 75.5%) | |
| 10:00 AM | NAHB Housing Market Index, Feb, est. 67 (prior 67) |
| Business Inventories, Dec, est. 0.4% (prior 0.7%) | |
| 4:00 PM | Net Long-term TIC Flows, Dec, (prior $30.8b) |
| Total Net TIC Flows, Dec, (prior $23.7b) |
Canadian Economic Data
| 8:30 AM | Manufacturing Sales, m/m, Dec, 2.3%,est. 0.3% (prior 1.5%, revised 2.3%) |
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