Market update
Tsys moving lower after core CPI came in stronger for Feb (0.3 vs 0.2), Housing Starts also above exp. Core Euro bonds higher overnite, strong rally in JGBs after BOJ Kuroda told the Japanese parliament that negative rates were possible, backtracking from stat ~$16.5bln of IG new issuance just in the last two days including Andarko, Ford but issuance likely to be fairly quiet today in front of the FOMC decision later this aft. GOCs slightly lower after 8:30 data, manufacturing sales 2.3% vs 0.5% exp. Provis opening unch, after ending 1-1.5bps wider yest, new CMB 5Y 52/51.
News headlines
- Fed to Signal Worst Is Over, Hikes Coming: Decision-Day Guide (Bloomberg) This week, Federal Reserve Chair Janet Yellen and her colleagues have an opportunity to clarify where they stand on the outlook for interest rates. The message will probably be that plans for additional tightening have been postponed, but not for long. Fed officials are expected to reduce the number of rate hikes they see in 2016 and leave the target range for the federal funds rate unchanged at 0.25 percent to 0.5 percent after a two-day gathering of the Federal Open Market Committee in Washington. Here’s what to look for when the FOMC releases its post-meeting statement and updated forecasts at 2 p.m. Wednesday
- Dollar Rallies Into Fed Meeting; Oil Rises, Stocks Are Stable (Bloomberg) The dollar extended its best run of gains in a month and oil rallied before the Federal Reserve’s policy review on Wednesday that may shed light on the timing of U.S. interest-rate increases. America’s currency climbed versus the yen after Bank of Japan Governor Haruhiko Kuroda said the Asian nation’s key rate could theoretically drop to minus 0.5 percent. It also climbed against the pound before the release of Britain’s annual budget. Oil rebounded to about $37 a barrel. Gains in German shares failed to hold up the Stoxx Europe 600 Index and U.S. equity-index futures were little changed as investors awaited signals on the health of the world’s biggest economy and whether the Fed will boost borrowing costs in the coming quarter.
- Trudeau Said to Forgo Added Stimulus With C$30 Billion Deficit (Bloomberg) Prime Minister Justin Trudeau will post a deficit of about C$30 billion ($22.5 billion) in his first budget next week, signaling he won’t unveil additional initiatives to kick-start the economy, government officials said. The budget, to be released March 22 by Finance Minister Bill Morneau, will mainly comprise pledges made during and since last year’s election, two governmental officials said on condition they not be identified because the plans aren’t yet public.
- Valeant Pharmaceuticals International Inc shares plunge after company reports Q4 loss, slashes 2016 revenue forecast (FinancialPost) When Valeant Pharmaceuticals International Inc. management said it was taking full responsibility for the company’s poor performance during its quarterly earnings call Tuesday morning, it probably wasn’t prepared to take the onus for wiping out more than half the stock’s value by market close.
- K. Pay Growth Edges Up as Jobless Rate Stays at Decade Low (Bloomberg) U.K. unemployment held at its lowest rate for a decade and wage growth ticked higher as the labor market continued to improve. Wage growth excluding bonuses climbed to 2.2 percent in the three months through January, the Office for National Statistics said in London on Wednesday. Economists had forecast a pickup to 2.1 percent from 2 percent in the fourth quarter. Unemployment fell by 28,000, leaving the rate at 5.1 percent, the lowest since early 2006.
- London Stock Exchange, Deutsche Boerse Agree on Merger (Bloomberg) Deutsche Boerse AG agreed to acquire London Stock Exchange Group Plc to create a giant in European trading, a deal that may kick off a bidding war as rivals look to scupper the agreement. While the companies declared it a merger of equals, Deutsche Boerse stockholders will get 54.4 percent of the enlarged group in the all-share agreement, and German boerse Chief Executive Officer Carsten Kengeter will run the enlarged business. The board will be equally split between directors from LSE and Deutsche Boerse. LSE’s market capitalization is $14.3 billion.
- From Oil Curse to Cure? Why Rebound in Crude Won’t Bring Russian Rate Cut (Bloomberg) Goldman Sachs Group Inc. says Russian monetary policy is now little more than a function of oil prices. Here’s why a 12 percent gain in crude since the central bank last reviewed interest rates probably won’t sway policy makers when they meet on Friday. With the benchmark on hold at 11 percent since July, Governor Elvira Nabiullina is coming off a surprise warning in January that the Bank of Russia may tighten policy if inflation risks intensify. Slowing price growth may indeed be grounds for monetary easing, but not when inflation expectations have barely budged.
Overnight markets
- Overview: US 10yr note futures are down -0.1704% at 128-6, S&P 500 futures are down -0.35% at 1999.5, Crude oil futures are up 1.43% at $36.86, Gold futures are down -0.17% at $1228.9, DXY is up 0.32% at 96.941.
US Economic Data
- MBA Mortgage Applications variation was -3.3%, down 3.5% from prior month
- Housing Starts number came in at a level of 1178k better than expected and up 58k from prior month.
- Housing Starts MoM growth was 5.2% beating the estimate by 0.6% and 9% from prior month
- Building Permits number came in at a level of 1167k weaker than expected, and down 37k from prior month
- Building Permits MoM variation was -3.1% worse than the estimate and down from prior month
- CPI MoM variation was -0.2% as expected and down 0.2% form prior month
- CPI Ex Food and Energy MoM growth was 0.3% beating the estimate and at the same level than prior month
- CPI YoY growth was 1.0% better than expected and down 0.4% from prior year
- CPI Ex Food and Energy YoY growth was 2.3%, beating the analyst estimate and up 0.1% from prior year
- Industrial Production MoM will be released at 9:15 AM
- Capacity Utilization number will be released at 9:15 AM
- FOMC Rate Decision will be released at 2:00 PM
Canadian Economic Data
- Manufacturing Sales MoM growth was 2.3% beating the estimate by 1.8% and up 1.1% from prior month
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