Market Update
US tsys lower, near lower end of range, yields 2-3.5 bps higher led by longs, with the 10Y 2.36%, prices steady after in line CPI. Stock futures slightly higher (S&P +0.177%), while European equities are mixed. TY futures sliding since Asian session on above avg volume (>300k), risk on tone following Citi 7 GS earnings both beat, with GS seeing a fourfold increase in net income on a 78% surge in bond trading revenues. UK gilt yields higher after bette than expected employment data and a disappointing 5Y gilt auction. Bunds lower, large block trade in bund futures (700mln equiv) while earlier widening in peripheral debt has reversed on strong order book for Italy 15Y syndication. GOCs lower before BOC decision, provis steady after finally improving 1-1.5bps yest on the back of a well received Sask long issue (2048 reopen @ Onts + 11.5),. We don not expect any change from BOC today -economic data have been mixed: trade & employment data have improved yet the output gap remains stubbornly high
News headlines
Futures flat ahead of Goldman results, Yellen speech (Reuters) U.S. stock index futures were little changed on Wednesday ahead of another set of big bank earnings and Federal Reserve Chair Janet Yellen’s speech. Goldman Sachs (GS.N) and Citigroup (C.N) are scheduled to report results before market opens. Goldman, like most of the big U.S. banks that have reported results so far, is expected to post a jump in quarterly profit as the U.S. presidential election in November boosted trading activity.
Rising U.S. shale-oil output threatens OPEC’s production pact (Market Watch) The oil market got a stark reminder Tuesday that rising oil production in the U.S. could upend efforts by major producers to bring global supply and demand for crude back in to balance. Just ahead of the settlement for oil futures prices CLG7, -1.77% on the New York Mercantile Exchange on Tuesday, the Energy Information Administration released a report on drilling productivity—forecasting a monthly rise of 41,000 barrels a day in February oil production to 4.748 million barrels a day.
China urges U.S. to bar Taiwan delegation from Trump inauguration (Reuters) The United States should not allow a delegation from Taiwan to attend U.S. President-elect Donald Trump’s inauguration, China’s Foreign Ministry said on Wednesday, raising a new bone of contention in Beijing’s relations with the incoming government. Trump broke with decades of precedent last month by taking a congratulatory telephone call from Taiwan President Tsai Ing-wen, and he has also said the « One China » policy was up for negotiation, a position Beijing strongly rejected.
No Brexit hit yet for UK workers as pay growth accelerates (Reuters) British workers saw their pay grow at the fastest pace in more than a year in the three months to November, official data showed on Wednesday, adding to signs that the country’s economy ended 2016 strongly despite the shock of the Brexit vote.
IEA Sees Significant Gains in U.S. Shale Oil as Prices Rise (Bloomberg) Oil-price gains will trigger a “significant” increase in U.S. shale output as OPEC and other producers rein in supply, according to the head of the International Energy Agency. “U.S. shale-oil production will definitely react strongly,” Executive Director Fatih Birol said Wednesday in a Bloomberg Television interview in Davos, Switzerland. At $56 to $57 a barrel, “a lot of shale plays in the United States would make perfect sense to produce.”
Canada given advance notice of Trump’s NAFTA demands (TheGlobeAndMail) Billionaire investor Wilbur Ross, chosen by U.S. president-elect Donald Trump to reshape U.S. trade policy, has informed Canada that rules of origin and independent dispute tribunals will be central to talks aimed at resetting the North American free-trade agreement.
Overnight markets
Overview: US 10yr note futures are down -0.3244% at 124-27, S&P 500 futures are up 0.19% at 2267, Crude oil futures are down -1.45% at $51.72, Gold futures are down -0.01% at $1212.8, DXY is up 0.51% at 100.84, CAD/USD is up 0.59% at 0.762
US Economic Data
| 8:30 AM | CPI, m/m Dec, 0.3%, est. 0.3% (prior 0.2%) |
| CPI Ex Food and Energy, m/m, Dec, 0.2%, est. 0.2% (prior 0.2%) | |
| CPI, y/y, Dec, 2.1%, est. 2.1% (prior 1.7%) | |
| CPI Ex Food and Energy, y/y, Dec, est. 2.2% (prior 2.1%) | |
| 9:15 AM | Industrial Production, m/m, Dec, est. 0.6% (prior -0.4%) |
| Capacity Utilization, Dec, est. 75.4% (prior 75.0%) | |
| 10:00 AM | NAHB, Housing Market Index, Jan, est. 69 (prior 70) |
| 4:00 PM | Total Net TIC Flows, Nov, (prior $18.8b) |
| Net Long-term TIC Flows, Nov, (prior $9.4b) |
Canadian Economic Data
| 10:00 AM | Bank of Canada Rate Decision Announcement, Jan 18, est. 0.50%, (prior 0.50%) |
| Bank of Canada Releases January Monetary Report |
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