Market Update US tsys weaker, yields 2-3bps higher with the 10Y 2.87 (+2.6bps), weighed by weakness in German bunds & UK gilts, with European stocks -0.60% and S&P futures -13.75. Euro spiking to 1.2315, bund yields +3bps on Reuters story that several ECB members see progress on the outlook for inflation while economic developments could allow the ECB to end bond buying by the end of the year. Also BN survey revealed German growth expected to rise at the fastest rate since 2011. Gilts sharply lower on report that transitional Brexit deal between EU & UK is close, 10Y gilt 1.50% (+7bps). Data calendar in the US is fairly light, FOMC decision and press conference should garner outsized attention as it is Powell’s first meeting as chairman, and the Fed is expected to raise rates by 25bps to 1.50-1.75%. GOCs opening weaker, underperforming tsys in 10s as 2s10s is 3bps steeper. Provi supply expected to be quiet despite end of spring break, with provinces in blackout, Ontario budget set for March 28th.
News headlines
Stocks Slide in Broad Selloff; Brexit Spurs Pound: Markets Wrap (Bloomberg) Stocks declined globally on Monday as investors braced for a week packed with risk events, from central bank decisions to a G-20 gathering. Commodities were broadly weaker, Treasury yields rose and the pound jumped on hopes for a Brexit breakthrough. U.S. stock futures slumped, with contracts on the Nasdaq 100 Index off 1.4 percent, as technology companies were roiled by weekend reports of a Facebook Inc. data breach and news that Apple appears poised to disrupt its supply chain. That sapped Asian equities, while tech shares also led a retreat for the Stoxx Europe 600 Index. The gauge’s drop is set to trigger a trading pattern known as a “death cross,” a bearish sign for many technical analysts.
EU, U.K. Agree to Transition Deal: Brexit Update (Bloomberg) The U.K. and EU have reached a deal on the transition agreement that businesses are keen to get pinned down for the period immediately after Brexit. Brexit Secretary David Davis and chief EU negotiator Michel Barnier are in Brussels and are due to brief reporters at 11:45 a.m. London time. Leaders are expected to sign off on the agreement at a summit on Thursday and Friday.
Weakening FANG Stocks Stir Overnight Volatility in U.S. Futures (Bloomberg) A steady weakening in U.S. equity futures snowballed into one of the biggest drops in a month for Nasdaq 100 contracts, as pre-market trading revealed losses of around 1.5 percent in Apple Inc., Facebook Inc., Alphabet and Amazon.com. Facebook was in the spotlight as government officials in the U.S. and Europe were demanding answers from the company after reports that Cambridge Analytica, the advertising-data firm that helped Donald Trump win the U.S. presidency, retained information on tens of millions of Facebook users without their consent. Apple suppliers including Samsung and LG Display fell in Asia as the iPhone maker was said to be producing its own displays for the first time.
Oil Slips as U.S. Shale Fears Untempered by Russian Reassurance (Bloomberg) Oil slipped as U.S. explorers resumed their drilling binge, raising concerns over whether output cuts by OPEC and its allies will be enough to clear a glut despite a pledge from Russia that it’s committed to the curbs. Futures in New York fell 0.4 percent after data showed American producers added oil rigs for the seventh time in eight weeks. U.S. output also continued to grow, touching a record 10.4 million barrels a day last week. Meanwhile, Russia’s assurance that it will prolong production cuts into 2019 if necessary failed to assuage fears over surging shale supplies.
Hedge Funds Suffer Worst Month in Two Years (Bloomberg) Hedge Fund returns overall fell 2.19 percent in February, wiping out January gains and leaving them nearly unchanged for the year at up 0.07 percent, according to the latest numbers out of the Bloomberg Hedge Fund Database. That came as markets were roiled by a 47 percent jump in the VIX Index in the month, a 3.9 percent slide in the S&P 500 and as 10-year yields backed up to 2.86 percent, leading to the worst month for hedge funds since January 2016, when they slumped 2.57 percent.
Canadian pension fund CDPQ wants to be its own private equity investor (Reuters) Caisse de depot et placement du Quebec (CDPQ), one of Canada’s biggest public pension funds, has relied on private equity firms to invest in leveraged corporate buyouts. Now it is building its own investing team to depend less on buyout firms as middle men.
World stocks on longest slide since November as Fed caution hits (Reuters) Shares were stuck on their worst run since November on Monday, as caution gripped traders in a week in which the Federal Reserve is likely to raise U.S. interest rates and perhaps signal as many as three more hikes lie in store this year.
Loonie struggles to stabilize as traders brace for Powell’s remarks (BNN) The Canadian dollar was struggling to find a floor on Monday as it fell as low as 76.19 cents US before breaking into positive territory. The currency’s instability comes as traders brace for Jerome Powell’s first rate decision as U.S. Federal Reserve Chair on Wednesday. Trade uncertainty and soft domestic data have also been weighing on the loonie in recent weeks. On Friday, the currency hit its lowest level since last June in the wake of a dovish speech by Bank of Canada Governor Stephen Poloz, weak housing data, and NAFTA tension.
Overnight markets
Overview: US 10yr note futures are down -0.169% at 120-05, S&P 500 futures are down -0.5% at 2742.25, Crude oil futures are down -0.26% at $62.18, Gold futures are down -0.09% at $1311.1, DXY is down -0.18% at 90.072, CAD/USD is down -0.21% at 0.7651.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.789% | 2 Year | 2.312% |
| 5 Year | 2.011% | 5 Year | 2.667% |
| 10 Year | 2.184% | 10 Year | 2.872% |
| 30 Year | 2.321% | 30 Year | 3.106% |
US Economic Data
There is no US economic data for today
Canadian Economic Data
| 10:00 AM | Bloomberg Nanos Confidence, Mar 16th (56.7 prior) |
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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230