cti2015header-morning comments web

Market update

US tsys trading lower after ‘risk on’ session after China GDP, which thou less than exp, exceeded some forecasts and left door open for further stimulus. US 10Y 2.055 (+1.5bps) vs 2.085 in early NA trading. Light data session so bonds likely to take cue from stocks esp in light of ongoing volatility, both BOA & MS beat Q4 earnings exp which should also support stocks. Euro stocks higher (+2.5%), crude up 0.75%,core Euro bonds lower with longs underperforming after better than exp German ZEW (59.7 vs 53.1). GOCs lower led by 10s, curve ~1.5bps steeper with longs well bid 10/30 ~1bp flatter. Provis 1bp tighter on no trade, Ont 46 117/116, Ont 25 106.5/106.

News headlines

  • China GDP Slows to Weakest Since 2009 on Manufacturing Slide (Bloomberg) China’s economy slowed in December, capping the weakest quarter of growth since the 2009 global recession, as the Communist leadership grapples with a transition to consumer-led expansion. Industrial production, retail sales and fixed-asset investment all slowed at the end of the year, while gross domestic product rose 6.8 percent in the fourth quarter from a year earlier. Full-year growth of 6.9 percent, the least since 1990, was in line with the government’s target of about 7 percent.
  • Oil rises on record Chinese demand, oversupply caps gains (Reuters) Oil prices rose more than 3 percent on Tuesday as data showed Chinese oil demand likely hit a record high in 2015, but contracts remained near 12-year lows as the IEA said the market should stay oversupplied this year. Iran has said it plans to increase oil production by 500,000 barrels a day now that sanctions have been lifted under a nuclear deal with world powers.
  • Euro zone inflation confirmed at 0.2 percent in December (Reuters) Euro zone inflation was confirmed at 0.2 percent in December, the European Union’s statistics office data showed on Tuesday, with prices going up in restaurants and cafes and falling the most for fuel. Eurostat confirmed its earlier estimate that consumer prices in the 19 countries sharing the euro were flat month-on-month in December for a 0.2 percent year-on-year rise. However, the statistics office revised down the inflation number for November to 0.1 percent year-on-year from 0.2 percent reported earlier.
  • François Hollande Aims 2 Billion Euro Plan at France’s Economic ‘Emergency’ (NYTimes) Declaring the French economy to be in a “state of emergency,” President François Hollande announced on Monday a 2 billion euro plan to subsidize job creation and temporarily move half a million unemployed people off the welfare rolls, as record unemployment threatens his bid for re-election next year.
  • IMF cuts global growth forecasts (TheGuardian) The Washington-based body said world output would be 0.2 points lower in 2016 and 2017 compared with forecasts made just three months ago – and that the risks to its predictions were to the downside.
  • A Hint of Trouble in European Debt (WSJ) A wave of selling has taken Europe’s corporate-bond market to levels typically seen during recessions, another indication that the turmoil in global markets could spread into the wider economy. The gap in yields, or spread, between Eurozone high-grade corporate debt and safer government bonds has ballooned to its widest level in nearly three years, according to Barclays bond indexes. Three years ago, the European economy was in recession following the sovereign-debt crisis that had engulfed the continent.
  • Fed Almost Certain to Keep Interest Rates Unchanged at Next Meeting (WSJ) Federal Reserve officials, facing an economic jumble as 2016 begins, will almost certainly keep short-term interest rates steady at a policy meeting this month and turn their focus toward a potential cliffhanger decision about whether to lift them when they gather again in March.
  • Currency instability’ now a serious concern for Canada (FinancialPost) Canada’s economy is being threatened by “currency instability” as the loonie’s rapid decline against the U.S. dollar is hurting business and consumer confidence, economists warn. The loonie fell last week below 70 cents against the U.S. dollar for the first time since 2003, with the currency trading at just under 69 cents on Monday.
  • Why the price of oil will recover faster than you think (FinancialPost) It no doubt feels like a new paradigm for oil investors with the price of oil failing 72 per cent since 2014, the second-largest peak-to-through decline in more than 30 years. Many are pointing fingers at the Organization of the Petroleum Exporting Countries for the monster wave of oil now hitting the markets, but it really all started with the  U.S. shale producers.
  • German Jan ZEW Econ Expectations 10.2 Vs 16.1 in Dec German economic sentiment deteriorated at the start of the year, albeit less than forecast, as slower growth in China and problems in other large developing economies cloud Germany’s economic outlook, a survey of analysts and institutional investors showed Tuesday. The ZEW indicator of economic expectations fell to 10.2 in January from 16.1 in December, its lowest level since October last year. Economists polled by The Wall Street Journal had forecast a decline to 8.0.

Overnight markets

  • Overview: US 10yr note futures are down  -0.16% at 128-08, S&P 500 futures are up +1.19% at 1897.50, Crude oil futures are up  +0.68% at 29.62$, Gold futures are down -0.50% at $1085.20, DXY is up +0.33% at 99.286.

US Economic Data

  • NAHB Housing Market Index will be released at 10am
  • Net Long-term TIC Flows at 4pm from the US Treasury

Canadian Economic Data

  • Foreign investment in Canadian securities continued in November, at a net $2.58-billion, though that amount was dwarfed by October’s $19.08-billion, which was revised sharply down from $22.08-billion.



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