Market Update
Tsys lower in risk on trade, yields 3bps higher, EGBs lower after polls show Macron beat Le Pen in TV debate last night. Gilt yields sharply higher on firmer Feb inflation figures – UK CPI 2.3% vs 2.1% exp. above BOE’s 2.0% target for the first time since Nov 13. Bunds weighed by French results, UK data, easing of French election risk has raised rate hike expectations along euribor strip. GOCs lower, spds 1-2bps wider vs tsys on better than exp Jan Retail Sales (2.2% vs 1.5% exp). Jan. GDP likely to be revised higher after better readings on manufacturing and now retail sales in the past week. CAD sharply higher after the release, buoyed by residual weakness in USD from dovish fed last week. Provis unch, Alberta underperforming post budget. 407 Intl in the mkt with $250mln June 1 33s (~16yrs) at ~125.
News headlines
Euro Climbs as France Concern Eases; Gold Retreats: Markets Wrap (Bloomberg) The euro rose to the strongest in more than a month after a French presidential debate eased concern about a populist win in the election. The dollar extended its decline as Fed officials weighed the pace of borrowing-cost hikes, and emerging-market stocks kept climbing.Europe’s common currency strengthened against most of its major peers after centrist Emmanuel Macron was widely judged to have come out on top in the televised contest. That helped send the greenback lower for a fifth day. Developing-nation equities extended a winning streak, with the MSCI Emerging Market Index advancing an eighth day. Gold fell for the first time in five days. Sterling surged after data showed U.K. inflation rose faster than expected.
U.K. Inflation Gains More Than Forecast, Breaching BOE Goal (Bloomberg) U.K. inflation accelerated more than economists forecast in February, breaking through the Bank of England’s target for the first time in more than three years. The 2.3 percent increase in the consumer prices index was the fastest since September 2013 and above the median prediction for 2.1 percent. The rate is up from just 0.3 percent a year ago, reflecting sterling’s 17 percent drop since the Brexit vote in June, as well as an increase in oil prices.
Oil prices rise on talk of OPEC cut extension, inventories in focus (Reuters) Oil prices rose on Tuesday, helped by expectations that an OPEC-led output cut would be extended beyond June but gains were pegged back by concerns about persistently high crude inventories. The Organization of the Petroleum Exporting Countries and some non-OPEC producers agreed to curb production from Jan. 1 by 1.8 million barrels per day (bpd) for six months to drain crude from record stockpiles. But inventories remain stubbornly large.
EU finance ministers worried about free trade after ‘surreal’ G20 (Reuters) European Union finance ministers expressed concern on Tuesday over the future of free trade after what one of them called a « surreal » meeting of finance chiefs of the world’s 20 biggest economies at the weekend. Breaking a decade-long tradition of endorsing open trade, G20 finance ministers and central bankers made only a token reference to trade in their communique, acquiescing to an increasingly protectionist United States after a two-day meeting in Germany failed to yield a compromise.
Bill Morneau says Ottawa will go light on the red ink in Wednesday’s budget (Financial Post) Canada’s Finance Minister is sticking by his pledge to lower the nation’s debt ratio, signalling the government won’t push much deeper into deficit when it delivers its budget this week. Bill Morneau said he remains committed to the notion a falling level of debt relative to the total size of the economy shows fiscal prudence. The country’s low growth, along with new spending on infrastructure and transfer payments, has forced the government to abandon other fiscal pledges.
TransCanada Corp. seeks natural gas pipeline approval linked to Petronas LNG project (Financial Post) Transcanada Corp has secured shippers’ commitment for a pipeline associated with Malaysian state-owned oil company Petronas’ pending Pacific NorthWest liquefied natural gas terminal in western Canada and will seek early construction, the company said on Monday. Government construction approval will allow the company to start building most of the North Montney Mainline before Petroliam Nasional Bhd, or Petronas, decides whether to commit to the project, TransCanada said in a statement.
Overnight markets
Overview: US 10yr note futures are down -0.126% at 123-27, S&P 500 futures are up 0.19% at 2374.75, Crude oil futures are up 0.27% at $48.35, Gold futures are down -0.12% at $1232.5, DXY is down -0.55% at 99.859, CAD/USD is down -0.49% at 0.7526.
US Economic Data
| 8:30 AM | Current Account Balance, 4Q, -112.4b, est. -129.0b (prior -113.0b, revised -116.0b) |
Canadian Economic Data
| 8:30 AM | Retail Sales, m/m, Jan, 2.2%, est. 1.5% (prior -0.5%, revised -0.4%) |
| Retail Sales Ex Auto, m/m, Jan, 1.7%, est. 1.3% (prior -0.3%, revised -0.5%) |
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