cti2015header-morning comments web

Market update

US tsys lower opening, curve ~1bp steeper, US 10Y 1.78 (+3bps). Tsys pressured in Asia on the back of heavy selling early on ~30K TY1 contracts, with the ten yr falling as low as 1.72% before rising back to ~1.79 in NA open.   News overnite included weak earnings from BHP & Standard Chartered, weaker German IFO and lower crude and a lower CNY fixing. Yet a heavy corp supply calenday as well as this aft 2Y auction may account for some of the weakness in tsys, even as the tsy curve is steeper. Latest JPM Tsy Client Survey showed increase in both longs & shorts with neutral pos fairly close to 1y avg. GOCs are lower led by 10s which are ~4bps cheaper on the curve so far.. Provis opening unch after late day selling yest post BHP earnings, possibly some profit taking as issuance widely expected (MP, NF, BCMFA , QC26 reopen…). BMO Q1 beat est $1.75 vs $1.72, National also beat $1.17 vs $1.15.

News headlines

  • Risk rally fades as stocks, oil slip back into the red (Reuters) The recent recovery in riskier assets fizzled out on Tuesday, with a fall in stocks, oil and the value of China’s yuan currency boosting investor demand for safer assets such as the Japanese yen, government bonds and gold. Oil fell more than 2 percent and the main European stock indices fell as much as 1 percent, giving back some of their recent gains: oil rose more than 5 percent on Monday and world stocks recorded their biggest rise last week since early October.
  • Earliest Chinese Data Signal Slowdown Hasn’t Bottomed Out Yet (Bloomberg) The first indicators for China’s economy this month signal its slowdown hasn’t bottomed out yet, highlighting the case for continued stimulus as the nation prepares to host finance chiefs and central bankers from the Group of 20 later this week. Private gauges of manufacturing and services fell to new lows, a reading of business confidence slipped, and interest in small and medium sized businesses deteriorated, the readings show. If confirmed in official data for February that starts to roll out from March 1, such weakness would suggest a slowdown in the nation’s old growth drivers may be deepening.
  • The Trickle of U.S. Oil Exports Is Already Shifting Global Power (Bloomberg) The sea stretched toward the horizon last New Year’s Eve as the Theo T, a red-and-white tug at her side, slipped quietly beneath the Corpus Christi Harbor Bridge in Texas. Few Americans knew she was sailing into history. Inside the Panamax oil tanker was a cargo that some on Capitol Hill had dubbed “Liquid American Freedom” — the first U.S. crude bound for overseas markets after Congress lifted the 40-year export ban.
  • Canada’s banks could be forced to raise equity, cut dividends if oil prices keep sinking, Moody’s warns (Financial Post) Some Canadian banks could be forced to preserve capital by raising equity or even cutting dividends if oil prices continue to slump, Moody’s warns in a new report. In a “severe stress” scenario modelled by the ratings agency, and included in the report to be widely circulated Monday, losses in consumer lending portfolios would exceed historic peaks and capital markets activity at the country’s biggest banks would be significantly crimped.
  • BMO Profit Increases 6.8% After Bank Buys GE Finance Unit (Bloomberg) Bank of Montreal posted fiscal first-quarter profit that beat analysts’ estimates as contributions from its purchase of General Electric Co.’s transportation-finance business added to U.S. earnings. Net income for the period ended Jan. 31 climbed 6.8 percent to C$1.07 billion ($778 million), or C$1.58 a share, from C$1 billion, or C$1.46, a year earlier, Canada’s fourth-largest lender by assets said Tuesday in a statement.
  • BHP, Standard Chartered Drag Europe Stocks From Three-Week High (Bloomberg) A retreat in miners, led by BHP Billiton Ltd. after it cut its dividend, sent European stocks lower for the second time in three days. BHP lost 3.5 percent after also reporting a profit drop. That dragged down a gauge tracking commodity producers, after Monday’s surge to the highest level since Dec. 3. Standard Chartered Plc was another notable decliner, down 3.7 percent after posting a surprise annual loss.
  • Carney Says BOE Has Room for Maneuver Should Economy Weaken (Bloomberg) Mark Carney said Bank of England officials have scope to loosen monetary policy if needed as concerns that Britain may leave the European Union put further pressure on the pound. “If we were in a position where the economy needed additional stimulus, we do have considerable room,” the central bank governor told lawmakers in London on Tuesday.


Overnight markets 

  • Overview: US 10yr note futures are down -0.2628% at 130-14, S&P 500 futures are up 0.05% at 1937.25, Crude oil futures are down -0.21% at $33.32, Gold futures are up 1.02% at $1222.4, DXY is up 0.01% at 97.385. 

US Economic Data 

  • Consumer Confidence Index will be released at 10:00 AM
  • Richmond Fed Manufacturing Index will be released at 10:00 AM
  • Existing Home Sales number will be released at 10:00 AM
  • Existing Home Sales MoM growth will be released at 10:00 AM

 Canadian Economic Data 

  • There is no major economic data today.


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