Market Update
US tsys slightly lower, steeper, US 10Y 2.53 after reaching 2.55% in European trading. US data mix on the weak side with claims, inventories higher thou Chicago Fed for Dec stronger – 0.144 highest since Jan 16. Core European bonds lower, 10Y bund 0.464%, 10Y gilt 1.49% (+2.5bps). Large block sale of TY1 at 7:44am 22,898 TYH vs bunds – UK Q4 GDP came in stronger led by services once again. GOCs unch after US data, curve steeper with longs lagging, 10s30s 63.8 bps (+1) as 10s lead the way higher, recovering earlier losses as tsys bounce on weaker data. This morning the BOC conducts its switch operation whereby the Bank issues $400mln in benchmark 2048s and buys back off the run longs 2029s-2041s duration neutral. Nothing on the calendar until Nov GDP next Tuesday. Ontarios trading down this morning, 26s @79, 48s @90.5. Peripherals bid this morning after trading up yest aft, rolls 0.5bps tighter i.e. Alta/Ont46 7.7/6.5, Man/Ont 26 7/6, Sask/Ont 48 10/9. We are buyers of small CNQCN 22s, SAPCN 21s, & TD 4.859.
News headlines
Global Stocks Rally Gathers Pace as Bonds Slide: Markets Wrap (Bloomberg) A global equities rally gathered speed as investors embraced riskier assets after the Dow Jones Industrial Average topped 20,000 for the first time. Gold retreated with bonds. European stocks climbed, pushing a benchmark all-country index to within 1.5 percent of its record high. The dollar rebounded, strengthening against most major peers. Copper touched the highest price since November after reports of lower production. Global government bonds extended declines as France’s 10-year yield breached 1 percent for the first time in more than a year.
Oil rises on weaker dollar, but U.S. supply caps gains (Reuters) Oil prices rose on Thursday, driven up by a weakening dollar, though gains were capped by plentiful supplies and bulging inventories despite efforts by OPEC and other producers to cut output to prop up the market. Benchmark Brent crude was up 35 cents a barrel at $55.43 by 1125 GMT. U.S. light crude futures were up 20 cents at $52.95.
UK GDP figures show solid end to 2016 despite Brexit vote (TheGuardian) The UK economy grew by 0.6% in the final quarter of 2016 thanks to buoyant consumer spending, marking a strong finish to the year despite the Brexit vote. It is the initial estimate for fourth-quarter GDP from the Office for National Statistics, and matches the 0.6% growth seen in the third and second quarters. It was a touch better than the 0.5% rise expected by City economists. The pound hit a fresh six-week high of $1.2673 just before the data was released.
Caterpillar reports bigger quarterly loss (Reuters) Caterpillar Inc (CAT.N), the world’s largest construction and equipment maker, reported a bigger fourth-quarter loss on Thursday, hurt by higher-than-expected restructuring costs.
China Said to Order Banks to Curb New Loans in First Quarter (Bloomberg) China’s central bank has ordered the nation’s lenders to strictly control new loans in the first quarter of the year, people familiar with the matter said, in another move to curb excess leverage in the financial system.
U.K. Commons to Complete Article 50 Bill Debate in Two Weeks (Bloomberg) Prime Minister Theresa May’s government will push its draft law to trigger Article 50 of the European Union’s Lisbon Treaty through the House of Commons within two weeks as it seeks to keep the Brexit process on track by her self-imposed March 31 deadline.
Overnight markets
Overview: US 10yr note futures are down -0.0379% at 123-25, S&P 500 futures are up 0.02% at 2294.5, Crude oil futures are up 0.49% at $53.01, Gold futures are down -0.73% at $1191.7, DXY is up 0.38% at 100.41, CAD/USD is up 0.29% at 0.7629.
US Economic Data
| 8:30 AM | Advance Good Trade Balance, Dec, -$65.0b, est. -$65.3b, (prior -$65.3b) |
| Wholesale Inventories, m/m, Dec P, 1.0%, est. 0.1% (prior 1.0%) | |
| Retail Inventories, m/m, Dec, 0.0%, (prior 1.0%) | |
| Chicago Fed Nat Activity Index, Dec, 0.14, est. -0.05 (prior -0.27, revised -0.33) | |
| Initial Jobless Claims, Jan 21, 259k, est. 247k (prior 234k, revised 237k) | |
| Continuing Claims, Jan 14, 2100k, est. 2040k (prior 2046k,revised 2059k) | |
| 9:45 AM | Markit US Services PMI, Jan P, est. 54.4 (prior 53.9) |
| Markit US Composite PMI, Jan P, (prior 54.1) | |
| Bloomberg Consumer Comfort Index, Jan 22, (prior 45.2) | |
| 10:00 AM | New Home Sales, Dec, est. 588k (prior 592k) |
| New Home Sales, m/m, Dec, est. -0.7% (prior 5.2%) | |
| Leading Indicator (with revisions), Dec, est. 0.5% (prior 0.0%) | |
| 11:00 AM | Kansas City Fed Manufacturing Activity, Jan 8, (prior 11) |
| CFIB Business Barometer, Jan, est. 60.1 (prior 60.7) |
Canadian Economic Data
There is no major economic news for 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