Market Update
US tsys lower after Q4 GDP was revised higher -2.9% vs 2.5%, way off the o/n highs which saw the 10Y dip below 2.75% (low since Feb 6th), now 2.78, tsys rising with gilts & bunds in European trade. S&P futures +7.75, USD index unch, crude lower for a third day, 64.45 (-0.60%). UK gilts sharply higher, yields 3-5bps lower, curve steeper – significant m/e extension and large cash flows in April with the BB Pan-Euro agg projected to rise 0.10 while the UK Sterling agg extension is 0.22 vs .08 last March. US month end tsy extension 0.06 vs 0.08 last March. The US Treasury auctions $29bln in 7Y notes and $15bln in 2Y FRNs this aft – 5Y auction yesterday well received with highest b/c (2.5) since Sep, indirect bidders 63.5 vs 58.5 Feb. GOCs unch, in line with tsys, 10Y 2.14% – lowest since Jan 8th after falling 9bps yest
News headlines
Tech Rout Punishes U.S. Stocks as Treasuries Surge: Markets Wrap (Bloomberg) A selloff in technology shares sent U.S. equity benchmarks lower, with losses accelerating late in the day. Bonds surged on demand for safe havens, pushing the yield on 10-year Treasuries below a key level. Trade angst weighed on leading tech companies with the Nasdaq 100 Index erasing most of Monday’s gain after a report the Trump administration is considering a crackdown on Chinese investments in technologies the U.S. considers sensitive. Facebook’s woes mounted and Nvidia Corp. spooked investors in chipmakers. The Chicago Board Options Exchange Volatility Index — Wall Street’s fear gauge — spiked.
Trump Urges Pressure Against North Korea After Kim’s China Trip (Bloomberg) U.S. President Donald Trump called for continued pressure against Kim Jong Un, after China said the North Korean leader expressed an openness to disarmament talks during a surprise visit to Beijing. Trump struck an optimistic tone after the unexpected summit with Chinese President Xi Jinping, saying in a pair of early morning tweets Wednesday that Kim might “do what is right for his people and for humanity” and give up his nuclear weapons. “In the meantime, and unfortunately, maximum sanctions and pressure must be maintained at all cost!” Trump said.
Shire Surges on News of Possible Takeda Bid (Bloomberg) Takeda Pharmaceutical Co. is considering its biggest takeover ever — a bid for Shire Plc that could approach $50 billion and propel the Japanese company into the ranks of the world’s top drugmakers. A combination would boost Takeda’s position in drugs for cancer, gastrointestinal diseases and nervous-system ailments, adding key treatments that are in the late stages of testing, according to a statement Wednesday. Shire, based in Lexington, Massachusetts, and listed in London, gained as much as 26 percent.
Brexit Bulletin: Divide and Wait (Bloomberg) The fishermen can’t wait, the public don’t want to wait, but Prime Minister Theresa May says she might need more time. Just like Brexit itself, the question of how long the U.K. should spend getting ready before finally leaving the European Union’s political and legal structures is dividing the country. First there was the argument about the transition period, which was agreed to last week. Brexit-backing fishermen aren’t happy that the U.K. won’t “take back control” of its waters – escaping the quotas of the Common Fisheries Policy – until Jan. 1, 2021. Yet it could have been worse for them, as May was exploring a longer transitional phase.
Oil Heads for Longest Slide in a Month as Fears of Glut Increase (Bloomberg) WTI falls 66 cents to $64.59 a barrel, sliding for a third day
Oil headed for its longest losing streak in almost a month on signs a global glut may persist. Futures in New York fell as much as 1.3 percent after dropping about 1 percent over the previous two sessions. An industry report was said to show a 5.32 million-barrel gain in U.S. crude inventories last week, far higher than the median estimate in a Bloomberg survey before government data later Wednesday. European stockpiles rose the most in five months last week.
Hudson’s Bay posts first profit in eight quarters but misses expectations (Reuters) Canadian department store Hudson’s Bay Co (HBC.TO) on Wednesday posted its first profit in eight quarters, but missed expectations as comparable sales and margins declined in some divisions. The owner of the Saks Fifth Avenue luxury retailer said it had net income of C$84 million ($65.23 million) in the fourth quarter, which ended Feb. 3, compared with a net loss of C$152 million a year earlier.
Quebec sets aside big money for health and debt repayment, taxes Netflix in 2018-19 budget (BNN) he final Quebec budget before the provincial election sets aside big money for health and education as well as more help for families — areas expected to become campaign battlegrounds in the lead-up to October’s vote. While annual spending growth has averaged 2.4 per cent since 2014-15, the 2018-19 budget increases it by 5.2 per cent and promises $16 billion in additional money over the next five years. Despite the substantial hike, Finance Minister Carlos Leitao maintains his budget is not political and that the Liberal government is not trying to buy votes.
Overnight markets
Overview: US 10yr note futures are up 0.09% at 121-01, S&P 500 futures are up 0.32% at 2624.25, Crude oil futures are down -0.69% at $64.8, Gold futures are down -0.59% at $1340, DXY is up 0.13% at 89.492, CAD/USD is down -0.04% at 0.7762.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.829% | 2 Year | 2.268% |
| 5 Year | 2.02% | 5 Year | 2.574% |
| 10 Year | 2.141% | 10 Year | 2.77% |
| 30 Year | 2.281% | 30 Year | 3.025% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Mar 23rd 4.8% (-1.1% prior) |
| 8:30 AM | GDP Annualized QoQ, 4Q 2.9% est 2.7% (2.5% prior) |
| Personal Consumption, 4Q 4.0% est 3.8% (3.8% prior) | |
| GDP Price Index, 4Q 2.3% est 2.3% (2.3% prior) | |
| Core PCE QoQ, 4Q 1.9% est 1.9% (1.9% prior) | |
| Advance Goods Trade Balance -75.4b est -74.4b (-74.4b prior) | |
| Retail Inventories MoM, Feb 0.4% Feb (0.8% prior) | |
| Wholesale Inventories, Feb 1.1% est 0.5% (0.8% prior) | |
| 10:00 AM | Pending Home Sales MoM, Feb est 2.0% (-4.7% prior) |
| Pending Home Sales NSA YoY, Feb (-1.7% prior) |
Canadian Economic Data
There is no Canadian economic data 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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230