Market Update
US tsys higher, US 10Y 2.705 (-1.5) despite stronger Jan ADP (234k vs 185k) and the US Treasury raising auction sizes for 3, 10 & 30 yr qrtly refunding. Tsy curve pairing back yesterday’s steepening as well, 2bps flatter led by the long end. Busy day with month end extensions a factor, Chicago PMI and FOMC this aft. Yellen expected to acknowledge the pickup in growth and inflation prospects in her final FOMC. US equity futures +12, Boeing blew past estimates forQ4, core eps $4.80 vs $2.90 exp on better than exp revenues, shares up ~6% pre-mkt. GOCs higher, wider vs tsys after Nov GDP came in as exp 0.4%, goods producing 0.8% – largest increase since May ’17 on oil&gas, utilities.
News headlines
Inflation Debate Grips Fed as Yellen Exits: Decision-Day Guide (Bloomberg) As Janet Yellen prepares to hand over the leadership of the Federal Reserve to Jerome Powell, the central bank is gripped by the same issue that’s marked her four-year term as chair: puzzlingly low inflation. The rate-setting Federal Open Market Committee is likely to maintain the range of its benchmark lending rate at 1.25 percent to 1.5 percent at the conclusion of a two-day meeting in Washington on Wednesday. It releases a statement at 2 p.m. and no press conference is scheduled to follow.
Euro-Area Inflation Slowdown Highlights ECB’s Uphill Battle (Bloomberg) Inflation in the euro area slowed at the start of the year, highlighting the hurdles faced by the European Central Bank as it attempts to foster price growth in a region still beleaguered in places by high unemployment. Consumer prices rose 1.3 percent in January, the European Union’s statistics office said on Wednesday. The reading exceeds the median forecast of 1.2 percent in a Bloomberg survey but is below December’s rate of 1.4 percent.
Trump Connects Presidency With Prosperity in ‘American Moment’ (Bloomberg) Donald Trump sought to connect his presidency to the nation’s prosperity in his first State of the Union address, arguing that the U.S. has arrived at a “new American moment” of wealth and opportunity. The president largely dispensed with his trademark antagonism in a bid for bipartisanship, portraying his administration — marked in his first year by discord — as working to build a “safe, strong and proud America.” In contrast with polling that shows most Americans consider him divisive, he promised to unify the country “as one team, one people and one American family.”
Stock Declines Ease as Dollar Drops; Oil Retreats: Markets Wrap (Bloomberg) The global stock declines that have shaped the week showed signs of easing on Wednesday, with U.S. futures climbing and European equities edging higher. The dollar slump deepened in the wake of President Donald Trump’s State of the Union address, and the euro rose after inflation data.
Oil Pares Strongest January Since 2013 on U.S. Supply Outlook (Bloomberg) Oil slipped for a third day in New York, continuing its retreat from a three-year high, on estimates that U.S. crude stockpiles increased last week. West Texas Intermediate futures fell 0.5 percent, bringing their monthly advance to 6.2 percent. Data from the U.S. Energy Department is forecast to show that inventories probably rose by 900,000 barrels to 412.5 million, according to a Bloomberg survey.
Toronto, Vancouver drive overvaluation in Canada housing (Reuters) Canada’s housing market still shows evidence of overvaluation, particularly in and around Toronto and Vancouver, despite slowing growth in prices, the federal housing agency said on Tuesday.
Japan’s Fujifilm to take over Xerox in $6.1 billion deal, create joint venture (Reuters) Japan’s Fujifilm Holdings is set to take over Xerox Corp in a $6.1 billion deal, combining the U.S. company into their existing joint venture to gain scale and cut costs amid declining demand for office printing.
Canadian drillers moving rigs south to chase better prospects in Texas oilfields (BNN) A growing number of Canadian drilling rigs are being moved south of the border to take advantage of brighter prospects in the United States — and observers say it’s unlikely they will ever return home. A week ago, Calgary-based Akita Drilling Ltd., primarily a Canadian driller, announced it would deploy its first rig into the prolific Permian Basin in West Texas by moving one from Western Canada.
Overnight markets
Overview: US 10yr note futures are up 0.051% at 121-23, S&P 500 futures are up 0.42% at 2836.5, Crude oil futures are down -0.6% at $64.11, Gold futures are up 0.46% at $1346.1, DXY is down -0.3% at 88.89, CAD/USD is down -0.49% at 0.8145.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.834% | 2 Year | 2.125% |
| 5 Year | 2.072% | 5 Year | 2.502% |
| 10 Year | 2.288% | 10 Year | 2.713% |
| 30 Year | 2.37% | 30 Year | 2.955% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Jan 26th -2.6% (4.5% prior) |
| 8:15 AM | ADP Employment Change, Jan 234k est 185k (250k prior) |
| 8:30 AM | Employment Cost Index, 4Q 0.6% est 0.6% (0.7% prior) |
| 9:45 AM | Chicago Purchasing Manager, Jan est 64.0 (67.6 prior) |
| 10:00 AM | Pending Home Sales MoM, Dec est 0.5% (0.2% prior) |
| Pending Home Sales NSA YoY, Dec est 1.7% (0.6% prior) | |
| 14:00 AM | FOMC Rate Decision (Upper Bound), Jan 31st est 1.50% (1.50% prior) |
| FOMC Rate Decision (Lower Bound), Jan 31st est 1.25% (1.25% prior) |
Canadian Economic Data
| 8:30 AM | GDP MoM, Nov 0.4% est 0.4% (0.0% prior) |
| GDP YoY, Nov 3.5% est 3.4% (3.4% prior) | |
| Industrial Production Price MoM, Dec -0.1% est -0.2% (1.4% prior) | |
| Raw Materials Price Index MoM, Dec -0.9% est -2.3% (5.5% prior) |
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