cti2015header-morning comments web

US tsys trading higher, curve slightly flatter US 10Y 1.817 (-1bp). Volume in TY futs below avg. Overnite S&P lowered the outlook for China to negative from stable to ‘reflect our expectation that the economic and financial risks …are increasing’. Yet China stocks closed higher, while Japanese equities fell. Core Euro bonds higher led by 10Y gilts despite upward revision to Q4 UK GDP thou the increase came about primarily from higher government spending. But euro bonds supported by weakness in equities with the stoxx down 1.0% towards key support at 3000. GOCs under pressure after Jan real GDP came in 0.6% vs 0.3% exp. Provis opening unch after closing firmer yest, QC & Ont supply still possible after yest Q26 deal which is a full 1.5bps better bid (100/99 vs 101.5).

News headlines

  • Roller-coaster first quarter ends with shares, dollar under pressure (Reuters) World stocks fell for the first time in four days on Thursday, the final day of a roller-coaster first quarter that has hammered the dollar and the pound but has proven the best in decades for gold and bonds. European markets had a groggy morning with shares FTEU3 down 1 percent, the dollar hovering near a seven-week low versus the euro EUR= and oil LCOc1 volatile again after an extremely wild V-shaped ride so far this year.
  • Oil prices slide as U.S. crude stocks hit record (Reuters) Oil futures fell on Thursday, with U.S. crude hitting its lowest price in more than two weeks as the country’s crude stocks reached yet another record high, renewing concerns about global oversupply. The increase in U.S. inventories came despite seasonal refinery utilisation hitting an 11-year high, while a rise in the dollar .DXY put further pressure on oil prices.
  • China Rating Outlook Cut to Negative From Stable by S&P (Bloomberg) Standard & Poor’s has cut the outlook for China’s credit rating to negative from stable, saying the nation’s economic rebalancing is likely to proceed more slowly than the ratings firm had expected. The nation’s credit rating is AA- with a negative outlook, S&P said in a statement, which also affirmed the long-term and A-1+ short-term sovereign credit ratings.
  • K. Economy Shows More Momentum; Current-Account Gap Widens (Bloomberg) The British economy ended 2015 with more momentum than previously estimated. Gross domestic product rose 0.6 percent in the fourth quarter instead of the 0.5 percent reported last month, the Office for National Statistics in London said on Thursday. There were upward revisions to services, industrial output and construction. GDP rose 0.4 percent in the third quarter.
  • Euro zone inflation stays negative in March but ‘core’ prices rise (Reuters) The fall in euro area inflation slowed this month while core figures, which strip out volatile food and energy prices, accelerated, mildly positive news for the European Central Bank as it struggles to revive anaemic price growth. Annualised inflation picked up to -0.1 percent from -0.2 percent, in line with expectations, as rising food and services prices offset another big fall in energy costs, data from Eurostat showed.
  • Wage Surge in Hot U.S. Labor Markets Sending Hopeful Sign to Fed (Bloomberg) With Minneapolis-St. Paul’s health-care industry booming, scientist Erin Nelson fielded more than 20 unsolicited calls in the past year asking her to consider switching jobs. She took one in September at a 40 percent raise. “Pay is becoming much more competitive,” said Nelson, 35, who designs research projects for medical-device companies. “It is a nice feeling to have job security, that there are jobs out there.”
  • Bank of Canada warns economy’s recovery from oil shock will take more than two years (Financial Post) Canada will take more than two years to adjust fully to the drop in oil prices, a senior Bank of Canada official said on Wednesday, signaling no quick end to a shock that has roiled the economy. Deputy Governor Lynn Patterson said a simulation run by the bank suggested it would be several years before the economy found a new balance. The plunge in crude prices pushed the oil-exporting nation into a mild recession last year, prompting policymakers to cut interest rates twice, although the bank is expected to remain on hold next month.
  • ‘Fragile five’: These OPEC producers are on the verge of collapse if oil prices don’t stabilize soon (Financial Post) The global oil price rout has left many oil producers reeling across the world. From Canada to Norway, Saudi Arabia to Russia, none of the world’s largest oil exporters have been spared from oil prices that declined 45 per cent last year alone. While some of the biggest producers will stumble along, five oil-producing economies are on the verge of collapse if oil prices do not stabilize soon, according to RBC Capital Markets.
  • Argentine Senate approves deal to end debt dispute, re-enter markets (Reuters) Argentina’s Senate gave the green light to a landmark deal to repay creditors holding defaulted debt in the early hours of Thursday, marking the end of a 14-year legal battle that had made the country a global financial pariah. The deal, which had already been approved by the lower house of Congress, is the cornerstone of new President Mauricio Macri’s plan for revitalizing an economy hobbled by low investment, high inflation and precarious central bank reserves.
  • Cara Operations Ltd, owner of Swiss Chalet, buys St-Hubert BBQ chicken chain for $537 million (Financial Post) Canada’s Cara Operations Ltd, owner of the Swiss Chalet casual dining chain and Harvey’s burger outlets, said on Thursday it would buy St-Hubert BBQ, one of Quebec’s largest casual dining chains, for $537 million. Toronto-based Cara, Canada’s largest operator of full-service restaurants, went public a year ago and had indicated it was looking to expand through acquisitions. Analysts had flagged privately held St-Hubert as one of the most likely targets for Cara, which is controlled by dealmaker Prem Watsa’s Fairfax Financial Holdings Ltd.


Overnight markets 

  • Overview: US 10yr note futures are up 0.024% at 130-2, S&P 500 futures are up 0.02% at 2055.75, Crude oil futures are up 0.52% at $38.52, Gold futures are up 0.57% at $1235.6, DXY is down -0.41% at 94.452.

 US Economic Data 

  • Initial Jobless Claims number came in at a level of 276k, stronger than expected and up 9k from prior month
  • Continuing Claims number was at a level of 2173k, weaker than expected and down from prior month
  • Chicago Purchasing Manager will be released at 9:45 AM   

Canadian Economic Data 

  • GDP MoM growth was 0.6%, stronger than expected and up from prior month
  • GDP YoY growth was 1.5%, stronger than expected and up from prior month


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