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Market Update Tsys trading higher, 10Y below 2.90% @ 2.88 (4bps), following move in bunds after weaker German GDP. Also supporting bunds is the widening in peripherals, particularly Italy , BTP/bund 10Y spd @ 1 mnth wides on pre Italian election jitters. USD index is firmer, equities stronger (emini +11), crude unch 62.75 consolidating after yesterday’s rally on surprise draw in DOE crude inventories. Focus on Fed speakers and Fed MPR to congress at 11:00. In Canada, GOCs are lower after Jan CPI surprised to the upside 0.7% vs 0.5% exp with the y/y falling to 1.7% vs 1.5% exp, and the range of BOC 3 core measures up to 1.8-1.9 from 1.6-1.9 in Dec.  By region Ontario’s inflation rate rose 0.9% vs -0.5% in Dec reflecting a 20% hike in the minimum wage on Jan 1st.

News headlines 

Mnuchin Urges Markets to Shrug Off Worries Over Tax Cuts, Debt (Bloomberg) Treasury Secretary Steven Mnuchin brushed aside signs that investors are nervous about rising prices and criticism that growing debt will harm U.S. economic security, declaring that President Donald Trump’s policies won’t cause inflation. “There are a lot of ways to have the economy grow,” Mnuchin said in an interview aboard a train to Philadelphia on Thursday, where he toured the U.S. Mint. “You can have wage inflation and not necessarily have inflation concerns in general.”

Wall Street May Be Rethinking Its Relationship With Guns (Bloomberg) Will Wall Street ever let go of guns? That question has come up before — after the shootings in Newtown, in Orlando, in Las Vegas, and on and on. Now, with the nation’s emotions raw over the killings in Florida last week, evidence is mounting that investors may be rethinking their long, fraught relationship with the firearms industry.

VIX Funds Face Fresh Scrutiny From U.S. Regulators (Bloomberg) U.S. regulators are scrutinizing this month’s implosion of investments that track stock-market turmoil, including whether wrongdoing contributed to steep losses for VIX exchange-traded products offered by Credit Suisse Group AG and other firms, several people familiar with the matter said.

With Elections to Win, One Nafta Team May Prefer to Keep Talking (Bloomberg) Few people are cheering the prospect of several more months of Nafta talks. Mexico’s ruling party may be among that small group. The country is cranking into campaign mode at the same time as it prepares to host the latest round of trade wrangling next week. That means Mexican negotiators have a kind of dual mandate. They have to pursue the best outcome for the nation, while keeping one eye out for their bosses in the governing PRI, which is seeking to hang on to the presidency in July’s election.

RBC tops first-quarter profit expectations, raises dividend (BNN) Royal Bank of Canada is boosting its payout to shareholders after topping first-quarter profit estimates on the back of growth in its core retail banking division. Net income in the three months ending Jan. 31 held steady at $3.01 billion as RBC took a $178-million charge tied to U.S. tax changes. On an adjusted basis, the bank earned $2.05 per share. Analysts, on average, expected $1.99 in earnings per share.

Global stocks subdued as U.S. dollar edges higher (BNN) A stronger U.S. dollar and slightly higher global borrowing costs kept world shares subdued on Friday and left gold limping toward its worst week since December. Europe’s main London, Frankfurt and Paris markets barely budged in early moves, keeping MSCI’s 47- country world index just in the black on the day but facing its third red week in the last four. Modest gains for the dollar meant the euro was set to post its second biggest weekly loss in nearly four months, as caution over the Italian election gave bond markets there their toughest week of 2018.

Overnight markets

Overview: US 10yr note futures are up 0.182% at 120-21, S&P 500 futures are up 0.42% at 2723, Crude oil futures are down 0% at $62.77, Gold futures are down -0.04% at $1332.2, DXY is up 0.17% at 89.893, CAD/USD is down -0.05% at 0.7875. 

US Economic Data

There is no US Economic data for today

Canadian Economic Data

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

Market Update Tsys  trading higher, rebounding from yesterday’s post FOMC minutes sell-off, the 10Y 2.92%(-3bps), on heavy volume in TY futures (~540k).  Equities lower in Europe, S&P futures +5.25, crude slightly lower 61.53. Core EGBs mixed – gilts lower, bunds slightly higher. Bunds rallying on weaker German IFO – the expectations component dropping to the lowest since last March. Gilts lagging bunds, tsys despite downward revision in Q4 GDP to 0.4% from 0.5%.  The US auctions $29bln in 7Y notes at 1:00pm.  GOCs sharply higher, outperforming tsys 2-4bps after Retail Sales fell 0.8% in Dec vs unch exp , with the core down 1.8% vs 0.3% increase exp.

News headlines

Fed’s Quarles Says U.S. Economy in ‘Best Shape’ Since Crisis (Bloomberg) Federal Reserve Governor Randal Quarles delivered an upbeat assessment of the U.S. economy and endorsed a “gradual” path for raising interest rates in his first public speech on monetary policy since joining the central bank in October. “The U.S. economy appears to be performing very well and, certainly, is in the best shape that it has been in since the crisis and, by many metrics, since well before the crisis,” Quarles said in prepared remarks Thursday in Tokyo.

ECB Keeps Policy Unchanged as Euro Gains Risk Curbing Inflation (Bloomberg) The European Central Bank maintained its pledge to move slowly in removing euro-area stimulus, setting the stage for President Mario Draghi to face questions on the strength of the single currency. Policy makers reiterated that they’ll continue buying 30 billion euros ($37 billion) of assets a month until at least the end of September. They kept interest rates unchanged and repeated that they expect borrowing costs to stay at present levels until well past the end of net bond purchases.

Top Political Donors Have Already Given $66 Million for Midterms (Bloomberg) Billionaire Tom Steyer and packaging king Richard Uihlein are leading the charge among mega-donors seeking to influence the November elections, with the top 10 contributors logging a combined $65.7 million so far in the current campaign cycle.  With control of Congress at stake, the top Democratic and Republican donors will be pressed to finance a battle that’s already triggering television advertising and expected to set a spending record. The first midterm elections under President Donald Trump will be a high-priced test of whether the GOP can keep majorities in both the House and Senate. As many as a dozen Senate seats and 80 in the House could be in play.

Big Banks in U.S. Forced to Reevaluate Hiring Foreign Workers (Bloomberg) Big banks in the U.S., which have been seeking to hire more foreign workers in recent years under the H-1B visa program, are now being forced to reconsider their approach after the Trump administration made it harder to obtain the work permits. Eight major investment banks increased their H-1B applications for high-skilled workers by almost 60 percent over five years to more than 7,000 in fiscal year 2017, according to a Bloomberg analysis of visa filing data.

Canada close at 2-1/2-week high, led by financials (Reuters) Canada’s main stock index closed at a 2-1/2-week high on Wednesday, led by financials and industrials, with all sectors but technology posting gains. The Toronto Stock Exchange’s S&P/TSX composite index closed up 84.57 points, or 0.55 percent, higher at 15,524.01, its strongest close since Feb. 2. Canadian stocks bucked a downward trend in global stocks that were driven lower by a stronger U.S. dollar and rising government bond prices after minutes of the Federal Reserve’s January policy meeting showed confidence in the need to keep raising interest rates.

CIBC beats first-quarter profit estimates, raises dividend (BNN) Canadian Imperial Bank of Commerce set the bar for its peers on Thursday with fiscal first-quarter profit easily beating expectations. Overall net income in the three months ending Jan. 31 was $1.33-billion. On an adjusted basis, CIBC earned $1.43-billion or $3.18 per share. Analysts, on average, were expecting $2.83 in earnings per share.

Loblaw books $107-million charge on bread scandal, warns of ‘exceptional headwinds’ (BNN) The head of Loblaw Companies is warning of major headwinds facing his food retailing empire as it contends with fallout from last year’s stunning bread price-fixing admission. Total revenue at Loblaw dipped 0.9 per cent in the fourth quarter to $11.03-billion. Adjusted quarterly profit rose 12.2 per cent to $441-million or $1.13 per share. Analysts, on average, expected $1.11 in earnings per share.

Overnight markets

Overview: US 10yr note futures are up 0.104% at 120-11, S&P 500 futures are up 0.25% at 2705.5, Crude oil futures are down -0.42% at $61.42, Gold futures are down -0.43% at $1326.4, DXY is up 0.12% at 90.112, CAD/USD is down -0.06% at 0.7877. 

US Economic Data

Canadian Economic Data

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

Market Update Tsys trading mixed, short end yields higher, yields slightly lower out the curve, 10Y 2.88% (-0.5bps), moderate volume in TY futures (350k), ongoing March/June roll impacting figure, narrow 3 tick range. Equities lower in Europe, Focus today on Jan FOMC minutes, $15bln 2Y FRN and $35bln 5Y note auction. Core EGBs higher, curves flatter. French and German PMIs weaker than exp- 10Y bund yield 0.706% (-2.3bps). USD index higher for third day, euro at a one-week low 1.2315.  GOCs higher, outperforming tsys by 0.5- 1bps. Provis unch, QC 5Y green bond expected to be launched shortly, Newf issued a 5Y FRN @ CDOR +14.5bps which was well received.

News headlines

The U.S. 10-Year Looks Poised to Cross a Red Line This Week (Bloomberg) Enter the danger zone. Bond markets are signaling the 10-year U.S. Treasury yield may reach 3 percent as early as this week — a potential watershed for risk appetite across asset classes. A deluge of debt supply and the strengthening momentum of bears feeding off inflation fears could help send benchmark yields higher. The 10-year yield currently sits at about 2.9 percent, with the U.S Treasury poised to kick off a big week of issuance by auctioning $151 billion of short-term notes and $28 billion of two-year debt later on Tuesday.

 Fed Minutes May Give Clues to 2018 Interest Rate Word Puzzle (Bloomberg) Federal Reserve officials added the word “further” twice to their January statement. On Wednesday, investors may find out why. At Chair Janet Yellen’s last meeting Jan. 30-31, the central bank pledged twice to make “further gradual adjustments” in interest rates as opposed to just “gradual adjustments” at the prior gathering. While the language was consistent with adding more emphasis to the plan for rate hikes, the minutes of the closed-door meeting, due Wednesday, will probably give details on what message officials wanted to send with the wording tweak.

U.K. Wages Pick Up as Fewer Eastern EU Workers Fill Jobs (Bloomberg) U.K. pay is picking up after employment among citizens of the eastern countries that joined the European Union more than a decade ago fell for the first time since 2009. Average weekly earnings excluding bonuses rose 2.5 percent in the fourth quarter from a year earlier, the most since December 2016, the Office for National Statistics said on Wednesday. The overall employment rate rose to 75.2 percent, close to a record, though unemployment increased to 4.4 percent as fewer workers were economically inactive.

Mueller Gets Plea, No Cooperation, as Skadden Lawyer Admits Lies (Bloomberg) U.S. Special Counsel Robert Mueller on Tuesday extracted another guilty plea as prosecutors bear down on former Trump campaign chairman Paul Manafort and his deputy, Rick Gates. Alex van der Zwaan, a former associate at Skadden, Arps, Slate, Meagher & Flom, admitted in court in Washington that he misled investigators about the last time he talked with Gates, who was indicted in October with Manafort over their consulting work in Ukraine. Gates is reportedly considering cooperating with Mueller.

Dollar Extends Gain; Europe Bonds Rise, Stocks Dip: Markets Wrap (Bloomberg) The dollar extended its rally and benchmark Treasuries were flat before another round of U.S. debt sales and the release of minutes from the latest Fed meeting. European bonds advanced and stocks dropped after some worse-than-expected data dented the region’s growth story.

Maple Leaf fourth-quarter profit falls (Reuters) Canadian meat packaging company Maple Leaf Foods Inc’s quarterly profit fell 22.4 percent as costs rose. Net earnings fell to C$59.1 million, or 45 Canadian cents per share, in the fourth quarter ended Dec.31, from C$76.2 million, or 56 Canadian cents per share, a year earlier.Total sales rose to C$876.8 million from C$828.2 million.

TSX stock futures point to higher open (Reuters) Stock futures for Canada’s main stock index were slightly higher on Wednesday as investors waited for minutes from the U.S. Fed’s last policy meeting in January. March futures on the S&P TSX index SXFc1 were up 0.11 percent at 7:15 a.m. ET. Canada’s main stock index closed lower on Tuesday, following a mixed session, with weakness among gold mining stocks offsetting gains for the energy group.

B.C. hikes foreign buyers’ tax in effort to cool hot housing markets (BNN) British Columbia moved to ease the province’s housing crisis Tuesday with a budget that introduces a new tax on property speculators, higher taxes on foreign homebuyers and plans to create 114,000 affordable housing units over the next decade. Finance Minister Carole James said the tax measures are part of the government’s aim to improve housing affordability in markets where some seniors are forced to live in their vehicles and young professionals are refusing to take jobs in B.C. because they can’t find a place to live.

Overnight markets

Overview: US 10yr note futures are up 0.065% at 120-18, S&P 500 futures are up 0.06% at 2715.75, Crude oil futures are down -0.5% at $61.48, Gold futures are down -0.04% at $1330.7, DXY is up 0.25% at 89.943, CAD/USD is up 0.22% at 0.789. 

US Economic Data

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