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Market Update Tsys higher, near top of o/n range on above avg volume (405k), 10Y 2.82(-1.1bps), curve 0.5bps flatter – key Jan CPI data expected at 8:30 – 0.3% vs 0.1% in Dec with the core forecast to rise 1.7% vs 1.8% in Dec. The release takes on more importance given the selloff in equity markets last week attributed in part to Jan’s 2.9% rise in avg hourly earnings.  Equity futures higher (S&P +9.5), USD index steady, JPY stronger for 3rd day, reaching below 107 for the first time since Nov 2016. Core EGBs higher, gilts/bunds ~2bps lower outperforming tsys by 1bp.   Eurozone GAP 0.6% as expected, Dec Ind Prod 0.4% vs 0.1% exp, 5.2% y/y the highest since Aug 2011. GOCs higher, in line with tsys, 10Y 2.311 (-1bp). Provis closed yest unch , 10Y CMB expected to price in the context of 36bps, also 5Y FRN reopoening 2/15/23  ~100.33. 

News headlines

U.S. Futures Extend Gains Ahead of Key Inflation Data Release (Bloomberg) U.S. stock-index futures extended gains, hitting a session high in early London trading as investors await a key inflation report Wednesday. March contracts on the S&P 500 rose 0.5 percent at 8:24 a.m. in London after fluctuating during Asian trading hours. Futures on the Dow Jones Industrial Average added 0.6 percent, while the Nasdaq 100 Index was up 0.6 percent.

Any Hint of Faster Inflation in Data Could Knock Markets All Over Again (Bloomberg) Wednesday’s report on the U.S. consumer price index will be the most closely watched in recent memory, with investors seeking to understand the recent plunge in the stock and bond markets. They’ll probably need to look beyond the main numbers for the full story.

Netanyahu Clings to Power After Police Recommend Indictment (Bloomberg) Israeli Prime Minister Benjamin Netanyahu declared he has no plan to go to early elections, as his coalition closed ranks around a leader who police say should stand trial for bribery. Coalition members denounced the police recommendations, saying the prime minister should continue to govern while Attorney General Avihai Mandelblit reviews the case and decides whether to press charges. Netanyahu and his allies said the fact that police relied on testimony from his political rival Yair Lapid shows the investigation was biased.

Zuma Has Next Move in ANC Power Battle as Gupta Home Raided (Bloomberg) The noose tightened on South African President Jacob Zuma as the police went after key allies while leaders of the ruling African National Congress vowed to force him from office. Police raided the Johannesburg home of the Gupta family, who are in business with Zuma’s son, Duduzane, early Wednesday as the nation awaited the president’s next move in his struggle for power with Cyril Ramaphosa.

TSX futures fall on lower oil prices (Reuters) Futures pointed to a lower opening for Canada’s main stock index on Wednesday, as oil prices fell pressured by rising U.S. crude production. March futures on the S&P TSX index were down 0.23 percent at 7:15 a.m. ET. The Thomson Reuters/Ipsos Primary Consumer Sentiment Index is due at 11:00 a.m. ET. Canada’s main stock index fell modestly on Tuesday, pausing after racking up a hefty gain in the previous session, as industrial and energy shares fell along with the price of oil. Dow Jones Industrial Average e-mini futures were up 0.45 percent at 7:15 a.m. ET, while S&P 500 e-mini futures were up 0.44 percent and Nasdaq 100 e-mini futures were up 0.46 percent.

Canada, U.S. exchange barbs over NAFTA talks as stresses rise (Reuters) Canada and the United States exchanged barbs on Tuesday over sluggish negotiations to update NAFTA, reflecting mounting tensions over trade talks that appear unlikely to conclude on schedule. The talks have effectively stalled as Canada and Mexico seek to address wide-ranging U.S. demands for changes to the North American Free Trade Agreement. The early March deadline for wrapping up the talks has been extended to at least early April, officials said. But participants have said privately it could take months longer than that.

Morneau to deliver next federal budget on Feb. 27 (BNN) Finance Minister Bill Morneau will introduce the federal government’s next budget on Feb. 27 as the country faces persistent uncertainty around trade and competitiveness. With the future clouded by such unknowns, private-sector experts will press Morneau to keep his fiscal powder dry when they gather later this week for their annual pre-budget meeting. Morneau, who announced the budget date Tuesday in the House of Commons, sits down Friday in Toronto with leading economists at a roundtable that typically includes about a dozen experts from commercial banks, think tanks and trade associations.

Overnight markets

Overview: US 10yr note futures are up 0.09% at 121-04, S&P 500 futures are up 0.39% at 2672, Crude oil futures are down -0.84% at $58.69, Gold futures are up 0.22% at $1333.3, DXY is down -0.02% at 89.684, CAD/USD is down -0.1% at 0.795. 

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 higher, thou off highs from Asian session as US equity futures pare losses (S&P fut -8.25), 10Y 2.838% (-2bps) and the curve 2s/30s 3bps flatter.  The 2Y getting hit after Fed Meister remarked  that economic fundamentals are sound and that the latest mkt moves shouldn’t curb risk taking… Core EGBs mixed – gilts lower with yield curve flatter as UK inflation surprised to the upside for Jan, CPI 3.0% vs 2.6% exp, core 2.7% vs 2.5% in Dec –  probability of May rate hike inching higher to 75% from 73% pre-release. Crude lower, back below $60, as IEA said the pickup in shale production in the US could offset a forecasted rise in demand.  GOCs opening better bid, outperforming tsys in the short end. Provis  opening unch, supply expected in the 10Y. The CAD is steady vs the USD , 1.2598, yet is off 0.53% vs the euro close to recent lows 64.35 on crude weakness. 10Y CMB and FRN expected to launch today – CMB 2.35/28 36/35.5 unch.

News headlines

Stock Recovery Falters; Yen Rallies With Havens: Markets Wrap (Bloomberg) European shares edged lower following a late downswing in Asia and haven assets rallied as last week’s surge in volatility continued to hang over markets. The dollar weakened against most major currencies. S&P 500 futures pointed to a retreat in U.S. stocks at the market open after two days of gains. The yen headed for the strongest close since Nov. 2016 and the Swiss franc gained with gold. Bonds climbed, with the 10-year Treasury yield falling back after touching 2.89 percent on Monday. Metals found support from the weaker dollar. The pound advanced as data showed U.K. inflation held at 3 percent in January.

Trump’s $4.4 Trillion Budget Boosts Defense With More Red Ink (Bloomberg) President Donald Trump proposed a $4.4 trillion federal budget on Monday for fiscal 2019, a plan Congress is expected to all but ignore that would slash entitlements and other domestic programs in favor of higher spending on the military and immigration enforcement.

VIX Manipulation Costs Investors Billions, Whistle-Blower Says (Bloomberg) A whistle-blower told U.S. regulators that a scheme to manipulate the VIX, the volatility gauge thrust into the spotlight last week during a wild trading session, costs investors hundreds of millions of dollars a month. A Washington-based lawyer told the Securities and Exchange Commission and Commodity Futures Trading Commission — the nation’s top markets regulators — in a letter Monday that his client found a flaw that allows traders “with sophisticated algorithms to move the VIX up or down by simply posting quotes on S&P options and without needing to physically engage in any trading or deploying any capital.” Billions in purportedly ill-gotten profits have been scooped up by “unethical electronic option market makers,” according to the letter.

Zuma Defies ANC’s Call to Quit, Leaving South Africa in Limbo (Bloomberg) South Africans awoke to find their nation in limbo after President Jacob Zuma’s refusal to obey his ruling African National Congress’s request to resign voluntarily prompted its top leadership to order his removal from office. The ANC’s National Executive Committee decided to “recall” Zuma, 75, during a 13-hour meeting that ended early Tuesday, according to five people familiar with the matter who asked not to be identified because the decision hasn’t been made public. It marked the failure of efforts to convince Zuma to agree to an amicable transfer of power from his scandal-ridden administration to one headed by party leader Cyril Ramaphosa.

Dalio Says ‘We’re Past the Top’ in Bonds, Sees Rising Risks of a U.S. Recession (Bloomberg) Billionaire hedge fund manager Ray Dalio said the risks of a recession in the next 18 to 24 months are rising and bonds are past their peak. In a LinkedIn post on Monday, Dalio said the U.S. is further along in the business cycle than he thought and that it’s difficult to make a call on equities.

Stock futures little changed amid drop in oil prices (Reuters) Stock futures for Canada’s main stock index were little changed on Tuesday, as oil prices edged lower after the International Energy Agency estimated world crude supply could overtake demand this year.

TMX posts profit beat as lower expenses offset revenue fall (BNN) Toronto Stock Exchange operator TMX Group Ltd reported on Monday a higher-than-expected fourth-quarter profit as lower operating expenses before acquisition costs helped offset a fall in revenue. Total revenue fell 2 per cent to $170.9 million in the quarter ended Dec. 31 due to a 9 per cent decline in revenue from the global solutions, insights and analytics segment. Derivatives trading revenue also fell 3 per cent to $27.6 million in the period from a year earlier.

Sears pensioners try to recoup missing money by going after billions paid to shareholders (CBC) Sears Canada pensioners are heading to court to try to recoup close to $300 million they say is missing from their pension fund following the retailer’s demise. Representatives for Sears pensioners will ask Ontario Superior Court on Thursday to appoint a trustee to scrutinize nearly $3 billion paid in dividends to Sears shareholders — the biggest recipient of which was Eddie Lampert, CEO of U.S. hedge fund ESL Investments.

Overnight markets

Overview: US 10yr note futures are up 0.078% at 120-32, S&P 500 futures are down -0.4% at 2644.75, Crude oil futures are down -0.81% at $58.81, Gold futures are up 0.17% at $1328.7, DXY is down -0.47% at 89.783, CAD/USD is up 0.09% at 0.7944. 

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