Commentaires

Market Update Tsys trading firmer, near highs of session  on heavy volume (667k TY), curve steeper led by the 5Y10Y  2.834 (-0.7bps). EGBs higher amid talk of asset allocation trades out of stocks as European stocks are down 1.3%, crude  down another 0.65 @ 65.09. Bunds higher outperforming tsys, 10Y tsy/bund spd above 210 for the first time since last April, despite better than exp Eurozone/German Markit Service PMI. GOCs lower,~1.5bps wider vs tsys, 10Y 2.37%. Provis  0.5bps wider, Ontario longs trading down @ 69.5. Overall spreads have held in fairly well considering the volatility in rates. 

News headlines

Stock Selloff Deepens; Dollar Steady as Gold Gains: Markets Wrap (Bloomberg) Global stocks extended the biggest selloff since 2016, with European and Asian equities slumping and futures pointing to another leg down for U.S. share at the open. Treasuries and the dollar stabilized while oil fell and gold rose. Futures for both the S&P 500 Index and Dow Jones Industrial Average dropped, signaling more losses to come. The Stoxx Europe 600 Index retreated for a sixth day in the longest losing streak since November, following similar moves across Asia as both regions took their cue from the U.S. rout on Friday. Yields on core government bonds in Europe fell, and those of 10-year Treasuries also edged lower. The pound slumped after data and the yen gained with so-called safe-haven assets.

How Spiking Bond Yields Could Topple a Stock Market Rally (Bloomberg) You may have heard: bond yields are surging. It’s sowing extreme angst in U.S. equities, which last week fell the most in two years. And though the tumble in the S&P 500 may be nothing but a breather, concern is mounting that the Treasury market’s travails are becoming an inescapable portent for stocks. Selling resumed Sunday night as index futures opened lower, a week after yields on 10-year Treasuries climbed to a four-year high of 2.84 percent. Here are some thoughts on why that can be bad for equities.

Euro-Area Companies Boost Jobs as Output Nears 12-Year High (Bloomberg) Economic momentum in the euro area surged to the fastest pace in almost 12 years, pushing firms to pile on the most additional workers since the start of the millennium. A composite Purchasing Managers’ Index rose to 58.8 in January from 58.1 in December, IHS Markit said. That unexpectedly beat the previous flash estimate of 58.6, with the revision driven mainly by better-than-expected momentum in the service sector, led by Germany.

Merkel, SPD Push Ahead in Government Talks After Missed Deadline (Bloomberg) German Chancellor Angela Merkel resumed talks Monday on extending her government alliance with the Social Democratic Party, sending efforts to break the country’s political deadlock into overtime. With Merkel’s fourth term hanging in the balance, a Sunday target date for concluding a coalition pact came and went as the SPD sought concessions on labor and health-insurance rules. The prospects of a deal on Monday are “fifty-fifty,” Social Democrat lawmaker Karl Lauterbach, a key negotiator on health care, said on ZDF television.

Broadcom Raises Qualcomm Hostile Bid to About $121 Billion (Bloomberg) Broadcom Ltd. has raised its bid for Qualcomm Inc. to about $121 billion, in an attempt to force what could be the largest-ever technology deal. The new offer of $82 a Qualcomm share will be Broadcom’s final offer, according to a statement Monday. The deal would take the form of $60 in cash and the remainder in Broadcom shares.

Canada’s PM talks tough on NAFTA, repeats he could walk away (Reuters) Canadian Prime Minister Justin Trudeau took a tough line on NAFTA on Friday, repeating that he could walk away if he was not happy with talks to modernize a pact the United States contends needs major changes.

Scotiabank expects up to $6.5 billion excess capital by 2020 (Reuters) Bank of Nova Scotia expects to generate C$7 billion to C$8 billion ($6.5 billion) of excess capital by 2020, giving it the opportunity to return capital to shareholders or make acquisitions, its chief financial officer said.

‘Still early days’: Toronto housing braces for full impact of stress tests (BNN) Canada’s largest housing market has lived through its first month under new stress tests, and observers say while sales activity cooled dramatically in January it was far from a “dead market.” With some home purchases pulled forward into the final months of 2017 as buyers attempted to beat the Jan. 1 stress test deadline, Toronto’s market is being closely watched for signs of weakness.

Overnight markets

Overview: US 10yr note futures are up 0.155% at 120-30, S&P 500 futures are down -0.42% at 2745.25, Crude oil futures are down -0.66% at $65.02, Gold futures are up 0.18% at $1339.7, DXY is up 0.1% at 89.286, CAD/USD is up 0.01% at 0.8046.

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 slightly higher before payrolls, 10Y 2.78% (-1.2bps), futures near highs on heavy volume. European equities down 1.0%, S&P futures -16, gold weaker, crude unch. Deutsche Bank -5.0% on Q4 earnings & revenues miss. Core EGBs lower despite equities and weaker ECO data, 10Y gilt +3bp @ 1.56%. GOCs  slightly higher in line with tsys, 10Y 2.36%. Yesterday yields spiked higher, 10Y largest selloff since Sept to 2.38% the highest since May ’14, and underperforming the decline in tsys as the 30Y tsys rose above 3.0% for the first time since May. Provis fairly contained despite the move higher in GOC yields, rapid flattening in 10s30s.  

News headlines

Bond-Market Pain Reaches 30-Year Treasuries as Yield Breaches 3% (Bloomberg) The benchmark 10-year U.S. yield hurtled toward 2.8 percent, setting fresh highs since 2014, and the 30-year yield broke through 3 percent for the first time in eight months. Treasuries found little support throughout the trading session — no more month-end buyers like pensions and index funds to step in, and little sign of demand from Asian buyers. Most traders were content to let the bear-market narrative run its course after the worst January for the world’s biggest bond market since 2009.

Deutsche Bank Investors See No Silver Lining After Results Slump (Bloomberg) Deutsche Bank AG investors searching for good news after the bank’s third straight annual loss found little to give them optimism. The Frankfurt-based lender, which had already guided for a slump, surprised with revenue that fell to the lowest in seven years and declines at businesses from transaction banking to equity derivatives. Even cost control — a key feature of Chief Executive Officer John Cryan’s tenure — was worse than expected.

Dollar Gains Before Jobs Data; Stocks Extend Drop: Markets Wrap (Bloomberg) Stocks in Europe declined as a bond selloff deepened across the continent. The dollar rebounded from three days of losses and Treasuries steadied before U.S. jobs data that may give further clues on the Federal Reserve’s rate path. The Stoxx Europe 600 Index dropped for a fifth straight day, the longest streak since November, as heavyweights Deutsche Bank AG and BT Group Plc slumped after disappointing results. Germany’s DAX gave up the year’s gains, capping the worst weekly decline since 2016. Futures on the S&P 500 also slipped. Bund yields reached a two-year high as core European bonds fell along with gilts, while the euro and pound weakened. Japanese debt gained and the yen declined after the Bank of Japan intervened to stem the rise in rates.

Oil Near $70 as U.S. Shale Surge Looms Over Bullish Banks (Bloomberg) Brent crude traded near $70 a barrel as the specter of expanding U.S. supply was weighed against Wall Street banks’ growing faith in a price rally. The benchmark grade is on course to end the week lower, after being whipsawed by concern about rising American production and optimism over rosy outlooks painted by forecasters including Goldman Sachs Group Inc.

Scotiabank expects up to $6.5 billion excess capital by 2020 (Reuters)  Bank of Nova Scotia expects to generate C$7 billion to C$8 billion ($6.5 billion) of excess capital by 2020, giving it the opportunity to return capital to shareholders or make acquisitions, its chief financial officer said.

Canada manufacturing growth strongest in nine months in January (Reuters) The pace of growth in the Canadian manufacturing sector picked up at the start of the year to its highest level in nine months as measures of new orders and employment rose in January, data showed on Thursday.

Stock futures edge lower as gold falls (Reuters) Stock futures pointed to a slightly lower opening for Canada’s main stock index on Friday as spot gold prices edged lower, led by a rise in the U.S. dollar.

Overnight markets

Overview: US 10yr note futures are down -0.026% at 121-06, S&P 500 futures are down -0.62% at 2805, Crude oil futures are down -0.12% at $65.72, Gold futures are up 0.07% at $1348.9, DXY is up 0.2% at 88.846, CAD/USD is up 0.39% at 0.812.

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

Market Update Tsys weaker across the curve, 5Y above 2.55, 10Y 2.75%, futures near o/n lows on heavy volume (600k TY). Tsys lower with EGBs as Spanish & French supply weighed, 10Y bund above 0.73% . Stocks in Europe reversing gains unable to recover after a three day selloff, S&P futures -3.5, the USD also reversing post FOMC rally to trade close to low 88.96.  GOCs lower in line with tsys, 10s leading with 2s10s 2bps steeper, CGBS breaking Monday’s low below 132. Provis opening unch, MP long deal yest @ Onts +8, well received, now 7.5 bid.  Central One (AH) priced an 3Y FRN @ CDOR+35 which looked cheap vs DOLCN (BBB) 3Y @27 . BNS 10Y deposit note @ 80 traded slightly tighter in secondary. 

News headlines

Janet Yellen’s Fed Era Ends With Unanimous Vote of No Rate Hike (Bloomberg) Federal Reserve officials, meeting for the last time under Chair Janet Yellen, left borrowing costs unchanged while adding emphasis to their plan for more hikes, setting the stage for an increase in March under her successor Jerome Powell.

Euro-Area Manufacturers Start Year With Near-Record Momentum (Bloomberg) Manufacturing in the euro area grew at one of the fastest paces on record in January, with high demand fueling inflationary pressures. A Purchasing Managers’ Index for the sector slipped to 59.6 — matching a previous flash estimate — from 60.6 in December, IHS Markit said on Thursday. Companies raised selling prices by the most in almost seven years, partially due to a steep increase in energy costs, the London-based company said.

America Winning ‘Cold Currency War’ to Weaken Dollar, Pimco Says (Bloomberg) The U.S. is fighting — and winning — a “cold currency war” as it seeks to weaken the dollar, according to Pacific Investment Management Co. The greenback’s nearly 12 percent plunge since the start of 2017 is being fueled by fiscal and monetary policies as well as rhetoric intended to debase the U.S. currency, Pimco global economic adviser Joachim Fels wrote in a blog post. Central banks from Japan to Europe have refrained from pushing back too hard amid fears over increased protectionism from the Trump administration.

Europe Stocks Advance as Treasuries Lead Bond Drop: Markets Wrap (Bloomberg) Stocks in Europe and Asia kicked off February with gains, as investors decided the outlook for growth and corporate earnings was strong enough to quell concerns about the recent jump up in bond yields. Treasuries resumed a slide and the dollar edged higher.

Top iPhone Suppliers Warn of Slower Sales Ahead of Apple Results (Bloomberg) Qualcomm Inc. and Broadcom Ltd., key suppliers to Apple Inc., have implied that orders related to the iPhone tailed off more than normal at this time of year. Some of Apple’s iPhones are built with Qualcomm’s modems, which are chips for connecting to cellular networks. The San Diego-based chipmaker said Wednesday that orders from a large “thin modem” customer tailed off at worse-than-typical levels in the quarter. It was widely interpreted that the customer is Apple.

Canada PM says doesn’t think Trump will pull U.S. out of NAFTA (Reuters) Canadian Prime Minister Justin Trudeau on Wednesday said he did not think U.S. President Donald Trump would pull out of NAFTA, despite slow progress at negotiations to update the $1.2 trillion trade pact.

Canada economy picks up in Nov with broad-based growth (Reuters) The Canadian economy accelerated in November by the most in six months, with activity broad-based across a number of sectors including manufacturing and keeping the Bank of Canada on track to raise interest rates again before long.

Bitcoin skids to lowest since November after worst month in three years (Reuters) Bitcoin, the world’s largest cryptocurrency, skidded 9 percent on Thursday to its lowest level since late November, as a Facebook ban on cryptocurrency adverts and a growing regulatory backlash against the nascent market rattled investors.

Overnight markets

Overview: US 10yr note futures are down -0.141% at 121-13, S&P 500 futures are down -0.21% at 2819.75, Crude oil futures are up 1.13% at $65.46, Gold futures are down -0.01% at $1343, DXY is down -0.15% at 89, CAD/USD is up 0.06% at 0.8116.

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