Comments

Market Update Tsys trading lower, 10Y above 2.65% (+3.7bps), curve 2bps steeper, above avg volume in TY futures (380k). Tsys pressured by UK gilts after strong UK labor mkt data (102k vs -12k exp) – 10Y gilt above 1.40% for the first time since Feb. USD fell to a new low (DXY -0.64%) after Mnuchin said a weaker USD ‘is good for us’.  The Eurozone PMI rose to 58.6 in Jan, the highest since 2006 and above 57.9 consensus. In Canada GOCs are lower, outperforming tsys in 2s & 30s (~2bps) with 10s wider on the curve +2bps vs 2s30s, the cheapest since August. OIS mkt pricing in  ~40% odds of a rate hike at the April BOC meeting vs 98% pre rate hike last Wednesday.  

News headlines

Trump Team at Davos Backs Weaker Dollar, Sharpens Trade War Talk (Bloomberg) President Donald Trump’s top economic advisers set the stage for the rollout of his “America First” manifesto on the world stage. A day before Trump’s scheduled arrival in the Swiss ski resort of Davos for the World Economic Forum’s annual meeting, Treasury Secretary Steven Mnuchin endorsed the dollar’s decline as a benefit to the American economy and Commerce Secretary Wilbur Ross said the U.S. would fight harder to protect its exporters.

Euro-Area Economy Opens 2018 With Best Growth in Almost 12 Years (Bloomberg) The euro-area economy strengthened further at the start of 2018, bringing with it signs of a long-awaited pickup in inflation. The improvement lifted IHS Markit’s Purchasing Managers’ Index to 58.6 from 58.1 in December, higher than economists had forecast. The gauge is now at a level suggesting quarterly economic growth of close to 1 percent, according to the report.

U.K. Labor Market Unexpectedly Strong as Employment Rises (Bloomberg) The U.K. labor market displayed unexpected resilience in the three months through November as employment jumped and wage growth ticked higher. The number of people in work rose 102,000 to a record high, confounding market expectations that employment would fall. Basic pay growth quickened to 2.4 percent, the highest in almost a year, though it still lags well behind the rate of inflation.

Dollar Woes Deepen as Stocks Edge Up; Gold Rises: Markets Wrap (Bloomberg) There was no respite for the dollar on Wednesday, with the greenback extending the decline that’s taken it to the lowest level in three years. U.S. stock futures advanced as European equities nudged higher, and gold added to recent gains.

China Vows Further Opening as U.S. Talks Trade War: Davos Update (Bloomberg) Billionaires, world leaders and investors are gathered in Davos, Switzerland, for the World Economic Forum’s annual meeting to hobnob and discuss topics ranging from the global economy and sexual harassment, to the risks and opportunities of artificial intelligence. Not to mention hear a speech by President Donald Trump.

NAFTA negotiators open key round of talks amid upbeat signs (Reuters) Officials opened a key round of negotiations to modernize NAFTA on Tuesday amidst optimistic signs, as U.S. President Donald Trump said the talks were going “pretty well” and Canada’s chief negotiator said he had high hopes for progress.

U.S. Senate approves Powell to follow Yellen as Federal Reserve chair (CBC) The U.S. Senate on Tuesday approved President Donald Trump’s selection of Jerome Powell to be the next chairman of the Federal Reserve beginning next month. Senators voted 85-12 to confirm Powell to lead the nation’s central bank, a post that is considered the most powerful economic position in government. 

Overnight markets

Overview: US 10yr note futures are down -0.166% at 122-07, S&P 500 futures are up 0.31% at 2848.25, Crude oil futures are up 0.29% at $64.66, Gold futures are up 1.14% at $1357, DXY is down -0.7% at 89.494, CAD/USD is down -0.76% at 0.8114.

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 trading higher, TY futures near top of overnight range on relatively strong volume (405k), 10Y 2.622%. Tsys rising in Asia after the BOJ announced unch policy, maintaining stimulus with Kuroda stressing inflation is still far from 2.0% target. Trump announced tariffs on imported solar panels & washing machines.  Equities higher in Europe, thou S&P futures are lower (-2.0), giving up earlier gains, while crude remains close to $64 before inventory data later this morning. GOCs higher in line with tsys, 10Y 2.225% after reaching briefly above 2.25% yest aft.  Provincials unch yest after ~4bp widening off the lows of last week. We like 5Y provis after the rise in underlying GOC yields, while provi spds have lagged the narrowing in IG, particularly over 5Y product in ‘high beta’ sectors like reits/telcos.  If rates consolidate around these levels, there is an oportunity to play the bank sub/senior basis which will narrower since y/e, we feel has room to narrow further. 

News headlines

Trump Signs Bill Ending Shutdown as Immigration Battle Looms (Bloomberg) President Donald Trump signed a government spending bill Monday evening that ends a three-day partial shutdown, the White House said in a statement. But that leaves the fight over a politically charged immigration proposal unresolved for at least another three weeks.

Trump Marks Second Year With Asia Tariffs World Has Feared (Bloomberg) After a year of chest thumping, President Donald Trump has finally delivered the type of trade blow his political base has been craving. Trump slapped tariffs on imported solar panels and washing machines on Monday in his first major move to level a global playing field he says is tilted against American companies. The decision came two days after the one-year anniversary of his inauguration as he prepares to travel to the World Economic Forum in Davos, Switzerland, where his “America First” stance is likely to be at odds with the global business and political elite.

Kuroda Pushes Back Against Speculation Tightening Is Near (Bloomberg) Governor Haruhiko Kuroda delivered a message to investors speculating that the Bank of Japan might be nearing the start of policy normalization: Not so fast. Kuroda said the BOJ wasn’t in a position to even consider exiting its current policy, after it maintained its massive stimulus program and kept its inflation and economic forecasts unchanged earlier on Tuesday.

Bonds Advance as Stock Rally Sputters; Oil Climbs: Markets Wrap (Bloomberg) Government bonds advanced after the Bank of Japan signaled the age of easy money isn’t over yet, while U.S. stock futures and European equities pared a gain as optimism around corporate earnings and the end of the shutdown began to ebb. Gold and oil rose.

Netflix crosses US$100B market cap as subscribers surge (BNN) Netflix Inc snagged two million more subscribers than Wall Street expected in the final three months of last year, tripling profits at the online video service that is burning money on new programming to dominate internet television around the world.

IMF raises outlook for Canadian economy, upgrades global economic projections (CBC) The International Monetary Fund raised its estimate for economic growth in Canada this year as it said U.S. tax cuts are expected to help boost global economic growth. The international lending agency said Monday it now projects Canada’s economy will grow 2.3 per cent this year, up from an estimate of 2.1 per cent in October. Growth for 2019 is forecast at 2.0 per cent, up from an earlier projection for 1.7 per cent.

BMO and China’s largest bank ICBC expand tie up to sell more products (CBC) The Bank of Montreal has signed a new memorandum of understanding with China’s largest state-owned bank, Industrial and Commercial Bank of China Ltd. (ICBC), in an effort to expand its footprint in the world’s second largest economy. The new agreement will allow BMO and ICBC to cooperate on everything from asset management to corporate financing and trade in China and Canada.

Overnight markets

Overview: US 10yr note futures are up 0.282% at 122-14, S&P 500 futures are down -0.08% at 2833, Crude oil futures are up 0.93% at $64.16, Gold futures are up 0.34% at $1336.4, DXY is down -0.08% at 90.332, CAD/USD is up 0.15% at 0.8024.

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 trading mixed, short end yields slightly higher, 10Y 1bp lower @ 2.65%, longs outperforming with the 30Y -2bps @ 2.916%. Above avg volume in TY futures (>400k). US shutdown likely to delay release of key retail sales, GDP data.  US equity futures back to unch, recovering earlier losses. Core EGBs lower, 10Y gilt +3bps @ 1.37% highest since Oct, bunds lower despite positive news on German govt coalition over the weekend.  GOCs opening unch, yields slightly lower in longs. GOC 5s30s steepening 2bps Friday after reaching new narrows in wake of BOC hike, similar move in US tsy curve.  OIS mkts are pricing in at least two more 25bp rate hikes by year end which would put the o/n rate at 1.75%. NAFTA  talks start this Tuesday in Montreal. Provi spds ~2bps wider last week with resumption of supply, despite 5-7 bp rise in underlying GOC yields.  

News headlines

Shutdown Extends Into Third Day as Senate Fails to End Impasse (Bloomberg) Lawmakers failed to negotiate an end to the government shutdown Sunday despite a bipartisan effort to broker a deal, raising the political stakes as federal agencies begin closing at the start of their normal workweek.

OPEC, Russia Signal Global Oil Alliance May Endure Past 2018 (Bloomberg) OPEC and Russia reaffirmed that they’ll persevere with oil-production cuts until the end of the year to clear a global glut and signaled their readiness to cooperate beyond that.

Merkel Closes in on Fourth Term With Her Familiar Coalition Ally (Bloomberg) Chancellor Angela Merkel moved forward in her bid to form a fourth-term government after her prospective coalition partner agreed to shelve its misgivings and enter negotiations on a common policy platform for Germany.

Dollar Slips as Shutdown Drags On; Stocks Mixed: Markets Wrap (Bloomberg) The dollar declined and Treasuries halted a recent selloff as investors assessed the impact of the U.S. government’s partial shutdown. European and Asian equities were mixed.

The Global Economy Is Doing Just Fine, But the Davos Elite Is Worried (Bloomberg) If things seem too good to be true in the global economy, they probably are. That’s according to some of the investors, Nobel laureates and academics attending the World Economic Forum’s annual meeting in Davos, Switzerland, which kicks off on Monday.

Sobeys CEO vows to provide best home delivery ‘on the planet’ with Ocado partnership (BNN) Sobeys is vowing to step up its game online, announcing a deal on Monday that its CEO says will give it the best delivery service “on the planet”. The Canadian supermarket operator is teaming up with Hatfield, U.K.-based Ocado to launch a new digital shopping platform. Under the agreement, Ocado will work exclusively with Sobeys on its web site, a new automated warehouse, and delivery management.

Canada PM to boost support for NAFTA in U.S. as talks intensify (Reuters) Canadian Prime Minister Justin Trudeau will visit three major U.S. cities next month to bolster support for NAFTA as negotiators revising the trade pact tackle major differences, officials said on Friday.

Halliburton posts wider fourth-quarter loss on tax provision (Reuters) Halliburton Co (HAL.N) reported a wider loss in the fourth quarter, as it set aside $1.05 billion for income tax payments related to recently-passed changes in U.S. corporate taxation.

Overnight markets

Overview: US 10yr note futures are down -0.102% at 122-05, S&P 500 futures are down -0.05% at 2809.5, Crude oil futures are down -0.09% at $63.31, Gold futures are down -0.15% at $1331.1, DXY is down -0.02% at 90.557, CAD/USD is down -0.15% at 0.8016. 

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