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Market Update

US tsys reversing earlier gains, trading near the lows, US 10Y 2.43 (+2.4bps), pre auction shorts going into 1PM $24bln 3Y auction.  European govt bonds mixed,  bunds lower despite very weak Dec Ind Prod (-3.0% vs 0.3% exp). Gilts lower, disappointing BRC retail sales, short end underperforming in weak 2019 Gilt reopening. Greece wider, 2Y approaching 10%  on ongoing tensions with EU over bailout targets. In Canada, GOCs lower, slightly underperforming as the curve steepens , 10Y 1.72%. Trade surplus showed surprising strength for the second month in a row, $923mln in Dec after $1.01bln (revised higher) in Nov. Energy exports surged 16% on rising WTI yet non energy exports were down 5.2% which is sure to attract attention from the BOC. Provis openign unch, Ontario issued a new 10Y bond yest  – $1bln June 27s @ 78.5 over the current 10Y which looked expensive @ 7.7 vs Ont 26s, the roll widening to 8.3/8.0 this morn.

News headlines 

Dollar Jumps, Gold Falls as Demand for Havens Ebbs: Markets Wrap (Bloomberg) The dollar strengthened against all of its major peers on the prospect of a U.S. interest rate increase as soon as March. Weakness in the euro helped European stocks shrug off some disappointing corporate results. The Bloomberg Dollar Spot Index rose the most in almost two weeks after a member of the Federal Reserve indicated the first rate increase of Donald Trump’s presidency remains “on the table” this quarter. Europe’s main equities gauge rose even as bellwethers BP Plc and BNP Paribas SA reported earnings that missed estimates. Gold slipped from the highest since November.

China Jan FX reserves fall below $3 trillion for first time in nearly 6 years (Reuters) China’s foreign exchange reserves unexpectedly fell below the closely watched $3 trillion level in January for the first time in nearly six years, though tighter regulatory curbs appeared to making some progress in slowing capital outflows. China has taken a raft of steps in recent months to make it harder to move money out of the country and reassert a firmer grip on its faltering currency, even as U.S. President Donald Trump steps up accusations that Beijing is keeping the yuan too cheap.

IMF says Greece should meet lower fiscal surplus target (Reuters) The International Monetary Fund said on Monday that Greece’s economy would only grow by just under 1.0 percent in the long run given the constraints of its bailout program, but should meet the fiscal surplus target preferred by most IMF directors. In its annual review of Greece’s economic policies, the IMF said most of its board directors favor a Greek fiscal surplus target of 1.5 percent of gross domestic product by 2018, while some directors favor the higher 3.5 percent target sought by Greece’s European lender group.

OPEC Output Cuts End Big Oil’s Trading Bonanza (Bloomberg) The oil-trading boom that cushioned the profits of Royal Dutch Shell Plc and BP Plc through the price slump of 2015 and early 2016 is over. BP said on Tuesday it made a “small” loss trading oil in the fourth quarter, while Shell last week said trading profits “flattened” in late 2016. The fall off in trading contributed to worse-than-expected fourth-quarter profits at Europe’s largest oil and gas producers.

Goldman Sachs Economists Are Starting to Worry About President Trump (Bloomberg) Just a few weeks ago, Wall Street analysts were busy boosting their economic forecasts on the expectation that President Trump would implement sweeping corporate-tax reform, a rollback of regulations, and new fiscal stimulus. Two weeks into his term and the president has been focused primarily on immigration and trade, causing a reevaluation among analysts at some banks that harks back to pre-election concerns about Trump’s uncertain effect on markets and U.S. economic growth.

Trump’s Dodd-Frank Do-Over Diverted to Slow Lane With Obamacare (Bloomberg) President Donald Trump’s pledge to dismantle the Dodd-Frank financial overhaul is colliding with the same reality as his pledge to gut Obamacare: The Republican majority in Congress can’t decide how to make it happen and Democrats are vowing to fight.

Overnight markets 

Overview: US 10yr note futures are down -0.075% at 124-27, S&P 500 futures are up 0.24% at 2292, Crude oil futures are down -0.66% at $52.66, Gold futures are down -0.19% at $1229.8, DXY is up 0.72% at 100.63, CAD/USD is up 0.63% at 0.7595.

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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

US tsys higher, accelerating higher in early NA trade with EGBS, tsy yields 2-4bps lower led by the 10Y @ 2.42 (-4.1bps). Tsys outperforming European govt bonds despite concerns over article 50 debate, widening in EU peripherals, with bund-BTP touching 200bps. In Japan, JGBs fell, yields 1-3bps higher with the curve 2bps steeper – Japan wages rose at the fastest pace since 2010 last yr according to data released Friday. GOCs higher in line with tsys, provis unch with new Ont 10Y (2027) expected this week. The BOC auctions $400mln in 2047 RRBs this Wed with long breakevens under some pressure since y/e.

News headlines

Currencies, Bonds Underscore Rising Political Risk: Market Wrap (Bloomberg) Caution crept through European bonds and currencies after prospective French presidential candidate Marine Le Pen unveiled a manifesto pledge to take her country out of the euro, underscoring political risk in the world’s biggest single market. Oil and gold tested highs.

Oil steadies as Iran and OPEC offset by U.S. drilling rebound (Reuters) Oil steadied near $57 barrel on Monday as OPEC supply cuts and rising tensions between the United States and Iran were countered by ample inventories and signs that higher prices will revive U.S. output.

Euro fades in face of French election risks (Reuters) The euro fell around half a percent on Monday as concerns over French politics ahead of presidential elections set for April and May drew investors’ focus back to a year of political risks to Europe’s established order. The dollar was broadly steadier after a poor set of wages data on Friday quashed speculation of a near-term rise in U.S. interest rates and sealed the currency’s fourth straight weekly fall, its worst start to a year in three decades.

German Factory Orders Surge Most Since 2014 on Investment (Bloomberg) German factory orders rose the most in two and a half years in December amid a surge in investment-goods demand, suggesting that the strong run of Europe’s largest economy at the end of the year is set to continue.

China services sector extends strong growth in January but pace eases: Caixin PMI (Reuters) Growth in China’s services sector remained robust in January as companies reported a solid increase in orders, though the pace of expansion eased from the previous month, a private business survey showed.

Scottish independence vote may be decided ‘within weeks’ – Sturgeon ally (Reuters) A decision on calling a new Scottish independence referendum could be made within weeks, said a Scottish Greens lawmaker whose party is a key ally of Scottish First Minister Nicola Sturgeon.

Overnight markets 

Overview: US 10yr note futures are up 0.4526% at 124-27, S&P 500 futures are down -0.15% at 2287.5, Crude oil futures are down -0.3% at $53.67, Gold futures are up 0.79% at $1230.4, DXY is up 0.26% at 100.13, CAD/USD is up 0.37% at 0.765.

US Economic Data

There is no major economic news for today.

 Canadian Economic Data 

Bloomberg Nanos Confidence, Feb 3, (prior 56.1)

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

Market Update

US tsys shooting higher after stronger headline employment (227k vs 180k) yet weaker AHE with downward revision, , 10Y 2.45% (-3bps).  Quiet overnight session with mkts awaiting payrolls, Reaction in tsys was muted in Asia despite the PBOC tightening monetary policy in a surprise move. The JPY and JGBs were volatile as the BOJ stepped in to buy to control rising yields, having to step in twice as the first operation failed to stem the decline in JGB prices forcing the BOJ to pay thru the offered side for bonds. Euro govt bonds lower, peripheral yields higher, the bund curve continuing to bear steepen on concerns of rising inflation – Eurozone inflation rose to the highest in four years in Jan to 1.8% as measured by the MUICP flash estimate. GOCs higher post US payrolls. Two year Cda auction yest, new May 19s went well, the WI/2Y roll 0.2bps narrower @ 5.6bps – still looks cheap to us. Provis grinding tighter basically all week, Ont 26s trading up at 78 – no domestic supply and a well received 5Y global adding to positive momentum in Ont spds.

News headlines 

Dollar Advances With Stocks Before Payrolls Data: Market Wrap (Bloomberg) The dollar climbed and European stocks gained before a report economists forecast will show employment growth in the U.S. expanded at a faster pace in January. Bonds in Europe slid, while oil advanced. Bloomberg’s Dollar Spot Index rose, paring a sixth weekly decline, its longest losing streak since 2010. Europe’s Stoxx 600 index advanced and the region’s bonds dropped. Britain’s pound dropped against most of its major peers after growth slowed in the service industry amid surging costs.

China raises short-term interest rates in fresh tightening signal (Reuters) China’s central bank surprised financial markets on Friday by raising short-term interest rates on the first day back from a long holiday, in a further sign that it is slowly moving to a tighter policy bias as the economy shows signs of steadying. The People’s Bank of China (PBOC) said it raised the interest rate on open market operation reverse repurchase agreements (repos) by 10 basis points, effective on Feb. 3.

Oil pushes higher on worries over new U.S. sanctions on Iran (Reuters) Oil prices edged higher on Friday in response to the possibility of new sanctions on Iran after U.S. President Donald Trump said “nothing is off the table” in dealing with the country after its test launch of a missile.

Euro may be too weak for Germany but too strong for others (Reuters) In an attack on Germany, U.S. President Donald Trump’s top trade adviser said the euro was “grossly undervalued”, a charge which may ring true for the German economy but not for the 19-member currency zone as a whole.

Gold Demand Rises to Three-Year High on Political Upheaval (Bloomberg) Gold demand rebounded to a three-year high in 2016 as investor concerns over political issues including Brexit spurred demand for a haven. Purchases through exchange-traded funds helped global demand climb about 2 percent to 4,309 metric tons last year, the World Gold Council said in a report Friday. The recovery in ETFs offset a decline in coin and jewelry demand and reduced buying by central banks.

Pound Falls as Services PMI Shows Loss of Momentum in Economy (Bloomberg) The pound extended its first weekly loss since early January after data showed that the services sector, one of the main engines of the British economy, is growing at a slower pace than expected.

Trump’s call to speed up NAFTA talks puts Canada on guard (GlobeandMail) U.S. President Donald Trump announced he wants to “speed up” renegotiation of NAFTA, an accelerated approach that could ramp up the bargaining pressure on Canada as the country tries to find a way to emerge unscathed from a rewriting of the rules of commerce with its largest trading partner.

Overnight markets 

Overview: US 10yr note futures are up 0.2764% at 124-23, S&P 500 futures are up 0.4% at 2284.5, Crude oil futures are up 0.45% at $53.78, Gold futures are down -0.28% at $1216, DXY is up 0.17% at 99.962, CAD/USD is down -0.05% at 0.7681.

US Economic Data 

Canadian Economic Data 

There is no major economic data release 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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230