Market Update

US tsys opening NY trading weaker, curve steeper with the 10Y note 2.44 (+3.4bps) . Nothing on the calendar today, mkt awaits Yellen semi-annual testimony tomorrow, PPI & CPI as well. JGBs lower, Japan Q4 GDP rose for the fourth straight quarter @ 1.0% ann., less than forecast (1.1%).  UK gilts, bunds weaker, peripheral spreads doing better. GOCs weaker, unch vs tsys for the most part . UK gilts, German bunds weaker, peripheral spreads doing better, also EGB supply from Austria & Italy weighing. Bloomberg highlighted Japan selling of treasuries in an article on Sunday, saying holdings declined by the most in four years in Dec.  The latest CFTC  COT report showed large specs covering shorts in 5s& 10s in the week ended last Tuesday , which covered Jan payrolls which showed the smallest increase in AHE since last August.

News headlines 

Global Stocks Keep Climbing as Treasuries Decline: Markets Wrap (Bloomberg) Rumors of the reflation trade’s demise seem to have been at least a little exaggerated, as investors shifted to equities from bonds. Global stocks continued a rally before data this week provides detail on the strength of U.S. consumer prices, and ahead of speeches from a range of Federal Reserve officials. Treasuries fell after data showed America’s biggest creditors ditching holdings. Iron ore surged and copper climbed, buoying commodity producers.

Oil falls on rise in U.S. drilling, selling ahead of OPEC report (Reuters) Oil prices fell nearly one percent on Monday in response to growing evidence that U.S. production is rising and as some investors unwound positions ahead of OPEC’s first report on compliance with its deal to cut production. Global benchmark Brent crude futures were down 45 cents at $56.25 a barrel at 0947 GMT and touched a session low of $56.04 a barrel. West Texas Intermediate (WTI) crude futures were down 41 cents at $53.45 a barrel and traded as low as $53.86 earlier in the day.

Saudi Arabia Tells OPEC It Cut Oil Output by Most in 8 Years (Bloomberg) Saudi Arabia told OPEC that it cut oil production by the most in more than eight years, going beyond its obligations under a deal to balance world markets. The kingdom reported that it reduced output by 717,600 barrels a day last month to 9.748 million a day, according to a monthly report from the Organization of Petroleum Exporting Countries. The group’s own analysts, who compile data from external sources, estimated that Saudi Arabia made a smaller 496,000 barrel-a-day cut — in line with last year’s supply agreement.

Dollar hits two-week high after U.S.-Japan meeting (Reuters) The dollar hit a two-week high against the yen on Monday as investors focused again on the U.S. reflation trade which dominated the aftermath of Donald Trump’s election in November but has stalled this year. All eyes are fixed on testimony by Federal Reserve chief Janet Yellen this week after signs that other policymakers at the U.S. central bank are leaning towards more hikes in interest rates this year than the two currently priced in by markets.

Trudeau visits U.S. with two aims: Push trade, avoid Trump’s ire (Reuters) When Canadian Prime Minister Justin Trudeau visits U.S. President Donald Trump on Monday, he will look to nurture economic ties while avoiding tensions over issues such as immigration on which the two are sharply at odds. Trudeau has taken a low-key approach toward Trump, a Republican who campaigned on a pledge to toughen U.S. immigration policies and renegotiate the North American Free Trade Agreement among Canada, the United States and Mexico.

Japan’s economy slows in Q4 on flat spending (Market Watch) Japan’s economy slowed again in the final quarter of 2016 as feeble spending by consumers took the shine off a pickup in exports and business investment, leaving growth lagging behind the pace targeted by Prime Minister Shinzo Abe’s administration. Japan’s real gross domestic product grew 1.0% on an annualized basis in the three months through December for the fourth consecutive quarter of expansion, the longest stretch of gains since 2013, according to Cabinet Office data released Monday. The expansion was slightly smaller than a forecast for 1.1% growth by economists surveyed by The Wall Street Journal.

Overnight markets 

Overview: US 10yr note futures are down -0.2129% at 124-17, S&P 500 futures are up 0.19% at 2317.25, Crude oil futures are down -0.74% at $53.46, Gold futures are down -0.7% at $1227.3, DXY is up 0.05% at 100.85, CAD/USD is up 0.16% at 0.7631.

US Economic Data

There is no major economic data release for today.

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

Market Update

Rates trading weaker, lower half of modest overnight range. Relative quiet with ongoing risk-on mood after US President Trump promised new tax measures Thursday. US Treasuries prices open NY weaker after overnight two-way flows. Trump/Japanese PM Abe joint news conference at 1pm ET. The Organization of Petroleum Exporting Countries (OPEC) has received an early and key endorsement of its effort to reduce the global oversupply of oil.International Energy Agency said OPEC had achieved 90% compliance with its agreement last year to lower production, best compliance in its history with respect to an agreement to curb production. Saudi Arabia appeared to cut more than was agreed on at the meeting with some key non-OPEC members in November.

News headlines 

Stock futures edge up after Wall St. hits record high (Reuters) U.S. stock index futures were slightly higher on Friday, a day after Wall Street hit record high on President Donald Trump’s promise to unveil a tax reform plan in the coming weeks. Trump called the tax plan as « phenomenal », but offered no specifics other than citing the need to lower tax burden on businesses.

Oil rises on signs of record compliance with OPEC output deal (Reuters) An OPEC-led production cut may well be accelerating a drawdown in global oil stocks that began last year, but implementing the reduction for just six months means the producer group will fall short of achieving its objective of rebalancing the market.

Euro zone, IMF agree on a common stance on Greece: official (Reuters) Euro zone lenders and the International Monetary Fund have reached agreed between themselves to present a common stance to Greece later on Friday in talks on reforms and the fiscal path Athens must take, euro zone officials said. Such a united stance would be a breakthrough because the two groups have differed for months on the size of the primary surplus Greece should reach in 2018 and maintain for years later as well as the issue of debt relief.

UK manufacturing jump shows economy ended 2016 strongly despite Brexit vote (Reuters) British manufacturing grew more strongly than expected in December, showing the economy remained resilient to the end of the year despite June’s Brexit vote shock, although 2017 looks likely to be more difficult. Official data released on Friday also showed the country’s smaller construction sector grew more quickly in December than many economists had forecast, while the trade deficit narrowed.

OpenText has been on a US$3 billion buying spree, and its CEO says it’s not done yet (Financial Post) Canada’s largest software company expects to get even bigger. Waterloo, Ont.-based Open Text Corp. has spent almost US$3 billion on acquisitions over the past three years, including its recently-closed purchase of Dell EMC’s enterprise content division. It was the company’s largest purchase, at US$1.62 billion, and it made OpenText the world’s largest vendor of software that helps businesses organize and store their documents.

Suncor says building delays behind cost hikes at Fort Hills oil sands (TheGlobeAndMAil) Suncor Energy Inc. is blaming construction delays and design changes for cost increases at its Fort Hills oil sands mine as the project nears completion amid uncertain oil markets. Suncor said the price tag for the sprawling Northern Alberta project now stands between $16.5-billion and $17-billion, up from $15.1-billion previously, after work on the project was halted for about a month during last year’s wildfires.

Overnight markets 

Overview: US 10yr note futures are down -0.1876% at 124-22, S&P 500 futures are up 0.13% at 2307.25, Crude oil futures are up 1.49% at $53.79, Gold futures are down -0.65% at $1228.8, DXY is up 0.24% at 100.89, CAD/USD is down -0.51% at 0.7645.

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