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Market update

US tsys trading lower after fairly subdues session with little reaction to the 6k jump in initial claims & better than exp Q4 productivity (-2.2 vs -2.9). Euro stocks lower, Asian stocks higher for a second day, crude lower @ $34.40.   Aussie govt bonds lower with the 2Y ~15 bps higher since Monday’s RBA meeting followed by better than exp Q4 GDP. GOCs are unch, 1bp tighter vs tsys, longs trading heavy with 10/30 back above 80bps. Yest $400mln RRB 47 auction went very well , breakevens rallying ~9bps since yest with shorter RRBs lagging. The positive momentum in provis continuing after yesterday’s 2-3bp rally – Ont 26s are 108.5 from 112 at issue yest.

News headlines

• ECB Brainstorms as Draghi Seeks Boost That Won’t Hurt Banks (Bloomberg) One week before a long-awaited stimulus decision, European Central Bank officials are privately deliberating over how to enhance their monetary policy stance without maiming its transmission. Committees studying how to mitigate the impact on banks have prepared potential measures that range from variations on a tiered deposit rate to techniques for countering the impact of stimulus on excess liquidity, according to people familiar with the discussions. The suggestions could still be rejected by the Executive Board or turned down at the Governing Council’s March 10 meeting. An ECB spokesman declined to comment.
• European Stock Rally Runs Out of Steam; Oil Falls, Bonds Rise (Bloomberg) European stocks halted their longest rally since October, oil fell from an eight-week high and bonds in the region rose as investors awaited fresh indications of the strength of U.S. economic growth. A five-day winning streak in European stocks came to a stop, with the U.K.’s Whitbread Plc and Germany’s Evonik Industries AG falling after earnings. Standard & Poor’s 500 Index contracts were little changed. Italian, Spanish and Portuguese bonds climbed. Russia’s ruble weakened as Brent ended a three-day rally. Asian shares and currencies held gains along with industrial metals amid speculation of increased Chinese stimulus.
• China Policy Moves Risk Property Price Bubble, PBOC Adviser Says (Bloomberg) China’s monetary policies have encouraged investors to pour money into real estate, inflating prices in cities such as Beijing, Shanghai and Shenzhen and increasing the risk that bubbles could form, central bank policy adviser Bai Chongen said in an interview. At the same time, smaller property markets are struggling with excess inventory, making it difficult to craft a unified policy response and requiring careful coordination with fiscal measures, he said Wednesday on the sidelines of a joint symposium hosted by the People’s Bank of China and the Federal Reserve Bank of New York in Hangzhou.
• Scotiabank urges Ottawa to spend $20-billion in rapid stimulus (TheGlobeAndMail) Bank of Nova Scotia wants the federal government to pump $20-billion into economic stimulus by mid-2017 to help get Canada out of the economic funk sparked by the collapse in oil prices. That, Scotiabank said last night, would equal 1 per cent of gross domestic product and would play into its new economic forecast for GDP growth of 1.3 per cent this year and 2.5 per cent next.
• Trudeau’s Message to World: Let Government Spending Do the Work (Bloomberg) Canadian Prime Minister Justin Trudeau is urging global leaders to rely more on government spending and less on monetary policy to spur growth as he prepares a budget that will push his country into deficit. In a wide-ranging interview Wednesday in Vancouver, Trudeau highlighted the importance of infrastructure spending and measures to bolster incomes of middle classes he says are critical to driving growth. He also defended his plan to go willingly into the red.
• Fastest-Growing Region in the Americas Is Loving the Oil Slump (Bloomberg) The slump in raw materials prices that has hurt Brazil, Chile, Peru and Colombia is leaving Central America unscathed. The region is bucking a trend of sluggish growth in the rest of Latin America as cheaper crude prices cut its fuel bills and faster growth in the U.S. boosts remittances and tourist spending. The region will grow by 4.2 percent this year, led by Panama’s 6.3 percent expansion, according to forecasts from the International Monetary Fund. That compares to an 0.8 percent growth forecast for Latin America as a whole.
• S. fourth-quarter productivity revised to show a less steep decline (Reuters) U.S. nonfarm productivity fell less steeply than previously thought in the fourth quarter, but still pushed up labor-related costs as companies employed more workers to raise output. The Labor Department said on Thursday that productivity, which measures hourly output per worker, decreased at a 2.2 percent annual rate and not the 3.0 percent pace it reported last month. It was still the biggest drop since the first quarter of 2014. Economists polled by Reuters had expected fourth-quarter productivity would be revised to show it contracting at a 3.2 percent rate. Productivity increased at a 2.0 percent rate in the third quarter and rose only 0.7 percent in 2015 – the smallest gain since 2013.

Overnight markets

• Overview: US 10yr note futures are down -0.0483% at 129-9, S&P 500 futures are down -0.1% at 1981.5, Crude oil futures are down -0.69% at $34.42, Gold futures are up 0.18% at $1244, DXY is down -0.24% at 97.974.

US Economic Data 

• Initial Jobless claims was at a level 278k weaker than expected by the analysts and up 6k from prior week
• Continuing Claims number came in at a level of 2257k, worse than the analyst estimate and up 4k from prior week.
• Markit US Services PMI will be released at 9:45 AM
• Markit US Composite PMI will be released at 9:45 AM
• ISM Non-Manufacturing Composite index will be released at 10:00 AM
• Factory Orders will be released at 10:00 AM
• Durables Goods Orders will be released at 10:00 AM
• Durables Goods Ex Transportation will be released at 10:00 AM

Canadian Economic Data 

• There is no major 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, 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 opening lower, US 10Y 1.84, curve steeper after ADP came in above exp (214K vs 190K) thou Jan was revised lower. Tsy 10Y futures confined to narrow range most of the o/n session with weaker bias as. European stocks higher for a 5th day, Crude -1.3% on API inventory data. Asian stocks sharply higher – Australia Q4 GDP rose 0.6% vs 0.4% exp. Euro continues to weaken on the back of expected ECB stimulus at next Thursday’s meeting. Core European bonds lower on better Aussie & Swiss (Q4 GDP) data, yet bunds recovered losses & curve steepened on German 5Y auction which came at lowest yield on record -0.36%. GOCs lower, curve ~1bp steeper – this aft the BOC auctions $400mln in 2047 RRBs. 30Y breakevens have rallied over the past month by ~15bps and at 140bps are sitting at two month highs – yet this is still ~ 60bps lower than the 2.0% headline & core inflation rate. Provis opening another 1bp tighter, Ont 46 118.5/118, Ont 25s 108.5/108 – rumoured supply yest did not materialize so today we expect Ont , Sak , Mani to take advantage of good mkt conditions.  Yest Choice Properties  came with 7Y & 30Y bond @ 216 & 325 – both of which we did not view as large enough concessions for a high beta BBB corp. The bonds broke 3bps tighter on the break.

News headlines

• Coeure Says ECB Watching Impact of Negative Rates on Banks (Bloomberg)  The European Central Bank is monitoring the risk that negative rates will hurt bank profitability while sticking to its commitment to deliver price stability first, Executive Board Member Benoit Coeure said. “We are well aware of this issue,” Coeure said in a speech in Frankfurt on Wednesday. “We are studying carefully the schemes used in other jurisdictions to mitigate possible adverse consequences for the bank lending channel. But I also think we need to qualify the narrative that banks’ challenges flow largely from our monetary policy.”
• How `Brexit’ Puts European Institutions at Risk of Downgrade (Bloomberg) The consequences of a “leave” vote in the U.K.’s June 23 referendum on its European Union membership may spread beyond Britain’s shores, according to Societe Generale SA. While the U.K.’s assets will depreciate should the nation vote to sever a more-than-40-year-alliance with the continent, its close links to the rest of the bloc’s financial entities also leave the EU vulnerable. The EU’s ratings could suffer and the European Investment Bank, which helps provide financing for projects in the region, is “particularly at risk” in the event of a “Brexit,” Cristina Costa, a Paris-based analyst at SocGen wrote in a note to clients.
• U.S. Index Futures Pare Declines With Crude Before ADP Jobs Data (Bloomberg) U.S. index futures were little changed after trimming declines with crude oil, following a surge in shares Tuesday that sent the Standard & Poor’s 500 Index to an almost two-month high. Contracts on the S&P 500 expiring in March fell 0.2 percent to 1,975 at 7:53 a.m. in New York. In yesterday’s votes, Donald Trump and Hillary Clinton solidified their positions in the race to their parties’ presidential nominations. Dow Jones Industrial Average futures lost 0.1 percent to 16,825. West Texas Intermediate crude futures declined 1.4 percent, trimming an earlier 2.5 percent slide. A gauge of growth in February private payrolls is due at 8:15 a.m.
• Moody’s cuts China outlook on eve of NPC, cites reform, fiscal risks (Reuters) Moody’s downgraded its outlook on Chinese government debt to “negative” from “stable” on Wednesday, citing uncertainty over authorities’ capacity to implement economic reforms, rising government debt and falling reserves. The Moody’s downgrade comes just days before the National People’s Congress (NPC) is due to vote on China’s 13th five year plan, a closely held development blueprint for the next five years, which policymakers began formally drafting in 2015.
• Japan PM Abe adviser: G20 statement not a restriction on BOJ (Reuters) The Group of 20’s agreement that monetary policy alone cannot lead to balanced growth does not place any restrictions on the Bank of Japan’s ability to expand its negative interest rate policy, an adviser to Japan’s prime minister said on Wednesday. The BOJ should calmly study the impact of its negative rate policy, which came into effect last month, when deciding its next move, Masahiko Shibayama told Reuters in an interview.
• Oil below $37 as U.S. inventory rise counters output freeze plan (Reuters) Oil edged further below $37 a barrel on Wednesday as an industry report showing a rise in U.S. crude stockpiles to a new record countered support from producer efforts to tackle a supply glut. U.S. crude inventories jumped by 9.9 million barrels last week, the American Petroleum Institute (API) said on Tuesday, much more than the 3.6-million-barrel increase analysts had forecast.
• Oil price slide casts shadow over Canada’s banks, despite solid quarter (Financial Post) Canada’s big banks wrapped up the first quarter of the fiscal year with increased profits and widely expected dividend hikes. But the early impact of the oil rut was evident, with increased provisioning and reports of growing credit card and loan delinquencies in the hardest hit provinces, primarily in Western Canada.

Overnight markets

• Overview: US 10yr note futures are down -0.1447% at 129-13, S&P 500 futures are down -0.29% at 1972.25, Crude oil futures are down -1.22% at $33.98, Gold futures are up 0.12% at $1232.3, DXY is up 0.14% at 98.493.

US Economic Data 

• MBA Mortgage Applications growth was -4.8%, up 0.5% from prior week
• ADP Employment Change was released at a level of 214K, beating the estimate by 24k and up 21k from prior month
• ISM New York will be released at 9:45 AM
• S. Federal Reserve will release Beige Book at 2:00 PM

Canadian Economic Data 

• There is no major 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, 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 mixed, short end modestly lower ,longs underperforming US 10Y 1.748 (-1.8bps). Tsys moving lower as stock futures improved o/n, Euro sotxx up ~1.0%. ISM Manufacturing coming up at 10:00EST after yest Feb Chicago PMI came in much weaker than exp (47.6 vs 52.5) – yet the index has been fairly eratic of late while Edmunds.com expects the best Feb for auto sales in 15 yrs.  GOCs are higher , spds narrower vs tsys despite Q4 GDP coming in 0.8% vs unch exp. Provis starting the day ~0.5bps weaker on supply rumours, with Sask 10Y, QC 10Y reopening, …

News headlines

• OPEC watching Iran, Russia, unlikely to cut output in June (Reuters) OPEC is very unlikely to cut output at its next meeting in June, even if prices remain extremely low, according to OPEC sources and delegates, as it will be too early to say how fast Iranian output is rising. The sources, which include officials from the Middle East, say OPEC countries such as Saudi Arabia also want to test Russia’s commitment to freezing output before taking any further steps to stablize prices.
• S. Index Futures Signal Equities to Rebound After Monthly Drop (Bloomberg) U.S. stock-index futures rose, indicating equities will rebound after capping their third consecutive month of losses, amid investor optimism about central bank support. Standard & Poor’s 500 Index contracts expiring in March rose 0.8 percent to 1,945.25 at 7:29 a.m. in New York. Equities erased a monthly gain yesterday, as banks and health-cares stocks put the brakes on a two-week rebound. While the index is still 5.6 percent above a Feb. 11 low, it’s 9.3 percent off an all-time high reached last May. A measure of volatility has jumped 13 percent this year. Dow Jones Industrial Average futures rose 125 points, or 0.8 percent, to 16,622, today.
• Caixin China PMI notes shrinking staffs (FinancialTimes) Another abysmal PMI reading for China’s manufacturing sector. The Caixin-sponsored composite PMI for February came in at 48, below expectations for 48.4. It had been 48.4 in January. The 50-mark separates contraction from expansion. The reading means the sector has been shrinking for a whole year now, and was its lowest in five months.
• Yuan Halts Seven-Day Losing Streak as PBOC Raises Reference Rate (Bloomberg) China’s yuan advanced for the first time in eight days, with a stronger central bank reference rate easing pressure spurred by Monday’s cut to lenders’ reserve ratios. The currency climbed 0.1 percent to 6.5475 a dollar as of 4:44 p.m. in Shanghai, according to China Foreign Exchange Trade System prices. The offshore yuan traded in Hong Kong reversed an early loss and gained 0.06 percent after the People’s Bank of China raised its reference rate by 0.1 percent to 6.5385.
• Chinese Officials Assure Lew There’s No Plan to Devalue Yuan (Bloomberg) China’s officials said there is no intention or need to devalue the yuan, according to U.S. Treasury Secretary Jacob J Lew, who was speaking at a briefing in Hong Kong after Monday meetings with Premier Li Keqiang in Beijing. Policy makers in China restated plans to rebalance the economy and cut excess capacity, and said they have the policy tools — monetary, fiscal and structural — to do the job, Lew said Tuesday. He discussed with them the need “for clear communication and frequent communication.”
• Euro sinks as weak data piles pressure on European Central Bank (Reuters) The euro hit its lowest in almost three years against the yen while European shares extended their strongest run of the year on Tuesday as data from around the region bolstered the case for more ECB stimulus next week. Asia had risen after weak China data fanned stimulus hopes there, and the same pattern emerged in Europe as euro zone manufacturing activity expanded at its weakest pace for a year despite more deep discounting.
• Fed’s Dudley sees downside risks to U.S. economic outlook (TheGlobeandMail) An influential Federal Reserve official on Tuesday said he sees downside risks to his U.S. economic outlook, an assessment that could flag a longer pause before the Fed’s next interest-rate hike than he and his colleagues had earlier signaled. “At this moment, I judge that the balance of risks to my growth and inflation outlooks may be starting to tilt slightly to the downside,” New York Federal Reserve President William Dudley said in remarks at a conference in Hangzhou, China sponsored by the People’s Bank of China and the New York Fed.
• Argentina, lead creditors settle 14-year debt battle for $4.65 billion (Reuters) Argentina has agreed to a $4.65 billion cash payment to its main holdout creditors and will present the deal to Congress this week for a vote which would end 14 years of bitter legal battles and pave the way for its return to global credit markets.
• Scotiabank hikes dividend as profit rises five per cent on gains in foreign banking (FinancialPost) Bank of Nova Scotia, Canada’s third-largest lender by assets, said fiscal first-quarter profit rose 5 per cent on higher earnings from its international business. Net income for the period ended Jan. 31 climbed to $1.81 billion, or $1.43 a share, from $1.73 billion, or $1.35, a year earlier, the Toronto-based bank said Tuesday in a statement. The lender raised its quarterly dividend 2.9 per cent to 72 cents a share.

Overnight markets

• Overview: US 10yr note futures are up 0.0359% at 130-18, S&P 500 futures are up 0.67% at 1942.5, Crude oil futures are up 1.19% at $34.15, Gold futures are up 0.87% at $1245.2, DXY is down 0% at 98.207.

US Economic Data 

• Markit US Manufacturing PMI will be released at 9:45 AM
• ISM Manufacturing will be released at 10:00 AM
• ISM Prices Paid will be released at 10:00 AM
• Construction Spending MoM growth will be released 10:00 AM

Canadian Economic Data 

• GDP MoM growth was 0.2%, better than expected by the analyst, and down 0.1% from prior year
• GDP YoY growth number came in at a level of 0.5%, beating the analysts estimate, and at the same level than prior year
• Quarterly GDP Annualized growth was 0.8% higher than expected and down 1.6% from Q3 2015
• RBC Canadian Manufacturing PMI will be released at 9:30 AM

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