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Market update

US tsys higher, 10Y 2.093 (-1bp), curve 2bps steeper led by 5Y, maintain gains after i. US yields briefly touched yest post Beige book lows before stocks reversed higher. Core Euro bonds also higher with flight to quality bid as crude fell to new lows o/n (brent @ 29.73). Bunds also supported by lower stocks led by industrials with ~11% fall in Renault shares. US auctions $13bln in 30Y bonds at 1:00ESt after a solid 3& 10Y. GOCs higher with ‘risk off’ theme, provis unch after some early buying, Ont 46s trading up @ 116, Ont 25 @ 105.5, ~11bps wider since y/e.

News headlines

• JPMorgan profits jump as costs reined in (FT) JPMorgan Chase saw the US banks’ fourth-quarter earnings season off to a solid start with a 10 per cent rise in net income, after cost cuts compensated for sluggish results from the investment banking arm and a near-50 per cent jump in bad loan provisions. The biggest US bank by assets is often seen as a barometer for an industry still grappling with tougher post-crisis rules on capital and liquidity, patchy client activity and near-zero interest rates. By that token, the results were encouraging, showing a slight lift in net revenues across the group and a 7 per cent fall in non-interest expenses.
• Bank of England votes 8-1 to hold rates at 0.5% (BBC) UK interest rates have been left unchanged again at 0.5% by the Bank of England’s rate-setters. Eight of the nine rate-setters on the Monetary Policy Committee (MPC) voted for no change, with one voting for a rise. The Bank rate has been at the record low of 0.5% since March 2009. A number of economists have been pushing their expectations of the first UK interest rate rise from the end of 2016 into the start of 2017.
• Bank of Indonesia Cuts Rates to 7.25% (Bloomberg) Indonesia’s central bank cut its main interest rate for the first time in 11 months, prioritizing a boost to flagging economic growth over concern looser policy could trigger more currency weakness. Bonds rose and stocks pared losses incurred earlier due to deadly attacks in Jakarta.
• Bank of Korea sets new 3-yr inflation target at 2 pct, drops band (Reuters) South Korea’s central bank said on Wednesday it was setting its new three-year inflation target at 2 percent, scrapping its current policy of using a targeted band for consumer prices. The target band is now 2.5 to 3.5 percent and will expire at the end of this year. Before the current target, South Korea used a midpoint of 3.0 percent within a range of 2.0 to 4.0 percent. The new target will be used from 2016 to 2018.
• Brent hits new 12-year oil below $30 in Asian trading (CNBC) Brent oil prices dipped below $30 in Asian hours Thursday, underscoring weakness in the energy market amid a continued increase in the supply of the commodity. U.S. WTI light sweet crude fell as much as 0.7 percent and was last at $30.66 a barrel while Brent oil fell as much as 1.9 percent to $29.73–its lowest level since February 2004–and was last at $30.05 a barrel.

Overnight markets

• Overview: US 10yr note futures are down -0.11% at 127-29+, S&P 500 futures are up +0.54% at 1891.75, Crude oil futures are up +1.12% at 30.83$, Gold futures are down -0.33% at $1083.5, DXY is down +0.02% at 98.910..

US Economic Data

• Initial claims for state unemployment benefits increased 7,000 to a seasonally adjusted 284,000 for the week ended Jan. 9. Economists polled by Reuters had forecast claims slipping to 275,000 in the latest week.
• The four-week moving average of claims, considered a better measure of labour market trends as it strips out week-to-week volatility, rose 3,000 to 278,750 last week.
• Continuing claims rose 29,000 to 2.26 million in the week ended Jan. 2. The four-week moving average of the so-called continuing claims increased 5,250 to 2.22 million.
• S. Import prices fell 0.5% in November, revised from a 0.4% decline.

  Canadian Economic Data

• New home prices rose by 0.2 percent in November from October, pushed up by strength in the major regions of Toronto and Vancouver

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
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Market update

US tsys trading lower, US 10Y 2.195 (+2bps), curve 1bp flatter as short end underperforms before $24bln 3Y note auction this aft. European equities ~2.0% higher led by exporters with crude slightly higher after plunging ~3.0% to the lowest since 2003. Core Euro bonds lower led by 10Y bunds +3 bps @ 0.57% – weighed by issuance after supply from Nether, Austria, Spain as well as 10Y German linker. GOCs opening lower, unch vs tsys. Provis seeing some early buying on screens – Ont 46 up @ 113.5, Ont 25s @ 103, Qc/Ont 25 rl @ 3.5/3.0. Wouldn’t be surprised to see an issue given all in yields and positive tone after 3 day ~6bp widening.

News headlines

• Surging Yuan Borrowing Costs in Hong Kong: What You Need to Know (Bloomberg) Hong Kong Interbank Offered Rates for yuan loans jumped by records to all-time highs across all tenors on Tuesday as intervention by China to support its exchange rate tightened the currency’s supply in the offshore market.

• Oil prices near $30 as selling continues (FT) As traders bet on lower prices, Brent crude fell by more than 2 per cent to $30.43 a barrel, extending losses over the first seven trading sessions of 2016 to 18.4 per cent. The international oil marker later steadied to trade at $31.65, up 0.1 per cent.

• Nigeria Says OPEC May Meet Soon as Oil Even Hurting Saudis (Bloomberg) OPEC will soon make efforts to convene before the next scheduled meeting in June as the slump in oil prices is hurting producers, including the world’s biggest exporter, Saudi Arabia, said Emmanuel Kachikwu, Nigeria’s minister of state for petroleum resources. Members are already engaged in informal discussions with some non-OPEC producers, including Russia, to join any future production cut to shore up prices, he said.

• British Pound Hammered: UK Industrial Production of -0.7% Is Lowest Figure Since 2012 (PoundSterling) The pound has weakened even further following a significant drop in Industrial and Manufacturing Production data, as analysts push back their forecasts of when the BOE is most likely to raise rates.

• Alcoa Swings to a Loss on Charges (WSJ) Alcoa Inc. swung to a loss in its fourth quarter on restructuring charges and its revenue fell 18% compare with a year ago amid sharply lower aluminum prices. Overall, the metals maker reported a fourth-quarter net loss of $500 million, or 39 cents a share, compared with a year-earlier profit of $159 million, or 11 cents a share, a year earlier. Excluding $565 million in restructuring-related costs and other items, adjusted per-share earnings fell to 4 cents from 33 cents a year ago.

• Tesla chief Elon Musk says Apple is making an electric car (BBC) Tesla Motors CEO Elon Musk thinks it’s pretty obvious that Apple is working on its own electric car, and that the iPhone maker would be a really good auto manufacturer, too. “It’s quite hard to do, but I think companies like Apple will probably make a compelling electric car. It seems like the obvious thing to do,” Musk said during the interview. “It’s pretty hard to hide something if you hire over 1,000 engineers to do it.”

Overnight markets

• Overview: US 10yr note futures are down -0.16% at 127-05, S&P 500 futures are up +0.97% at 1932.75, Crude oil futures are up +1.21% at 31.77$, Gold futures are down -0.90% at $1086.30, DXY is up +0.25% at 98.971.

US Economic Data

• United States NFIB Business Optimism Index below forecasts (95.4) in December: Actual (95.2)
• November JOLTS (job openings) report will be released at 10am
• January IBD/TIPP Optimism Index in the United States will be released at 10am

Canadian Economic Data

• There is no major economic data 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
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Market update

US tsys trading lower, US 10Y 2.16 (+4.3bps) as European equities reverse losses despite a ~6% plunge in China stocks & lower crude. Tsys were weaker o/n with German bunds before rebounding somewhat in European trading. Some concession building in front of this week’s 3/10/30Y US tsy supply. Also some talk of richness of 5Y note in view of rapid 2/5Y flattening on Fed repricing, as well as cheapness of long end after last week’s ~11bp steepening in 5/30 govt curve. Latest CFTC COT report (Jan 8)showed large specs reducing net longs in the 10Y note while adding to shorts in longs & ultras. In Canada, GOCs opening lower , lagging the tsy decline by ~1bp in longs. In Fridays’s rally, GOCs were not able to keep pace with tsys despite a relatively downbeat Cdn employment report – shows the extent to which Cda/US is relatively stretched with little movement this morning despite another lurch lower in crude. Provis hammered on Friday (+4bps), actually weaker to start this morning, Ont 46 113/112.5, Ont 25s 102.5/102.

News headlines

• Shenzhen closes down 6.6% as China market rout continues (FT) China equities plunged further on Monday after one of the most horrid weeks on record, as investors failed to take heart from efforts by the central bank to support the renminbi.

• Oil Seen Heading to $20 by Morgan Stanley on Dollar Strength (Bloomberg) A rapid appreciation of the U.S. dollar may send Brent oil to as low as $20 a barrel, according to Morgan Stanley.Oil is particularly leveraged to the dollar and may fall between 10 to 25 percent if the currency gains 5 percent, Morgan Stanley analysts including Adam Longson said in a research note dated Jan. 11.

• Big five US investment banks hurt by China and oil (FT) Wall Street banks are poised to unveil another batch of lacklustre profits after the run-up to the Federal Reserve’s historic interest rate rise failed to boost their crucial trading businesses.

• Canadian Oil Sands claims victory, calls for Suncor to disclose details to public (GlobeandMail) Canadian Oil Sands Ltd. is calling on Suncor Energy Inc. to disclose details of how shareholders reacted to its $4.3-billion hostile takeover bid for COS before a Jan. 8 deadline was extended by nearly three weeks.

• Shell boss bets oil price will double (TheSundayTimes) The boss of Royal Dutch Shell has predicted the oil price will more than double as he makes a final push to convince investors to back his $51bn (£35bn) takeover of rival BG. Shareholders of the two companies will vote at the end of the month on a takeover that has sharply divided City opinion.

• CMHC says annual pace of housing starts slows in December to 172,965 (CTV) Canada Mortgage and Housing Corp. says housing starts in December came in at a seasonally adjusted annual rate of 172,965 homes, down from 212,028 in November, mainly because of fewer multiple-unit projects. Economists had expected an annual pace of 200,000, according to Thomson Reuters.

• Alcoa’s Q4 Preview: Productivity Improvements To Partially Offset Impact Of Weak Aluminum Prices (Forbes) Alcoa will release its fourth quarter results and conduct a conference call with analysts on Monday, January 11. The weak prevailing aluminum pricing environment is expected to negatively impact the company’s results. However, the combined impact of the closure of high-cost smelting capacity and the company’s efforts to increase the productivity of its operations will, at least partially, offset the impact of subdued aluminum prices on its results.

Overnight markets

• Overview: US 10yr note futures are down -0.21% at 127-05, S&P 500 futures are up +0.68% at 1924.75, Crude oil futures are down +1.84% at 32.55$, Gold futures are up +0.27% at $1100.90, DXY is up +0.08% at 98.613.

US Economic Data

• December Labour Market Conditions Index will be released at 10ham, will offer additional perspective on last week’s surprisingly strong update on US payrolls in December.

Canadian Economic Data

• The Canadian Mortgage and Housing Corp indicated the seasonally adjusted annualized rate of housing starts dropped to 172,965 units in December from an upwardly revised 212,028 units in November. Forecasters expected 200,000 starts.
• The Bloomberg Nanos Canadian Confidence Index will be released at 10am
• Business Outlook Survey Future Sales Growth  Balance will be released at 10h30. TD expects the Future Sales Growth balance of opinion to fall to +10 from +16 in Q3 due to the continued push lower in commodity prices over the survey period.
• Bank of Canada Senior Loan Officer Survey for fourth quarter will also be released at 10h30.

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
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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