Commentaires

Market update

US tsys trading lower in spillover from yesterday’s risk on rally post Draghi, US 10Y 2.06 (+2.7bps), curve ~1bp flatter. Nikkei up 5.9% as expectations build for further BOJ stimulus – the JPY lower for a second day. US tsys rebounded somewhat in Europe with bunds as European data weak incl EZ PMIs, UK retail sales… GOCs lower, extending underpeformance vs tsys after stronger Dec Retail Sales even as core CPI weaker (-0.4% vs -0.3% exp). Cad continuing its march higher , up 0.64% @ 1.4174 with crude above $31. Provis saw saolid sponsorship yest despite long Man supply, and spds are in another 2bps this morn. Could expect supply after a relatively quiet two weeks, Ontario a strong candidate.

News headlines

• US Is Hiding Treasury Bond Data That’s Suddenly Become Crucial (Bloomberg) It’s a secret of the vast U.S. Treasury market, a holdover from an age of oil shortages and mighty petrodollars: Just how much of America’s debt does Saudi Arabia own? But now that question — unanswered since the 1970s, under an unusual blackout by the U.S. Treasury Department — has come to the fore as Saudi Arabia is pressured by plunging oil prices and costly wars in the Middle East.
• Canadian dollar rallies as oil price climbs (Globe and Mail) The Canadian dollar strengthened the most in 10 months as crude-oil prices rose following signals the European Central Bank may take further measures to stimulate that region’s economy.

• Stocks, oil jump as Draghi the dove tame global bears (Reuters) Stocks and oil, at the forefront of a global market rout since the turn of the year, rebounded strongly on Friday thanks to hints of more monetary policy support by the European Central Bank and bargain-hunting by bruised investors. World stocks recorded their biggest rise in a month, and Asian stocks had their best day in three months. Oil rallied 6 percent, after gaining 5 percent on Thursday, recovering from 12-year lows to go back above $30 a barrel.
• Argentina’s Macri hopes for creditor deal early in 2016 (Reuters) Argentine President Mauricio Macri said on Friday that talks with U.S. creditors in a long-running legal battle over unpaid debts had not made much progress, although he hoped to reach a settlement early this year. « We want to reach a settlement, find a fair agreement, » Macri told Reuters on the sidelines of the World Economic Forum in Davos, adding that he hoped to reach a deal « this year, early this year ».
• Global Markets Continue to Rally as Investors Seek Bargains (NY Times) Surging Japanese shares led a strong rebound in markets across Asia on Friday, and Europe had its second consecutive day of gains, as investors buffeted by days of volatility saw opportunity amid the recent sell-offs.

Overnight markets

• Overview: US 10yr note futures are down -0.25% at 128-11, S&P 500 futures are up +1.57% at 1890.25, Crude oil futures are up  5.45%% at 31.14$, Gold futures are down -0.16% at $1096.40, DXY is up +0.30% at 99.356.

US Economic Data

• December Chicago Fed National Activity Index narrowed to -0.22 from the revised -0.36 the previous month. The index was expected to come in at at -0.5.
• Markit will release its flash US manufacturing PMI for January at 9h45am
• US existing home sales are likely to bounce back to ‘normal’ after a 10% (MoM, sa) collapse in November wasn’t corroborated by any of the other housing data. Data will be released later today at 10ham

Canadian Economic Data

• Retail Sales came in at 1.7%, better than expected and up from last month’s 0.1%. The analysts were expecting a growth of 0.2% this month.
• Auto Retail Sales came in at 1.1% better than expected and up from last month’s : 0% growth . Expectations were for a growth of 0.4%.
• Consumer Price Index (CPI) number came in at 1.6% missing the estimate by 0.1% and up by 0.3% from last year’s number.

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 slightly higher, curve unch, US 10Y 1.964 (-1.2bps) vs 1.94 yest low. ECB left rates unch as exp. Draghi press conf likely to focus on the collapse in inflation expect – Eur 5Y5Y inf swaps back to Jan 15 low where QE was announced. Crude ~1.0% lower at 28.07, Asian stocks were lower led by Shanghai Comp -3.2% but Euro stocks are 1.0% higher. Dow futs -0.25%. The PBOC injected 400bln Yuan ($61bln) with reverse repos, the largest such operation since 2013. Core Euro bonds mixed, bunds higher, gilts lower blamed on switch trades out of gilts to bunds (MNI) after yest weak 5Y gilt auction. GOCs are lower,spds ~2bps wider vs tsys in the short end – curve flatter led by the belly. GOC curve saw large swings post BOC, ended up ~12bps flatter 2s/10s. Provis opening ~1bp weaker Ont 46 122/121. Focus on 10Y auction – $2.5bln reopening of June 26 with the roll 13.2/13.

News headlines

• PBOC Injects Most Cash in Three Years in Open-Market Operations (Bloomberg) China’s central bank cranked up cash injections in its money-market operations for the third week in a row, heading off a squeeze as a seasonal jump in demand for funds coincides with surging capital outflows. The People’s Bank of China added 400 billion yuan ($61 billion) to the financial system using reverse-repurchase agreements, the most in three years, bringing net injections via its various lending tools for the month to more than 1 trillion yuan.
• Even the ECB’s Cash Can’t Stop Investors Worrying About Portugal (Bloomberg) As bonds tumble across southern Europe, it’s beginning to look like the European Central Bank’s market stimulus never existed for Portugal. The country’s bonds have slid since an inconclusive election on Oct. 4 led to weeks of political wrangling and a minority Socialist government promising to ease austerity. Yields on benchmark 10-year securities have climbed almost 80 basis points since then to 3.09 percent. They’re higher than when ECB President Mario Draghi unveiled his bond-buying program, or quantitative easing, last January.
• Treasury Volatility at 4-Month High Leaves Analysts Struggling (Bloomberg) Treasury volatility jumped to the highest in almost four months, challenging analysts trying to predict the path of the securities amid whipsawing global financial markets. Yields on U.S. 10-year securities approached the lowest since October, erasing an earlier advance, as futures contracts on the Standard & Poor’s 500 Index slid and the Stoxx Europe 600 Index struggled to shrug off its recent losses. With inflation expectations in the U.S. tumbling along with oil prices, the nation is scheduled to sell $15 billion of 10-year Treasury Inflation Protected Securities Thursday.
• ECB holds steady, takes cautious stance as markets tumble (Globe and Mail) The European Central Bank held interest rates at record lows on Thursday, but the market crash, tumbling bank stocks and ebbing inflation may set the stage for action later in the year. In December, the Governing Council cut the deposit rate, increased the charge on banks for parking money at the ECB, and expanded its purchase program to buy chiefly government bonds.
• Loonie falls to ‘least favourite currency’ of 2016 for Australian bank strategist (Globe and Mail) When currency strategist Ray Attrill arrived in Toronto last month, he was feeling quite positive about the Canadian dollar. After meetings with investors and economists, his view changed.
• S. economy could start feeling tremors of global market instability (Globe and Mail) After another punishing day on global stock and commodity markets, there is growing anxiety in some quarters that the financial turmoil could undermine the broader U.S. economy. The United States has been an island of stability in a world of bad news, churning out jobs and registering steady if unspectacular growth. Now some economists and investors fear that a bout of extended instability in financial markets threatens to weaken the country’s economy.
• Greek PM says accepts partners’ demand for IMF role in bailout (Reuters). Greek Prime Minister Alexis Tsipras said on Thursday that Athens accepts its European partners’ insistence that the International Monetary Fund should play a role in supervising the country’s international bailout. Addressing the World Economic Forum in Davos on a panel that included German Finance Minister Wolfgang Schaeuble, Tsipras said Greece believed the European Union could manage the program on its own but it accepted that other partners wanted the IMF involved.

Overnight markets

• Overview: US 10yr note futures are up  +0.17% at 129-03, S&P 500 futures are up +0.35% at 1861.75, Crude oil futures are down  -0.21% at 28.28$, Gold futures are down -0.89% at $1096.30, DXY is up +0.64% at 99.704.

 US Economic Data 

• The Philly Fed manufacturing index came in at -3.5, better than expected and up from last month’s -10.2 reading. Expectations were for the report to come in at -5.9.
• Initial jobless claims increased by 10,000 to a seasonally adjusted 293K , est. 277k. That was the highest level since early July. The 4wk moving average of claims increased by 6,500 to 285,000. That was the highest reading since April 2015.
• Continuing unemployment benefit claims–those drawn by workers for more than a week–decreased by 56K to 2,208K
• Bloomberg Economic Expectations for January (prior 43.5) & Bloomberg Consumer Comfort for last week (prior 44.4) will be released at 9h45am

 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, 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 trading sharply higher, flatter, US 10Y below 2.0% (1.97, -8.5bps) on ‘risk off’ with US stock futures lower, European equities -3.0%, crude down 3.0% below $28.00. IEA warned oil market could ‘drown in oversupply’ (see above).  Tsys off the highs despite weaker 8:30 data including Dec Housing Starts -2.5%, CPI -0.1% vs 0.0% exp. Latest JPM Tsy Client Survey for Jan 19th revealed highest no. of shorts since Nov 23 of last year.  In Canada, GOCs are higher, lagging the rally in tsys by ~1.5bps with the curve ~2bps flatter after stronger Nov Wholesale Sales/Man Sales &before BOC. Crude weakness may tip the Bank’s hand in cutting rates with odds ~60%. Provis 2 bps wider, Ont 46 120/119, Ont 25 109.5/108.5.

News headlines

• Canadians’ household debt climbs to highest in G7 in world-beating borrowing spree (Financial Post) Canadian households are carrying the biggest debt to income loads in the Group of Seven, the federal budget watchdog says – and that burden is likely to get even heavier. Canadians have piled up the biggest increase in debt to income in the G7 since 2000, according to a new report by the Parliamentary Budget Officer, released Tuesday.
• Bank of Canada’s Policy Flexibility Makes Rate Decision a Coin Flip (Bloomberg) Multiple threats to financial stability have made crystal balls cloudier this year. Uncertainty reigns ahead of tomorrow’s Bank of Canada interest rate decision. The implied odds of a rate cut according to financial markets stand at just over 50 percent, and private-sector economists are almost evenly divided on whether the nation’s central bank will cut its policy rate to a financial crisis low of 0.25 percent. But one thing’s for sure, says Avery Shenfeld, chief economist at CIBC World Markets: what the Bank of Canada will project as the headline inflation rate by the end of 2017. Canada Banks Unlikely to Fully Match Bank of Canada Cut: CIBC.
• Poloz Arrives at Crossroads With Canada Recovery in Tatters (Bloomberg) Stephen Poloz is in a no-win situation.As the Bank of Canada governor prepares to release his interest rate decision, forecasters are about evenly split on whether he’ll cut the benchmark rate to 0.25 percent or leave it at 0.5 percent. A cut risks adding to an already epic currency slump and may do little for growth; standing pat gives the impression the central bank is cold to the widening damage from collapsing oil prices.
• Global Stocks Slide on Oil Rout (Wall Street Journal) Global stocks resumed the year’s steep selloff Wednesday as oil prices sank to a 12-year low and resurgent concerns about global growth snapped a brief bout of gains in financial markets. Futures pointed to a 1.8% opening loss for the S&P 500. Changes in futures don’t necessarily reflect market moves after the opening bell. As shares across Asia and Europe fell, investors turned to perceived havens such as the yen, gold and U.S. Treasurys.
• K. wage growth slowest since February even as unemployment falls again (Globe and Mail) Wage growth in Britain in the three months to November was its slowest since February, official data showed on Wednesday, the latest sign the Bank of England will take its time before raising interest rates.The slowing in wage growth came even as Britain’s unemployment rate unexpectedly fell to 5.1 per cent, its lowest since early 2006, from 5.2 per cent in the three months to October.
• IMF says refugee influx could provide EU economic boost (TheGuardian) The recent influx of refugees into Europe is likely to raise economic growth slightly in the short term – mainly in Austria, Germanyand Sweden – and could deliver a bigger long-term economic boost to the EU if refugees are well integrated into the job market, according to the International Monetary Fund.3
• Oil market could drown in oversupply in 2016, says IEA (TheGuardian) The world could find itself drowning in oil this year and prices could fall further as new Iranian output cancels out production cuts elsewhere, according to the International Energy An increase in supply and weakening demand growth will ensure there is an overabundance of oil until late 2016 at the earliest, the IEA said in its January report. It said the result would be the third successive year when supply exceeded demand by 1m barrels a day, and the system would struggle to cope.
• Global unemployment to rise by 3.4 million in two years, report says (TheGuardian) International Labour Organization predicts joblessness will surpass 200 million by end of 2017 for the first time on record. More than 3 million people will become unemployed worldwide in the next two years, making existing jobs vulnerable and fuelling potential social unrest as the global economy slows, a report warns.The International Labour Organization predicts unemployment will rise by about 2.3 million this year to 199.4 million, and that 1.1 million will be added to the global count in 2017, taking joblessness to more than 200 million for the first time on record.

Overnight markets

• Overview: US 10yr note futures are up  +0.24% at 128-22, S&P 500 futures are down -1.45% at 1846.00, Crude oil futures are down  -1.97% at 27.90$, Gold futures are up +1.17% at $1101.80, DXY is up +0.01% at 99.002.

 US Economic Data

•  Mortgage applications grew 9% from one week earlier (previous +21.3% with purchase sub-index +17.8% and refi sub-index +23.8%),
• Housing starts dipped 2.5 percent last month to a seasonally adjusted annual rate of 1.15 million homes. This follows a sharp 10.1 percent gain in November.
• Building permits fell 2.9 percent in December to an annual rate of 1.23 million.
• Consumer Price Index slipped 0.1 percent after being unchanged in November. Despite the drop last month, the CPI increased 0.7 percent in the 12 months through December, the biggest increase in a year.

 Canadian Economic Data

• Canada November wholesale trade sales +1.8% vs +0.5% expected. Prior was -1.1% (revised to -1.3%)
• Canada Manufacturing Shipments (MoM) above expectations (0.5%) in November: Actual (1%)
• The Bank of Canada will announce its decision on a key interest rate at 10am against a backdrop of low oil prices, a tumbling Canadian dollar and grim prospects for economic growth.

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