Commentaires

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

Market update

US tsys lower curve steeper led by 5s (+3.5bps) after much stronger than expected  non-farm payrolls (275k vs 201k exp), US 10Y 2.185 (+4bps). European stocks mixed, but CSI Comp +2.0% on state buying according to story in FT (see below)& PBOC setting higher yuan fix for the first time in nine sessions. Euro bonds higher, 10Y bund/tsy spd ~4bps higher @ 164. Dovish comments from ECB talking about more QE if needed. GOCs lower,  employment +22.8k in Dec vs 8k exp., but building permits -19.6% vs -2.9%. Provis trading up after payrolls Ont 25s @ 98 after closing 1.5-2 bps wider yest.

News headlines

• Chinese Markets Rise After Volatile Opening (NYTimes) With Beijing’s grip slightly looser, Chinese markets steadied on Friday. Exchanges in Europe also rose modestly at the start, and futures trading indicated that Wall Street would open higher. Friday’s market action followed a Thursday-night decision by the Chinese government to stop using “circuit breakers” that were supposed to keep China’s markets from dropping disastrously over the course of a single trading day.
• German Industrial Output Drops Unexpectedly (WSJ) German industrial production declined unexpectedly in November and the trade surplus was below forecasts for that month, official data showed Friday, a sign that Europe’s largest economy is struggling to gain momentum after a weak third quarter.
• Apple shares fall to lowest level since October 2014 (FT) Apple’s share price fell to its lowest level since October 2014, as concerns about slowing growth in iPhone sales outweighed news of strong performance in the App Store last year. Shares in the world’s most valuable company fell close to $100 on Wednesday, compounding Tuesday’s falls after the Nikkei Asian Review wrote Apple had cut iPhone orders by as much as 30 per cent with suppliers.
• Retail investors pull billions out of global equity funds (FT) The amount of money retail investors pulled out of global equity funds hit a five-month high this week, as wild gyrations in mainland Chinese stock markets sent financial shockwaves around the world.
• Saudi Arabia is considering an IPO of Aramco, probably the world’s most valuable company (TheEconomist) Saudi Arabia is thinking about listing shares in Saudi Aramco, the state-owned company that is the world’s biggest oil producer and almost certainly the world’s most valuable company. Muhammad bin Salman, the kingdom’s deputy crown prince and power behind the throne of his father, King Salman, has told The Economist that a decision will be taken in the next few months. “Personally I’m enthusiastic about this step,” he said. “I believe it is in the interest of the Saudi market, and it is in the interest of Aramco.”
• Japan earnings fall for first time in 5 months (FT) Bad news for wages and consumption in Japan: in November real earnings slipped for the first time in five months, dashing hopes that modest rises during early autumn may be sustained. Real cash earnings – wages adjusted for inflation – fell 0.4 per cent year-on-year in November, figures from the ministry of health, labour and welfare show. This was the first contraction since June when they declined 3 per cent. Earnings had risen 0.4 per cent in October and in July they rose 0.5 per cent – the highest since late 2010.

Overnight markets

• Overview: IG25 5Y 93.096/93.663 (-2.63), US 10yr note futures are down -0.16% at 126-29, S&P 500 futures are up +1.09% at 1954, Crude oil futures are up +0.42% at 33.41$, Gold futures are down -1.00% at $1096.90, DXY is up +0.72% at 98.928.

 US Economic Data

•  US created 292,000 jobs in December; unemployment rate stays unchanged at 5.0%
• Manufacturing added 8,000 jobs last month. Unusually warm weather boosted construction payrolls, which increased 45,000.
• Retail payrolls rose only 4,300 as mild temperatures hurt sales of winter apparel.
• United States Average Hourly Earnings (MoM) below forecasts (0.2%) in December: Actual (0%)
• Data on wholesale inventories for November will be released at 10h00am
• Consumer credit data for November will be released at 15h00.

  Canadian Economic Data

• The value of Canadian building permits issued in November fell 19.6 per cent on widespread declines in the energy-producing province of Alberta, which had seen a boom in October
• Canada Net Change in Employment came in at 22.8K, above forecasts (10K) in December
• Canada national unemployment rate for December remained unchanged at 7.1 per cent.

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