Market Update
Tsys slightly higher, long end outperforming, top of narrow range before non farms, US 10Y 2.203%. Crude lower, down another 2.0% or 5% w/w, reversing yest gains after US DOE data showed another drawdown in inventories. Core Euro EGBs higher, gilt yields 0.5-1.5bps lower led by 10Y ,not much direction before key US data. GOCs slightly higher as well, yields ~1bp off 6mnth lows after yesterday’s rally led by longs , 10s30s maintaining flatter bias. Index buying of provis brought spds 1-2bps tighter, CMBs lagged the move closing 1bp tighter.
News headlines
Global Stocks Rally on Growth Optimism; Oil Drops: Markets Wrap (Bloomberg) Global stocks rallied after private American hiring data bolstered confidence in the global economy. Oil headed for a three-week low as U.S. output expanded. European shares advanced and the MSCI World Index traded at a record following new highs in U.S. benchmark gauges. The dollar held on to gains triggered by a report showing companies added more workers to U.S. payrolls in May than forecast. Oil was poised for the biggest weekly drop since May 5, while industrial metals including copper declined, driving the Bloomberg Commodity Index to the lowest in more than a year.
Oil slides as U.S. climate withdrawal compounds glut concerns (Reuters) Brent crude tumbled below $50 on Friday, heading for a second straight week of losses, on worries that U.S. President Donald Trump’s decision to abandon a climate pact could spark more crude drilling in the United States, worsening a global glut. Benchmark Brent crude futures LCOc1 were off by nearly 3 percent at $49.14 per barrel at 1034 GMT (6:34 a.m. ET), down $1.49 from the previous close.
Yuan ends week on firm footing as market ponders PBOC moves (Reuters) The Chinese yuan ended a holiday-shortened week just off seven-month highs, jumping sharply higher after China’s central bank took aggressive steps to prop up the currency, a move that has left traders and analysts guessing at its motivations. The People’s Bank of China (PBOC) already took markets by surprise last week when it announced it would add an as-yet undefined « counter-cyclical » factor to its daily reference point calculations to overcome depreciation expectations.
Ottawa suspends talks with Boeing over Super Hornet jet purchase (TheGlobeAndMail) The Trudeau government has suspended negotiations with Boeing Co. to purchase fighter planes as it continues to play hardball with the Chicago company over a U.S. trade complaint the firm lodged against Montreal aircraft maker Bombardier Inc. Steven MacKinnon, parliamentary secretary to Public Services and Procurement Minister Judy Foote, announced Thursday that Canada has paused talks with Boeing as the dispute shows no signs of winding down.
Economy, low rates push Canadian auto sales to record (TheGlobeAndMail) Car buyers stomped on the accelerator pedal in Canada last month, sending sales soaring 11 per cent from May, 2016, levels and shattering the monthly record hit in April, 2016. Auto makers delivered 216,861 vehicles in May, only the second time ever that sales have topped 200,000 in a single month – last April was the only previous occasion. That put the total for the first five months of this year 5 per cent ahead of the pace in 2016, which was a record year.
Home Capital trouble has not hit mortgage insurance portfolio, says head of CMHC (FinancialPost) The problems at Home Capital Group Inc. have not led to any noticeable uptick in default rates tracked by the Canada Mortgage and Housing Corporation. According to emails that have come to light since Home Capital’s current liquidity crisis began, CMHC has been aware of potential documentation fraud at the alternative mortgage lender since at least 2015.
Overnight markets
Overview: US 10yr note futures are up 0.062% at 126-09, S&P 500 futures are up 0.22% at 2434.75, Crude oil futures are down -1.84% at $47.47, Gold futures are down -0.44% at $1264.5, DXY is up 0.09% at 97.283, CAD/USD is up 0.07% at 0.7394.
US Economic Data
| 8:30 AM | Change in Nonfarm Payrolls, May, , est. 182k (prior 211k) |
| Change in Private Payrolls, May, , est. 175k (prior 194k) | |
| Change in Manufacturing Payrolls, May, , est. 5k (prior 6k) | |
| Unemployment Rate, May, , est. 4.4% (prior 4.4%) | |
| Average Hourly Earnings, m/m, May, , est. 0.2% (prior 0.3%) | |
| Average Hourly Earnings, y/y, May, , est. 2.6% (prior 2.5%) | |
| Labor Force Participation, May, , est. 62.9% (prior 62.9%) | |
| Trade Balance, Apr, , est. -$46.1b (prior -$43.7b) |
Canadian Economic Data
| 8:30 AM | Labor Productivity , q/q, 1Q, , est. 1.2% (prior 0.4%) |
| Int’l Merchandise Trade, Apr, , est. -0.02b (prior -0.14b) |
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