Market Update US tsys lower, 10Y 2.877%, as equity markets are strong (S&P fut +11, while crude has reached multi year highs despite Saudi reaffirming 1mln bbl production increase. Light data day in the US with auto sales, factory orders and early close for July 4th holiday. Bunds/gilts lower – Eurozone producer prices rose 3% in May above 2.7% exp and the largest increase in a year. The Chinese currency (CNY) pared losses after the Chinese central bank made comments meant to reassure investors, saying that China’s fundamentals were strong. GOCs trading slightly higher, underperforming tsys by ~1bp, 10Y 2.15%. Odds of a rate hike at next week’s BOC have risen to ~84% based on OIS, from 58% a week ago. The latest Business Outlook Survey (BOS) released Friday showed Business optimism rising to the second highest level on record in Q2, even as NAFTA uncertainty , trade tarrifs are expected to weigh on activity somewhat going forward.
News headlines
Canada Strikes Back at Trump, and Condo Buyers Will Pay the Price (Bloomberg) Condo buyers in Canada’s already pricey markets may be the next to pay up as the trade battle with the U.S. radiates through the construction industry. Canada imposed a 25 percent tariff on U.S. steel imports on July 1, retaliating against levies President Donald Trump slapped on goods from its northern neighbor a month ago. Prime Minister Justin Trudeau’s government is also said to be preparing quotas and tariffs for other countries to prevent a flood of steel rushing in to undercut prices.
China Won’t Weaponize the Yuan in Trade War, PBOC Official Says (Bloomberg) Top Chinese central bank officials on Tuesday vowed to keep the nation’s currency stable, helping to reverse declines, and pledged that yuan devaluation won’t be used as a weapon in the trade conflict with the U.S. People’s Bank of China Governor Yi Gang said China will “keep the yuan exchange rate basically stable at reasonable and balanced level,” a repetition of standard language that helped stoke speculation that policy makers are prepared to take tougher actions to arrest the plunge in the currency.
China’s U.S. Exports Cooled in First Half as Tariffs Approach (Bloomberg) Growth in China’s exports to the U.S. slowed significantly in the first half of 2018, according to official data released Tuesday, indicating that the brewing trade conflict between the two nations may already be taking a toll. China’s exports to the U.S. expanded 5.4 percent in the first half, 13.9 percentage points lower than the same period last year, the General Administration of Customs said in a statement on its website. Chinese exports to the U.S. in June rose 3.8 percent, 23.8 percentage points lower than the same month in 2017.
Stocks Rally as China Talks Up Yuan; Oil Advances: Markets Wrap (Bloomberg) Most stock markets rebounded on Tuesday, with European shares and U.S. futures rallying following a mixed Asian session in which all eyes were on China’s yuan. The euro rose as Germany’s coalition government dodged a crisis over migration. Telecom companies led an advance in the Stoxx Europe 600 Index, while futures on the S&P 500, Dow Jones and Nasdaq all pointed to a firmer open. Miner Glencore Plc headed for the biggest decline in two years, however, after saying it has been subpoenaed by the U.S. Department of Justice. Hong Kong stocks slumped as the city returned from a holiday, but emerging-market shares pared declines as China’s central bank said it won’t use the yuan as a tool in a trade conflict.
Better-than-expected Canada growth boosts rate hike prospects (Reuters) Canada’s economy shrugged off the effects of bad weather to post unexpected growth in April and business optimism rose to near record levels in the second quarter, pushing up the Canadian dollar and boosting odds of an interest rate hike next month. Statistics Canada said on Friday that GDP rose by 0.1 percent from March, the seventh time in the last eight months that the economy has expanded. Analysts in a Reuters poll had predicted no change.
Canadian populist Doug Ford sworn in as Ontario province premier (Reuters) Populist leader Doug Ford was sworn in as Ontario’s new premier on Friday, ending 15 years of Liberal rule in Canada’s most populous province, and he promised to drop a program aimed at reducing greenhouse gas emissions. Ford and his Progressive Conservative party swept to power in Ontario’s parliamentary elections earlier this month with a vow to cut personal and corporate taxes. Ford, 53, is the brother of the late mayor of Toronto Rob Ford, who made headlines in 2013 when he admitted to smoking crack cocaine.
Element AI aims for unicorn status with record Canadian financing (BNN) Element AI Inc., a Montreal-based startup that deploys artificial intelligence software within businesses that don’t have experience with the technology, is looking to raise as much as $250 million in a new round of venture-capital funding, according to four sources familiar with the matter. The people said the Series B financing, if successful, would give Element AI a valuation of $1 billion, placing it among a special class of Canadian startups with valuations north of the billion-dollar mark. It would also be the biggest such venture-capital funding round ever for a startup in Canada and yet another sign of the maturation of the country’s technology sector.
Overnight markets
Overview: US 10yr note futures are down -0.104% at 119-31, S&P 500 futures are up 0.45% at 2739.5, Crude oil futures are up 1.05% at $74.72, Gold futures are up 0.57% at $1248.8, DXY is down -0.28% at 94.608, CAD/USD is down -0.17% at 0.7595.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.917% | 2 Year | 2.559% |
| 5 Year | 2.065% | 5 Year | 2.77% |
| 10 Year | 2.161% | 10 Year | 2.88% |
| 30 Year | 2.206% | 30 Year | 2.999% |
US Economic Data
| 10:00 AM | Factory Orders, May est 0.0% (-0.8% prior) |
| Factory Orders Ex Trans, May (0.4% prior) | |
| Durable Goods Orders, May est -0.5% (-0.6% prior) | |
| Durables Ex Transportation, May (-0.3% prior) | |
| Cap Goods Orders Nondef Ex Air, May (-0.2% prior) | |
| Cap Goods Ship Nondef Ex Air, May (-0.1% prior) | |
| 07/03 | Wards Total Vehicle Sales, Jun est 17.00m (16.81m prior) |
Canadian Economic Data
| 8:30 AM | MLI Leading Indicator MoM, May 0.2% (0.1% prior) |
| 9:30 AM | Markit Canada Manufacturing PMI, Jun (56.2 prior) |
| 10:00 AM | Bloomberg Nanos Confidence, Jun 29th (55.3 prior) |
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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230
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