Market Update
US tsys/ EGBs trading higher on ‘risk off’ after China announced retaliatory tariffs on $50bln US goods including aircraft & soybeans , US 10Y 2.75%(-3bps), heavy volume in TY futures (550k). The 10Y bund -1bp @ 0.49% low since Jan 9th. S&P futures -35 pts (1.4%), Nasdaq -107 (1.6%). Little reaction to stronger than expected March ADP 241k vs 210k exp. GOCs higher, in line with tsys, 10Y 2.11% (-3bps) approaching last week’s low 2.10%. Provi spreads gapping ~2bps wider, Ont 27s 70.5/70 (68), Ont 48s 83.5/82.5 (81.5). BOC auctions $3bln in 5Y bonds at noon – new Sep 23s with the WI roll 3.3/3.0, 0.3bps flatter from yest. Coupon should be 2.0% based on current 5Y (1.985%).
News headlines
China’s Counterpunch to Trump’s Tariffs Sparks Global Selloff (Bloomberg) Tit-for-tat tariff threats from the U.S. and China ignited fears that a trade war was beginning between the world’s two largest economies, sending U.S. stock futures tumbling and sinking European and Asian equities. President Donald Trump pushed back against an escalation with the Asian superpower, saying on Twitter that “we are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.”
Specter of Full Trade War Returns to Batter Stocks: Markets Wrap (Bloomberg) Fears of a trade war between the world’s two largest economies returned to haunt markets on Wednesday, sending U.S. stock futures tumbling and sinking European and Asian equities. Treasuries climbed while the dollar was steady, and gold jumped. Hopes that Tuesday’s gains in U.S. equity markets would lead to a more lasting rebound foundered as contracts for the S&P 500, Nasdaq 100 and Dow all slumped alongside both the Stoxx Europe 600 Index and the MSCI Asia Pacific Index. China said it would levy 25 percent tariffs on imports of 106 U.S. products including soybeans, automobiles, chemicals and aircraft, in response to proposed American duties on its high-tech goods. Safe-haven assets including bullion and the Japanese yen rallied, while European bonds tracked the jump in Treasuries.
Euro-Area Inflation Ticks Up to 1.4% (Bloomberg) Euro-area inflation accelerated last month, buttressing the arguments of policy makers keen to phase out unprecedented stimulus. The inflation rate rose to 1.4 percent in March, the highest level since the end of last year. The reading is in line with the median estimate in a Bloomberg survey and up from 1.1 percent in February. The core rate remained unchanged.
OPEC Output Falls to Lowest in a Year Amid Venezuela Woes (Bloomberg) OPEC crude production dropped to the lowest in a year amid the woes in Venezuela’s oil industry. Output from the 14 members of Organization of Petroleum Exporting Countries fell by 170,000 barrels to 32.04 million barrels a day in March, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. That’s the lowest since last April’s 31.9 million barrels a day. Back then, Equatorial Guinea — which pumped 130,000 barrels a day last month — wasn’t part of OPEC.
Toronto homes sales, prices slump in March (Bloomberg) Toronto homes sales sagged in March, tumbling 39.5 percent from the previous year, as tighter mortgage rules and higher borrowing costs dampened demand, data showed on Wednesday. Sales of detached homes plunged 46.3 percent and condo sales dropped 32.7 percent, as many would-be buyers put their plans on hold, the Toronto Real Estate Board (TREB) said. The average selling price in the Toronto area was C$784,558 ($613,799), down 14.3 percent from C$915,126 in March 2017, though up 2.1 percent from February 2018. The average selling price for a detached home, the most expensive segment of the market, plunged 17.1 percent, while the average condo price rose 6.1 percent.
TD Bank CEO Masrani fears trade tensions could bring on recession (BNN) As the possibility of a full-blown trade war between the U.S. and China looms, Toronto-Dominion Bank’s chief executive says he’s concerned that global trade tensions could boil over and even lead some nations into recession. In an exclusive interview, Bharat Masrani told BNN’s Amanda Lang that anything that disturbs global trade is worrisome. “Trade skirmishes have been there since freer trade started. Hopefully this is something in that realm, and not something substantial that results in protectionism and a trade war that could trigger a slowdown and perhaps even recessions in certain countries,” Masrani said.
Overnight markets
Overview: US 10yr note futures are up 0.181% at 121-02, S&P 500 futures are down -1.44% at 2575.5, Crude oil futures are down -1.4% at $62.62, Gold futures are up 0.9% at $1349.4, DXY is down -0.12% at 90.091, CAD/USD is up 0.21% at 0.7793.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.787% | 2 Year | 2.258% |
| 5 Year | 1.988% | 5 Year | 2.574% |
| 10 Year | 2.123% | 10 Year | 2.757% |
| 30 Year | 2.278% | 30 Year | 2.998% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Mar 30th -3.3% (4.8% prior) |
| 8:15 AM | ADP Employment Change, Mar est 210k (235k prior) |
| 9:45 AM | Markit US Services PMI, Mar est 54.2 (54.1 prior) |
| Markit US Composite PMI, Mar (54.3 prior) | |
| 10:00 AM | ISM Non-Manf. Composite, Mar est 59.0 (59.5 prior) |
| Factory Orders, Feb est 1.7% (-1.4% prior) | |
| Durable Goods Orders, Feb (3.1% prior) | |
| Durables Ex Transportation, Feb (1.2% prior) | |
| Cap Goods Orders Nondef Ex Air, Feb (1.8% prior) | |
| Cap Goods Ship Nondef Ex Air, Feb (1.4% prior) |
Canadian Economic Data
There is no Canadian economic data for 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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230