Market Update With the US mkt closed for the July 4th holiday, volumes in GOCs, futures expected to be minimal. Core EGBs lower led by UK gilts, led by the 2-5Y after UK Services PMI surprised to the upside 55.1 in June vs 54. Mkt pricing for a BOE rate hike in August has edged higher following the release to 72% from 64%. In Canada, GOCs are slightly lower, 10Y 2.144% , CGB volume just over 7k or ~25% of avg. An eventful day yesterday which saw CGBs rally 0.55 in the morning on no news (rumour of ‘fat finger’) and Can/US narrow 3-5bps led by the 10Y. Even after the move yest, Can/US still 2-6bps wider wk/wk in the wake of upbeat the BOC survey last Friday – odds of a BOC rate hike ~82% based on OIS.
News headlines
China’s Central Bank Faces Policy Bind Over Debt, Growth Goals (Bloomberg) China’s central bank is caught in a bind, as it seeks to tighten monetary policy for some parts of the economy while loosening it for others. Already engaged in the mammoth task of wringing bad debts out of China’s $40 trillion-plus financial system, the People’s Bank of China is now attempting to achieve that while simultaneously being asked to bolster flagging growth and rescue falling stock markets.
Wage Growth Is ‘Missing in Action’ and Workers Are Not Happy (Bloomberg) The weak wage growth that’s characterized global labor markets since the financial crisis has hit poorer workers most, compounding inequalities and fueling dissatisfaction, according to the OECD. The Paris-based body said pay increases are “missing in action,” even with rising employment, and any gains haven’t been equally distributed. In its Employment Outlook, the OECD said real labor incomes of the top 1 percent of earners have risen much faster than those of median full-time workers.
NATO Allies Push Back After Trump Scolds Them on Defense Budgets (Bloomberg) European nations and Canada pushed back against accusations they don’t spend enough on defense after receiving a scolding from U.S. President Donald Trump. Trump, who travels to Brussels next week to attend a potentially testy North Atlantic Treaty Organization summit, sent letters to several allied nations calling on them to increase their military budgets. “It will become increasingly difficult to justify to American citizens why some countries continue to fail to meet our shared collective security commitments,” Trump said in a letter addressed to Norwegian Prime Minister Erna Solberg seen by Bloomberg News. Norway, he wrote, “remains the only NATO ally sharing a border with Russia that lacks a credible plan to spend 2 percent of its gross domestic product on defense.
Europe Stocks, U.S. Futures Rise in Thin Trading: Markets Wrap (Bloomberg) European stocks edged higher and U.S. futures advanced amid holiday-hit trading, shrugging off a more downbeat mood in Asia where shares slipped even as the yuan extended a rebound. The dollar recouped earlier losses. Technology companies were the biggest decliners on the Stoxx Europe 600 Index, though a gain for telecom shares helped offset the move. Trading volumes were more than 40 percent below the 30-day average. Asian shares notched further losses even as China’s currency rose for a second day, though it pared some gains after a Reuters report that the central bank is comfortable with a weaker yuan. The yen nudged higher and the euro slipped, while the pound rose on data showing the U.K.’s services sector grew at the fastest pace in eight months in June. West Texas Intermediate oil gave up earlier gains and most industrial metals declined.
Canada’s Ontario government scraps cap-and-trade program (Reuters) The newly elected Ontario government announced on Tuesday it would end the province’s cap-and-trade program, a policy designed to reduce greenhouse gas emissions, fulfilling one of Premier Doug Ford’s election promises. However, it leaves businesses that bought C$2.8 billion ($2.1 billion) worth of allowances in limbo. Ford’s Progressive Conservative government swept to power last month, ending 15 years of Liberal rule in Ontario, Canada’s most populous province and the country’s economic engine, with a promise to cut corporate and personal taxes.
China presses Europe for anti-U.S. alliance on trade (Reuters) China is putting pressure on the European Union to issue a strong joint statement against President Donald Trump’s trade policies at a summit later this month but is facing resistance, European officials said. In meetings in Brussels, Berlin and Beijing, senior Chinese officials, including Vice Premier Liu He and the Chinese government’s top diplomat, State Councillor Wang Yi, have proposed an alliance between the two economic powers and offered to open more of the Chinese market in a gesture of goodwill.
U.S. auto tariffs could push Canada into recession by 2020, report says (BNN) Canada could slide into recession if Donald Trump carries through on his threat to slap tariffs on auto imports to the U.S., according to a new report by Scotiabank Economics. The U.S. president re-raised the spectre of auto tariffs in a Fox News interview on Monday. “I have a feeling [Mexican President-elect Andres Manuel Lopez Obrador]’s going to be fine. And the reason is because if they’re not fine, I’m going to tax their cars coming into America, and that’s the big one,” Trump said. The Scotiabank report, released Tuesday, labelled retaliatory trade action over autos as “unlikely,” but warned of dire consequences for Canada if it did happen.
Bombardier to recall 67 Toronto streetcars for maintenance (BNN) Bombardier is facing another setback with its streetcars in Toronto. Sixty-seven of the 89 new streetcars that were delivered to the Toronto Transit Commission (TTC) are being recalled to address a welding problem, according to Bombardier. “An in-depth investigation, started 18 months ago, confirmed that 67 streetcars produced up to 2017 with structural elements originated in Mexico, and in service in Toronto, need preventive welding maintenance,” the company said in a statement Wednesday.
Overnight markets
Overview: US 10yr note futures are down -0.039% at 120-09, S&P 500 futures are up 0.27% at 2720.5, Crude oil futures are down -0.49% at $73.78, Gold futures are up 0.26% at $1256.8, DXY is up 0.08% at 94.666, CAD/USD is up 0.09% at 0.7604.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.9% | 2 Year | 2.524% |
| 5 Year | 2.05% | 5 Year | 2.721% |
| 10 Year | 2.145% | 10 Year | 2.831% |
| 30 Year | 2.189% | 30 Year | 2.959% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Jun 29th -0.5% (-4.9% 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
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