Market Update Tsys are weaker, trailing the decline in European bonds, thou to a lesser extent, the US 10Y 2.985% (+1.3bps). USD index weaker, EUR higher for a 4th day , stocks firmer (S&P fut +3), crude higher (65.32 +0.62). Core EGBs weaker, German bund curve ~3bps steeper and the 10Y bund back to 0.50%, a two week high from 0.25% in the aftermath of the Italy crisis a week ago. Eurozone Q1 GDP came in at 0.4% as expected, the lowest since Q3 2016, from 0.7% in Q4. GOCs lower & steeper, 0.5bps wider vs tsys – 10Y 2.325% Provis well bid on ‘risk on’ tone, continued reinvestment flows from early June. Ontario election day – polls pointing to a conservative win, if not an outright majority.
News headlines
It’s Trump Against the Developed World as G-7 Frays Over Tariffs (Bloomberg) President Donald Trump will cut a lonely figure at a meeting of the world’s club for wealthy nations this week. From steel tariffs to Iran sanctions and climate change, the president will find himself isolated from other Group of Seven leaders at the summit in Quebec. The meetings on Friday and Saturday will be the first opportunity for America’s closest allies to express their frustration in face-to-face meetings with Trump after he imposed steel and aluminum tariffs last week.
Fed on Track to Raise Rates Regardless of Emerging-Market Woes (Bloomberg) Emerging markets struggling with higher U.S. interest rates are likely to get little sympathy from the Federal Reserve. Currencies of such nations have been hammered in a spreading selloff amid worries that their economies won’t cope with higher U.S. borrowing costs. That’s prompted central bankers in India and Indonesia to raise interest rates and urge Fed caution, while officials in Brazil are bracing for challenging times too.
Brexit Showdown Pits U.K. Premier Against Her Top Ministers (Bloomberg) U.K. Prime Minister Theresa May is facing a major cabinet rebellion over Brexit, in a conflict that could destabilize the whole government, according to people familiar with the matter. Brexit Secretary David Davis is said to be furious over May’s plan to tie the U.K. into European Union customs rules for an open-ended period of time after the country leaves the bloc next March. She argues it’s a necessary step to break the deadlock in talks with the EU.
Stocks Edge Up as Momentum Eases; Treasuries Slip: Markets Wrap (Bloomberg) European stocks nudged higher alongside S&P 500 futures as equity markets fought to maintain the momentum from a record-breaking rally in tech shares. Treasuries added to recent losses, with 10-year yields crawling toward 3 percent. The Stoxx Europe 600 Index gave up much of its advance as the euro strengthened again and after disappointing data on euro-area exports and German factory orders. The common currency was up for a fourth straight day amid talk of an end to the European Central Bank’s quantitative easing program. Earlier, shares rose from Tokyo to Sydney in the wake of another record finish for the Nasdaq, but futures contracts for the gauge were little changed on Thursday. The dollar slipped, while the Turkish lira jumped after the central bank raised interest rates by more than expected.
Ontario goes to the polls, with populist Doug Ford in lead (Reuters) Canada’s most populous province votes on Thursday, with populist Doug Ford’s Progressive Conservative party leading in opinion polls, in an election likely to end 15 years of Liberal rule. The election in Ontario, Canada’s economic engine and home to Toronto, the country’s largest city, has been reduced to a fight between Ford and the left-learning New Democratic Party, after Liberal leader Kathleen Wynne, premier since 2013, conceded on Saturday she would not be re-elected.
CP Rail deal will give workers 9 percent raise over four years (Reuters) Canadian Pacific Railway Ltd conductors and locomotive engineers will get a 9 percent salary hike over four years as part of a tentative agreement reached last week with the Teamsters, spokesmen from both the union and CP said on Wednesday. The agreement, which must first be ratified by members to go into effect this year, would give the 3,000 workers an increase of 2 percent for the first three years and 3 percent during the last year, Teamsters Canada spokesman Chris Monette told Reuters by phone.
Canada’s Dollarama reports 7.3 percent rise in quarterly profit (Reuters) Canada’s dollar-store chain Dollarama Inc (DOL.TO) on Thursday reported a 7.3 percent rise in quarterly profit as customers spent more at its stores during the Easter holiday. Net income rose to C$101.6 million ($78.46 million), or $92 cents per share in the first quarter ended April 29, from C$94.7 million, or 82 cents per share, a year earlier. Total sales rose to C$756.1 million from C$704.9 million.
Scheer rejects one-on-one trade talks with U.S. as long as NAFTA can be saved (BNN) Conservatives say it might help Canada’s bargaining position on the North American Free Trade Agreement if the Liberal government were to agree to American demands that it join the U.S. continental missile defence system. However, leader Andrew Scheer said Wednesday he still thinks there is a chance to preserve NAFTA as a trilateral trade deal between Canada, the U.S. and Mexico, and that Canada shouldn’t give in to one-on-one trade talks with the U.S. yet.
Overnight markets
Overview: US 10yr note futures are down -0.065% at 119-07, S&P 500 futures are up 0.08% at 2778.25, Crude oil futures are up 1.08% at $65.43, Gold futures are up 0.16% at $1303.5, DXY is down -0.29% at 93.341, CAD/USD is up 0.05% at 0.7722.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.938% | 2 Year | 2.52% |
| 5 Year | 2.172% | 5 Year | 2.821% |
| 10 Year | 2.324% | 10 Year | 2.985% |
| 30 Year | 2.374% | 30 Year | 3.136% |
US Economic Data
| 8:30 AM | Initial Jobless Claims, June 2nd est 220k (221k prior) |
| Continuing Claims, May 26th est 1738k (1726k prior) | |
| 9:45 AM | Bloomberg Consumer Comfort, June 3rd (55.2 prior) |
| 12:00 PM | Household Change in Net Worth, 1Q (2076b prior) |
| 15:00 PM | Consumer Credit, Apr est 14.000b (11.622b prior) |
Canadian Economic Data
| 10:30 AM | Bank of Canada Releases Financial System Review (FSR) |
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