Market Update US tsys are trading lower on above avg volume (400k TY fut), 10Y 2.80% (+2bps) on risk on after China pres Xi agreed to reduce certain import tariffs, as well as opening up sectors and expand trade with the US. Global stocks are on the rebound – Euro Stoxx +0.5% while S&P futures are +28 (1.1%). German bunds reversed earlier gains after ECB member Nowotny said the ECB could lift rates and end bond buys this yr. The euro spiked on the comments, rising to a one -week high vs the USD. Dallas Fed Kaplan (non voter) said he would prefer not to hike rates into flat or inverted tsy yield curve , while noting trade issues could have a ‘chilling effect’ on the economy. GOCs are trading lower & 2bps wider vs tsys, the CAD at a six-week high 1.2655. Provis opening 1bp tighter from yest close , Ont 27 69/68, Ont 48/27 roll trading up at 12.5.
News headlines
Xi Warns Against Returning to a ‘Cold War Mentality’ (Bloomberg) Chinese President Xi Jinping reiterated pledges to open sectors from banking to auto manufacturing in a speech that also warned against returning to a “Cold War mentality” amid trade disputes with U.S. counterpart Donald Trump. Xi pledged a “new phase of opening up” in his keynote address Tuesday to the Boao Forum for Asia, China’s answer to Davos. While the speech offered little new policy, Xi affirmed or expanded on proposals to increase imports, lower foreign-ownership limits on manufacturing and expand protection to intellectual property — all central issues in Trump’s trade gripes.
Russia Axes Bond Auction as Sanctions, Syria Risk Batter Ruble (Bloomberg) Russia’s currency plunged to the weakest level since December 2016 and the government canceled a bond auction as the toughest U.S. sanctions yet combined with an escalation in tensions over Syria to rattle investor sentiment. The ruble dropped 3.6 percent to 62.86 versus the dollar, taking its slump this week to 7.5 percent. The Finance Ministry cited unfavorable market conditions in its first decision to scrap a debt sale since August 2015. Exporters that benefit from a weaker currency led Russia’s benchmark stock index higher after its sharpest collapse on Monday since Russia annexed Crimea in 2014.
Trump Escalates Mueller Criticism, Calling Probe Attack on U.S. (Bloomberg) Donald Trump escalated his criticism of Special Counsel Robert Mueller’s Russia investigation and Attorney General Jeff Sessions following a raid on the office of the president’s personal attorney, describing the probe as an attack on the U.S. The FBI raid on Monday, which was approved by Deputy Attorney General Rod Rosenstein, represents “a whole new level of unfairness” in Mueller’s investigation, Trump complained to reporters in a meeting with military leaders.
Traders Turn Risk-On as U.S.-China Standoff Eases: Markets Wrap (Bloomberg) Risk appetite returned to markets on Tuesday after China’s President Xi Jinping struck a conciliatory tone on trade during a major address. Stocks in Asia and Europe rallied and U.S. equity index futures jumped, while some safe-haven assets retreated. The Stoxx Europe 600 Index followed shares from Sydney to Hong Kong higher alongside oil and metals. Xi said Cold War and zero-sum mentalities were “out of place,” and backed free trade and dialogue to resolve disputes. Treasuries extended declines with the yen, while gold pared a drop to trade little changed. European government bonds were broadly stable.
Canada explores options as Kinder Morgan halts pipeline work (Reuters) The Canadian government on Monday said it was considering all its options on the Trans Mountain pipeline expansion, including a possible investment of public funds to ensure construction goes ahead, after Kinder Morgan Canada halted most work on the project and set a May 31 deadline to scrap the plan.
TSX futures rise as trade dispute fears ease (Reuters) Futures pointed to a higher opening for Canada’s main stock index on Tuesday as Chinese President Xi Jinping’s promise to lower import tariffs eased concerns about a Sino-U.S. trade war. Xi said China will sharply widen market access for foreign investors, a chief complaint of the country’s trading partners and a point of contention for U.S. President Donald Trump’s administration, which has threatened billions of dollars in tariffs on Chinese goods.
Saskatchewan’s new Premier Scott Moe to deliver first budget (BNN) Questions about what kind of budget Saskatchewan’s new premier plans to deliver will be answered today. Scott Moe has promised to balance the provincial budget by 2020, even after reinstating an exemption of the provincial sales tax on crop, life and health insurance earlier this year. Finance Minister Donna Harpauer will deliver the budget later today in the legislature.
Overnight markets
Overview: US 10yr note futures are down -0.116% at 120-25, S&P 500 futures are up 1.13% at 2648.5, Crude oil futures are up 2.1% at $64.75, Gold futures are up 0.02% at $1340.4, DXY is down -0.28% at 89.589, CAD/USD is down -0.27% at 0.7897.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.811% | 2 Year | 2.295% |
| 5 Year | 2.028% | 5 Year | 2.618% |
| 10 Year | 2.173% | 10 Year | 2.799% |
| 30 Year | 2.316% | 30 Year | 3.024% |
US Economic Data
| 6:00 AM | NFIB Small Business Optimism, Mar 104.7 est 107.0 (107.6 prior) |
| 8:30 AM | PPI Final Demand MoM, Mar 0.3% est 0.1% (0.2% prior) |
| PPI Ex Food and Energy MoM, Mar 0.3% est 0.2% (0.2% prior) | |
| PPI Ex Food, Energy, Trade MoM, Mar 0.4% est 0.2% (0.4% prior) | |
| PPI Final Demand YoY, Mar 3.0% est 2.9% (2.8% prior) | |
| PPI Ex Food and Energy YoY, Mar 2.7% est 2.6% (2.5% prior) | |
| PPI Ex Food, Energy, Trade YoY, Mar 2.9% (2.7% prior) | |
| 10:00 AM | Wholesale Trade Sales MoM, Feb est 0.1% (-1.1% prior) |
| Wholesale Inventories MoM, Feb est 0.8% (1.1% prior) |
Canadian Economic Data
| 8:15 AM | Housings Starts, Mar est 216.8k (229.7k prior) |
| 8:30 AM | Building Permits MoM, Feb 225.2k est -1.3% (5.6% 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