Market Update Tsys trading lower, near bottom of overnight range on above avg volume (370k TY), 10Y 2.97% (+1.3bps) before May CPI (0.2%/2.8% exp). Equities unch, euro equities mixed, crude slightly lower, USD index unch. News flow dominated by Trump/Kim meeting, which had little impact on mkts. Fed kicks of two-day meeting with a 25bp rate hike expected tomorrow. Particular attention will be played to the language in the statement and whether the Fed will hike rates 3 or 4 times this year. GOCs slightly lower, in line with tsys, provis fairly steady along with rates over the past week. Busy session in primary corp issuance yesterday with 2 deals: (i) 2 tranche $650mln Cdn Tire , 2Y @ 69, 5Y @ 99 – both inside of guidance with very small fills ,(ii) $200mln CWB reopening 2.751% 2020 @ 87.1.
News headlines
Trump, Kim Sign Historic Pledge Toward Peace (Bloomberg) The U.S. and North Korea agreed to seek complete denuclearization of the Korean peninsula following a historic summit between President Donald Trump and Kim Jong Un, yet the accord set no deadline and left the path to disarmament undefined. Trump defended the two-page document he signed with Kim at the end of their meeting in Singapore earlier Tuesday, saying that he thinks his North Korean counterpart will live up to to it. “It’s very comprehensive,” the president said. “It’s going to happen.”
Trump Auto Tariffs Would Slam Canada as Trade Rhetoric Heats Up (Bloomberg) Donald Trump’s heightened attacks on Canadian Prime Minister Justin Trudeau are raising concerns that he might follow through on threats to impose auto tariffs, a move that would devastate the car industry in Canada and lead to higher U.S. prices. The Trump administration’s pledge to consider tariffs on all imported vehicles took on more urgency last weekend after Trump and his advisers accused Trudeau of “bad faith diplomacy” for his trade comments following a meeting of Group of Seven leaders in Quebec.
U.S. Small-Business Optimism Hits Second-Highest on Record (Bloomberg) A gauge of optimism among U.S. small-business owners rose to a 34-year high amid increasingly sunny expectations for sales and profits, a National Federation of Independent Business survey showed Tuesday. Small-business sentiment has remained elevated since Donald Trump was elected president in late 2016, with tax cuts, reduced regulations and solid economic growth supporting the optimistic outlook. At the same time, owners continued to cite difficulty finding workers with the necessary skills and qualifications and have raised compensation accordingly amid the lowest unemployment rate in 18 years. The report suggests that Trump administration tariffs, along with freight bottlenecks that have pushed up costs for some businesses, have had little effect so far on small-company sentiment.
Stocks Drift as Traders Look Beyond Korea Summit: Markets Wrap (Bloomberg) The meeting between President Donald Trump and Kim Jong Un was met with a collective shrug by global markets, which appear to be more fixated on a host of macro events and data due in a few days. Stocks were little changed, Treasuries edged down, and commodities mixed. The Stoxx Europe 600 Index opened higher, but pared its advance after modest gains for many Asian shares failed to ignite the MSCI Asia Pacific Index. S&P 500 futures fluctuated in a narrow range after the underlying gauge posted a small increase on Monday. Safe-haven assets including the yen and gold edged lower as Trump and Kim signed a document pledging to work toward peace on the Korean peninsula. The pound reversed a decline before Theresa May’s Brexit legislation goes to Parliament, as data showed a surprise moderation in the pace of U.K. wage growth.
Canadian dairy farmers cling to protections as Trump demands concessions (Reuters) Canadian dairy farmers want trade negotiators to keep their hands off the protected sector in increasingly contentious talks with the United States, however loudly U.S. President Donald Trump demands greater access, an executive with Canada’s biggest dairy lobby group said on Monday.
Quebec offers C$100 million in loans, guarantees to firms hit by U.S. metals tariffs (Reuters) The Canadian province of Quebec will offer C$100 million ($77.1 million) in loans and guarantees on loans to steel and aluminum companies hit by recent U.S. tariffs, the province’s economy minister said on Monday. Companies that transform the metals will benefit from the program after the United States recently slapped a 25 percent tariff on steel and a 10 percent tariff on aluminum imports.
DavidsTea losses more than triple in Q1 ahead of proxy battle (BNN) Embattled beverage retailer DavidsTea says its net loss more than tripled on weaker sales in the first quarter of its fiscal year just days before a proxy battle comes to a head. The Montreal-based company lost $1.2 million for the period ended May 5, compared with a loss of $362,000 a year earlier. That translated into a loss of five cents per diluted share, versus a loss of one cent in the first quarter of 2017.
Province launches two reviews into BC Hydro over costs, future of energy sector (BNN) The British Columbia government has launched a two-phase review of BC Hydro in an effort to find cost savings and direction for the Crown utility. The first part of the review is expected to examine ways to save money within Hydro, create new revenue streams in an effort to keep rates low and give the corporation the resources it needs to provide electricity. An advisory group that includes staff from government ministries and BC Hydro will conduct the first review.
Overnight markets
Overview: US 10yr note futures are down -0.118% at 119-10, S&P 500 futures are down -0.02% at 2786.25, Crude oil futures are down -0.21% at $65.96, Gold futures are down -0.21% at $1300.5, DXY is down -0.01% at 93.594, CAD/USD is up 0.23% at 0.7686.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.904% | 2 Year | 2.537% |
| 5 Year | 2.144% | 5 Year | 2.818% |
| 10 Year | 2.311% | 10 Year | 2.97% |
| 30 Year | 2.36% | 30 Year | 3.108% |
US Economic Data
| 6:00 AM | NFIB Small Business Optimism, May 107.8 est 105.0 (104.8 prior) |
| 8:30 AM | CPI MoM, May est 0.2% (0.2% prior) |
| CPI Ex Food and Energy MoM, est 0.2% (0.1% prior) | |
| CPI YoY, May est 2.8% (2.5% prior) | |
| CPI Ex Food and Energy YoY, May est 2.2% (2.1% prior) | |
| CPI Index NSA, May est 251.570 (250.546 prior) | |
| CPI Core Index SA, May est 256.884 (256.450 prior) | |
| Real Avg Weekly Earnings YoY, May (0.4% prior) | |
| Real Avg Hourly Earnings YoY, May (0.2% prior) | |
| 14:00 AM | Monthly Budget Statement, May est -139.5b (214.3b 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