Market Update
Tsys screaming higher, yields 5-7.5bps lower with longs outperforming after big misses on both May CPI & Retail Sales, 10Y 2.14%, after narrow overnite range on low volume before FOMC this aft. European equities extending yesterday’s rally, Stoxx up 0.80%, S&P fut +1.75, crude lower after API data showed invent rose 2.8mln bbls vs 2.7 mln decline exp. Core euro bonds higher after US data, UK gilts outperforming after larger than exp decline in UK avg weekly earnings, 10Y gilt below 1.0%. GOCs higher , curve flatter lagging the rise in tsys by ~1bp, CAD continuing higher 75.25, up another 1.0% since yest as Poloz said rate cuts ‘have largely done their work’, affirming Wilkins earlier warning on rates.Provis tighter by ~1bp with the surge in underlying GOC yields the last two days, shorter maturities 15-20bps higher in yield since Thursday. New CMB 22s 42/41.5 after reopening at 42.5 yest, well oversubscribed.
News headlines
Tech Bounce Spurs Europe Stocks; Oil Drops on Data: Markets Wrap (Bloomberg) European equity investors were in a bullish mood as technology companies extended their bounce, leading gains across almost all sectors. The dollar steadied and Treasuries rose, neither moving with conviction as traders tread water before the U.S. interest rate decision.
UK’s May faces calls to soften Brexit as political limbo drags on (Reuters) British Prime Minister Theresa May’s Conservative party resumed talks on a deal to prop up her minority government on Wednesday as she faced a battle over her Brexit strategy just days before EU divorce talks are due to begin.
China’s economy holds up in May but slowing investment points to cooling (Reuters) China’s economy generally remained on solid footing in May, but tighter monetary policy, a cooling housing market and slowing investment reinforced views that it will gradually lose momentum in coming months. Still, with half a year left to go, Beijing is expected to handily meet its annual 6.5 percent economic growth target without too many bumps, good news for President Xi Jinping ahead of a major political leadership reshuffle later this year.
Pound hit by wage disappointment, signs of delay to coalition deal (Reuters) Sterling handed back early gains to trade lower on Wednesday after a reading of UK wages missed forecasts and a report that a deal needed to form a government could be delayed until next week. The pound had been recovering from its almost 3 percent slide since Prime Minister Theresa May unexpectedly lost her parliamentary majority in elections last Thursday.
U.K. Squeeze Tightens as Real Wages Drop Most in Almost 3 Years (Bloomberg) The squeeze on U.K. households intensified in the three months through April as weaker wage growth inflicted the biggest loss of purchasing power in almost three years. Average earnings rose 1.7 percent, the slowest annual pace since early 2015, the Office for National Statistics said on Wednesday. Taking inflation into account, they fell 0.6 percent, the largest drop since August 2014. Barclays said the situation will continue to worsen this year, while HSBC said the pressure on consumers will last longer than it previously anticipated.
Vacant skyscrapers are an ‘albatross’ that Canada’s oil capital can’t shake off too soon (Financial Post) Naheed Nenshi was first elected mayor of Calgary in 2010 when the iconic Bow tower was rising to re-top the city’s skyline, new companies were opening their doors, established ones were expanding and luxury retailers were setting up shop. Office vacancy in the city’s bustling core was so tight, “You couldn’t get space downtown for love or money,” Nenshi recalled.
Overnight markets
Overview: US 10yr note futures are up 0.371% at 126-27, S&P 500 futures are up 0.17% at 2442.25, Crude oil futures are down -0.71% at $46.13, Gold futures are up 0.43% at $1274.1, DXY is down -0.29% at 96.692, CAD/USD is down -0.54% at 0.7593.
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Jun 9, 2.8%, (prior 7.1%) |
| 8:30 AM | CPI, m/m, May, -0.1%, est. 0.0% (prior 0.2%) |
| CPI Ex Food And Energy, m/m, May, 0.1%, est. 0.2% (prior 0.1%) | |
| CPI, y/y, May, 1.9%, est. 2.0% (prior 2.2%) | |
| CPI Ex Food and Energy, y/y, May, 1.7%, est. 1.9% (prior 1.9%) | |
| Retail Sales Advance, m/m, May, -0.3%, est. 0.0% (prior 0.4%) | |
| Retail Sales Ex Auto, m/m, May, -0.3%, est. 0.1% (prior 0.3%, revised 0.4%) | |
| Retail Sales Ex Auto and Gas, May, 0.0%, est. 0.3% (prior 0.2%, revised 0.5%) | |
| FOMC Rate Decision, June 14, est. 1.00-1.25% (prior 0.75-1.00%) |
Canadian Economic Data
| 8:30 AM | Teranet/National Bank HPI, m/m, May, 2.2% (prior 1.2%) |
| Teranet/National Bank HPI, y/y, May, 13.9% (prior 13.4%) |
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, David Leclair-Legault
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230