Market Update Tsys rallying sharply on heavy volume (625k TY fut), 10Y 2.91 (-2.7bps), buffeted by news of US tariffs on $50bln in Chinese goods, and the concomitant announcement of Chinese retaliatory measures. Core EGBs also higher, outperforming tsys as Germany’s CSU party has threatened to quit Merkel’s coalition govt. Euro equities slightly lower, S&P futures -10, crude unch, USD index slightly lower. GOCs higher, in line with tsys. Yesterday saw GOCs fully recoup Wednesday’s underperformance vs tsys led by strong buying of CGBs, 10s 7bps richer on the curve over the week. Provis trading down 0.5bps on risk off tone, Ont 28s 65/64.
News headlines
Wage Anxiety Casts a Shadow Over Canada’s Booming Job Market (Bloomberg) A key indicator of Canada’s labor-market health remains depressed, even with the economy producing some of the biggest pay increases in years and the unemployment rate sitting at a four-decade low. Workers are doubtful switching jobs would leave them better off financially, according to a Nanos Research Group poll conducted for Bloomberg News. Only one in 10 respondents said their wages would increase if they lost their jobs or chose to find a new one, while about seven in 10 said they’d probably be paid the same or less.
Trump’s Tariff Threats Are Paralyzing American Business (Bloomberg) President Donald Trump wants to level the playing field for American companies in the global economy, but his combative stance has unsettled business plans from the Atlantic to the Pacific. From Washington cherry farms to Midwestern chemical plants to New England lobster-trap makers, the risk of global trade war is creating anxiety among executives whose firms rely on foreign markets for revenue or to keep costs down with imported products.
Trump Approves Tariffs on $50 Billion of Chinese Goods (Bloomberg) President Donald Trump has approved tariffs on Chinese goods worth about $50 billion, said a person familiar with the decision, ratcheting up a confrontation on trade with Beijing and triggering losses in the domestic stock market. The Trump administration is preparing to release a refined list of the first batch of Chinese products to be hit with tariffs on Friday that hones in on technologies where China wants to establish itself as a leader, according to people familiar with the matter. In April, the U.S. revealed an initial list targeting about 1,300 products worth $50 billion in Chinese imports.
Stocks Fall as Trade Tensions Boil; Bonds Advance: Markets Wrap (Bloomberg) Stocks fell and bonds gained as trade tensions between the U.S. and China escalated, while investors weighed diverging monetary policies from the Federal Reserve and European Central Bank. Futures on the S&P 500 dropped and the Stoxx Europe 600 Index headed lower, erasing an earlier advance, after a mixed session in Asia. Treasury yields dipped and Italian debt led a rally in European bonds triggered by the ECB ruling out a rise in interest rates until the second half of 2019, a day after the Federal Reserve said American policy makers will continue with gradual hikes. The euro gained and the dollar was steady.
Canada debt-to-income ratio hits two-year low as rates set to rise (Reuters) Canadian household debt as a share of income slipped in the first quarter to a two-year low, a development sure to please policymakers worried about the pain that rising interest rates will cause. The ratio of debt to disposable income – which hit a record 170.0 percent last year – fell to 168.0 percent from 169.7 percent in the fourth quarter, Statistics Canada said on Thursday. This was its lowest since the 165.4 percent recorded in the first quarter of 2016.
Futures drop as oil prices slip (Reuters) Futures pointed to a lower opening for Canada’s main stock index on Friday as oil prices fell after Saudi Arabia and Russia hinted that two of the world’s biggest producers would increase output. Ahead of an OPEC meeting in Vienna on June 22-23, Russian Energy Minister Alexander Novak said on Thursday after talks with Saudi Energy Minister Khalid al-Falih in Moscow that both nations “in principle” supported a gradual increase in production after restricting output for 18 months.
Rogers Media cuts 75 jobs amid industry ‘headwinds’ (BNN) Rogers Media laid off approximately 75 full-time employees Thursday, citing ongoing industry challenges such as print revenue pressure. “We have reorganized our digital content and publishing structure to reflect the headwinds the industry is facing and make the business sustainable,” a company spokesperson said in a statement.
Overnight markets
Overview: US 10yr note futures are up 0.249% at 119-24, S&P 500 futures are down -0.51% at 2774.25, Crude oil futures are down -0.31% at $66.68, Gold futures are down -0.91% at $1296.4, DXY is down -0.1% at 94.783, CAD/USD is up 0.43% at 0.7597.
Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
2 Year | 1.899% | 2 Year | 2.549% |
5 Year | 2.104% | 5 Year | 2.782% |
10 Year | 2.227% | 10 Year | 2.906% |
30 Year | 2.253% | 30 Year | 3.028% |
US Economic Data
8:30 AM | Empire Manufacturing, Jun 25.0 est 18.8 (20.1 prior) |
9:15 AM | Industrial Production MoM, May est 0.2% (0.7% prior) |
Manufacturing (SIC) Production, May est 0.0% (0.5% prior) | |
Capacity Utilization, May est 78.1% (78.0% prior) | |
10:00 AM | U. of Mich. Sentiment, Jun est 98.5 (98.0 prior) |
U. of Mich. Current Conditions, Jun (111.8 prior) | |
U. of Mich. Expectations, Jun (89.1 prior) | |
U. of Mich. 1Yr Inflation, Jun (2.8% prior) | |
U. of Mich. 5-10 Yr Inflation, Jun (2.5% prior) | |
16:00 PM | Total Net TIC Flows, Apr (-38.5b prior) |
Net Long-term TIC Flows, Apr (61.8b prior) |
Canadian Economic Data
8:30 AM | Int’l Securities Transactions, Apr (6.15b prior) |
Manufacturing Sales MoM, Apr 1.3% est 0.6% (1.4% prior) | |
9:00 AM | Existing Home Sales MoM, May est -1.7% (-2.9% 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