Market Update
Tsys surging higher, following EGBs after ECB Draghi hints on potential stimulus if outlook doesn’t improve, US 10Y 2.025% (-7bps) lowest since Sep 2017, curve bull flattening. Euro equities 1.5% higher, S&P futures +17, crude unch. Draghi comments and six month low in German ZEW expectations push German bund yields to record lows, 10Y -0.32%, French 10Y 0.0% for first time. With FOMC tomorrow odds of a rate cut now almost fully priced for July. Focus will be on removal of the word ‘patient’ signalling more of a dovish shift, as well as dot plots. GOCs higher, in line with tsys, 10Y below 1.40% for first time since May 2017. Today sees April manufacturing sales ahead of CPI tomorrow and April Retail Sales Friday.
News headlines
Stocks, Bonds Climb as Draghi Fuels Stimulus Hopes: Markets Wrap (Bloomberg) Stocks climbed and bonds rallied on Tuesday as comments from ECB officials added fuel to investors’ hopes for easier monetary policies from the world’s biggest central banks.
Draghi puts further ECB easing firmly on the table (Reuters) The European Central Bank will ease policy again if inflation fails to accelerate, ECB President Mario Draghi said on Tuesday, signaling one of the biggest policy reversals of his eight-year tenure.
CANADA STOCKS-TSX futures up on rising gold prices ahead of Fed meeting (Reuters) Futures pointed to a higher opening for Canada’s main stock index on Tuesday, as gold prices edged up on hopes of a rate cut from the U.S. Federal Reserve, which begins its two-day interest rate meeting later in the day.
For Fed’s Powell, a gap with markets and Trump may need explaining (Reuters) Bond investors expect an aggressive set of U.S. interest rate cuts this year, and a voluble president pines for the “old days” when his predecessors bullied central bankers to get their way.
EU trade surplus with U.S. expands, deficit with China larger (Reuters) The European Union’s trade surplus in goods with the United States increased in the first four months of 2019 while its deficit with China widened, figures that could further strain global tensions.
Oil prices slip for second day on global growth fears (Reuters) Oil prices fell for a second day on Tuesday on signs that global economic growth is being hit by the U.S.-China trade war, though losses were capped by Middle East tensions after last week’s tanker attacks.
German 10-yr yield hits -0.30% on Draghi’s stimulus klaxon (Reuters) The euro dropped and German government bond yields hit -0.30% for the first time on Tuesday after European Central Bank chief Mario Draghi said the bank would provide more stimulus if inflation failed to pick up.
Market Overview: US 10yr note futures are up 0.417% at 127-28, S&P 500 futures are up 0.63% at 2914.5, Crude oil futures are down -0.13% at $51.86, Gold futures are up 0.77% at $1353.3, DXY is up 0.16% at 97.71, CAD/USD is up 0.04% at 0.7452.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.356% | 2 Year | 1.811% |
| 5 Year | 1.282% | 5 Year | 1.781% |
| 10 Year | 1.387% | 10 Year | 2.022% |
| 30 Year | 1.649% | 30 Year | 2.519% |
US Economic Data
| 08:30 AM | Housing Starts, May Survey: 1240k Actual: — Prior: 1235k |
| Housing Starts MoM, May Survey: 0.40% Actual: — Prior: 5.70% | |
| Building Permits, May Survey: 1293k Actual: — Prior: 1296k | |
| Building Permits MoM, May Survey: 0.20% Actual: — Prior: 0.60% |
Canadian Economic Data
| 08:30 AM | Manufacturing Sales MoM, Apr Survey: 0.40% Actual: — Prior: 2.10% |
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, Émile Bordeleau
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230