Market Update Tsys lower , US 10Y 2.835 (+1bp) , on heavy volume in TY futures (575k), with the USDJPY lower for a third day, the yen reaching the highest level since before the US election, concerns over potential trade war as China announced $3bln in retaliatory tariffs. S&P futures recovering from earlier losses, now up 3.5pts. Core Euro bonds lower led by long term gilts with the gilt curve 3.5bps steeper, some profit taking in bunds after yesterday’s risk off rally in global bonds. Fed governor Bostic saying rate hikes will be needed over the next couple of years. GOCs lower before key CPI/Retail Sales data, 10Y 2.19% (+1.6bps). CPI expected to rise 0.4% m/m in Feb, reflecting positive seasonal factors, with the closely watched core rate approaching 2.0% y/y.Provi spds 1-2bps wider in risk off session, Alberta budget yest no impact on spds.
News headlines
China Hits Back on Trump Tariffs as Europe Off Hook for Now (Bloomberg) The trade conflict between China and the U.S. escalated, with Beijing announcing its first retaliation against metals levies hours after President Donald Trump outlined fresh tariffs on $50 billion of Chinese imports and pledged there’s more on the way. On Friday, China unveiled tariffs on $3 billion of U.S. imports in response to steel and aluminum duties ordered by Trump earlier this month. The White House then declared a temporary exemption for the European Union and other nations on those levies, making the focus on China clear. Though Beijing’s actions so far are seen by analysts as measured, there may be more to come.
Oil Gains as Trump Picks Iran Hawk Bolton as Security Adviser (Bloomberg) Oil advanced on concerns that the U.S. president’s choice of a noted hawk as his new security adviser could inflame political tensions in oil-producing regions. President Donald Trump’s plans to appoint hardliner John Bolton as White House national security adviser raises the likelihood the U.S. will re-impose sanctions on Iran, the third-largest oil producer in the Middle East, analysts say. Prices are headed for their biggest weekly gain in a month, despite slumping Thursday after Trump’s call for tariffs on at least $50 billion of Chinese imports fanned worries about global economic growth.
Senate Averts Shutdown by Passing $1.3 Trillion Spending Bill (Bloomberg) The Senate narrowly averted a government shutdown by passing a $1.3 trillion spending bill early Friday that increases military and domestic spending and strengthens background checks for gun buyers. The 65-32 vote came after Republican conservatives objected to the higher spending and Republican Rand Paul of Kentucky held open the possibility that he’d delay the vote past a Friday midnight deadline that would have triggered a cloture.
Europe Stocks Slump as U.S. Futures Pare Decline: Markets Wrap (Bloomberg) Stock declines deepened on Friday, with European equities sliding to the lowest in more than a year and gauges tumbling across Asia as the negative news cycle for risk assets continued. Treasury yields and U.S. equity futures both pared a drop, however, signaling the selloff may yet ease. China announced retaliation against President Donald Trump’s tariffs and there was further turnover in the U.S. administration, compounding a retreat that started in technology shares and escalated when the White House upped its protectionist agenda on Thursday. Traditional havens including gold and the yen jumped as investors sought safer assets, though government bonds failed to add to gains from a day earlier.
EU Blames Russia, Expulsions Now in Sight: EU Summit Update (Bloomberg) European Union leaders sided with the U.K. and said it’s “highly likely” that Russia was behind the nerve agent poisoning in Britain of a former double agent. It’s an outcome that will please Prime Minister Theresa May. The language of the bloc was toughened significantly: It could find “no other plausible explanation” for the attack and believes it’s “highly likely” Russia is to blame.
TSX futures dip on trade war fears (Reuters) Futures for Canadian main stock index fell on Friday on rising fears of a global trade war after U.S. President Donald Trump announced tariffs on Chinese goods. Trump signed a presidential memorandum on Thursday that could impose tariffs on up to $60 billion of imports from China, but only after a 30-day consultation period that starts once a list is published. June futures on the S&P TSX index SXFc1 were down 0.25 percent at 7:15 a.m. ET.
Alberta budget sets out plan to balanced books in 5 years (BNN) Alberta’s 2018 budget includes more spending, an $8.8-billion deficit and a five-year plan to balance the books that’s tied to the ups and downs of oil prices and the vagaries of pipeline politics. “This budget continues to support the vital programs and services Albertans need,” Finance Minister Joe Ceci said Thursday. “It continues to work on the diversification of our economy and we need that vitally because of the wild swings in our revenues.” The budget, as in past years, increases funding for core programs in education, health and community services.
Overnight markets
Overview: US 10yr note futures are up 0.013% at 120-17, S&P 500 futures are up 0.11% at 2646.25, Crude oil futures are up 0.22% at $64.44, Gold futures are up 1.07% at $1347.5, DXY is down -0.26% at 89.623, CAD/USD is down -0.16% at 0.7741.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.823% | 2 Year | 2.283% |
| 5 Year | 2.046% | 5 Year | 2.627% |
| 10 Year | 2.181% | 10 Year | 2.836% |
| 30 Year | 2.307% | 30 Year | 3.087% |
US Economic Data
| 8:30 AM | Durable Goods Orders, Feb est 1.6% (-3.6% prior) |
| Durable Ex Transportation, Feb est 0.5% (-0.3% prior) | |
| Cap Goods Orders Nondef Ex Air, Feb est 0.9% (-0.3% prior) | |
| Cap Goods Ship Nondef Ex Air, Feb est 0.5% (-0.1% prior) | |
| 10:00 AM | New Home Sales, Feb est 620k (593k prior) |
| New Home Sales MoM, Feb est 4.6% (-7.8% prior) |
Canadian Economic Data
| 8:30 AM | CPI NSA MoM, Feb est 0.4% (0.7% prior) |
| CPI YoY, Feb est 1.9% (1.7% prior) | |
| Consumer Price Index, Feb est 132.4 (131.7 prior) | |
| CPI Core- Common YoY%, Feb est 1.9% (1.8% prior) | |
| CPI Core- Median YoY%, Feb (1.9% prior) | |
| CPI Core- Trim YoY%, Feb (1.8% prior) | |
| Retail Sales MoM, Jan est 1.1% (-0.8% prior) | |
| Retail Sales Ex Auto MoM, Jan est 0.8% (-1.8% 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