Market Update
US tsys open lower for a second day as risk-on tone prevails for a second day, US 10Y 2.304 (+3bps), moderate volume in TY futures (340k). European stocks higher, Stoxx 50 +0.25% after yesterday’s 4.0% increase, S&P futures +5, crude unch 49.25. Trump said to back off on border wall funding to avoid govt shutdown. UK gilts lower weighed by risk on sentiment even as public borrowing is set to decline for 2017-18 to GBP114.2bln from 115.1bln while the deficit for this FY fell to 2.6% of GDP from 3.8% (71.1b vs 72.5b exp). Bunds lower, 10Y +4.4bps @ 0.37% curve bear steepening – Germany issued E3.22bln of 2Y bonds @ -0.69% which was technically uncovered while a 10Y & long deal from EFSF (European Financial Stability Facility) pressured long end of the bund curve . Big move in CAD -USDCAD shot higher 92bps @ 1.3594 after 20% tariffs announced on Cdn lumber, GOCs lower underperforming tsys out the curve. BC/Ontario rollswider, long roll -5/-6 , 0.5bps wider on lumber news.
News headlines
Return of Risk Spurs Stocks as Europe Bonds Falter: Markets Wrap (Bloomberg) Markets are holding onto their appetite for riskier assets, with stocks in Europe hovering near a 20-month high and emerging markets extending this year’s outperformance. The yen fell with Treasuries and gold as haven demand ebbed for a second day.
Oil edges up, breaking six-day stretch of losses (Reuters) Oil rose on Tuesday, breaking a six-day streak of price falls, but with doubt swirling over OPEC’s ability to force global crude inventories to drop, sentiment has turned more bearish. Brent crude LCOc1 was up 8 cents at $51.68 a barrel by 0940 GMT, while U.S. crude futures CLc1 were up 10 cents at $49.33 a barrel.
Greece, lenders seek deal as bailout talks resume in Athens (Reuters) Greece and its foreign creditors resume talks on Tuesday on reforms prescribed under the international bailout and further debt relief, aiming to reach a comprehensive deal before a meeting of euro zone finance ministers on May 22.
U.S., North Korea Flex Military Muscles as Tensions Simmer (Bloomberg) The U.S. and North Korea both showed off their military prowess on Tuesday as nations in the region stepped up diplomatic talks to defuse a brewing crisis over Kim Jong Un’s nuclear program.
Canada vows to fight ‘unfair and punitive duty’ as Trump slaps tariff on softwood lumber (FinancialPost) The U.S. Commerce Department has imposed import duties ranging from 3 per cent to 24 per cent on shipments from Canadian softwood lumber producers. While the U.S. has slapped tariffs on Canadian lumber before, the measures taken Tuesday are unusually harsh because they come with a finding of “critical circumstances.”
CN posts jump in profit as railway moves record volumes (TheGlobeAndMail) Canadian National Railway Co. rode a wave of new shipping contracts and record volumes to a 12-per-cent jump in first-quarter profit. CN late Monday posted net profit of $884-million and diluted earnings per share of $1.16 in the first three months of the year. Revenue rose by 8 per cent to $3.2-billion, compared with the same period a year earlier. Analysts expected per-share profit of $1.15 (both adjusted and net) and revenue of $3.2-billion, according to Bloomberg.
Teck Resources profit misses estimates as costs rise (TheGlobeAndMail) Canada’s Teck Resources Ltd , North America’s largest producer of steel making coal, reported lower-than-expected profit due to higher costs, lower production and sales volumes. Unit production costs in the first quarter rose by $13 to $56 per tonne from a year ago. First-quarter coal production was 6.1 million tonnes, 8 per cent lower than last year, the company said on Tuesday.
Overnight markets
Overview: US 10yr note futures are down -0.224% at 125-17, S&P 500 futures are up 0.34% at 2378, Crude oil futures are down -0.47% at $49, Gold futures are down -0.66% at $1269.1, DXY is down -0.09% at 99.005, CAD/USD is up 0.75% at 0.7352.
US Economic Data
| 9:00 AM | FHFA House Price Index, m/m, Feb, est. 0.4% (prior 0.0%) |
| 10:00 AM | New Home Sales, Mar, est. 584k (prior 592k) |
| New Home Sales, m/m, est. -1.4% (prior 6.1%) | |
| Conference Board Consumer Confidence Index, Apr, est. 122.5 (prior 125.6) | |
| 10:00 AM | Richmond Fed Manufacturing Index, Apr, est. 16 (prior 22) |
Canadian Economic Data
There is no major economic data release 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, David Leclair-Legault
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230