Market Update US tsys little changed, slight bid tone after Merkel comments on EU tariffs, US 10Y 2.822%, heavy volume in TY futures (425k). Stock futures fading, S&P -10pts, DAX -1.3%. Crude also giving up earlier gains, after WTI traded close to $73, now 72.5 , still ~6% higher on the week. GOC curve 3bps flatter before 2Y auction at noon (reopening 1.75% Aug 1 2020, roll vs 2Y 3.4/3.0). Poloz sounding dovish yesterday… more ‘data dependent’ given uncertainties surrounding trade as well as new mortgage rules impact on housing. 2s initially rallied on the comments, as did USDCAD – yet both have faded back to pre Poloz levels, the CAD benefitting from broader weakness in the USD. Provies starting 1bp weaker after being pressured by supply/equities yest. Quebec green bond & TRP 10Y putting pressure on spds yest.
News headlines
China Shares Sink to Lowest Since March 2016 as Yuan Declines (Bloomberg) The Shanghai Composite Index sank deeper into a bear market Thursday, closing at the lowest since March 2016 as the yuan also weakened. The benchmark retreated for a fourth straight day, sliding 0.9 percent to end the session below 2,800 points for the first time in two years. It’s now down 22 percent from a January peak. The yuan fell 0.36 percent to 6.6260 per dollar as of 5:10 p.m. local time, heading for its weakest level since November. Stocks in Shenzhen also declined.
Powell Wants ‘Real Economy’ to Guide Fed (Bloomberg) Federal Reserve Chairman Jerome Powell is testing the economy’s room to run. It’s a strategy that contains both big benefits and risks for ordinary Americans and is causing excitement, tinged with caution, inside the central bank. Take Fed treatment of one of its bedrock conceptual benchmarks, a rate of unemployment that keeps inflation stable. In June, they estimated that level at 4.5 percent. Unemployment in May was 3.8 percent. Yet with no sign of price pressures, policy makers plan to let the labor market run even hotter, with the jobless rate projected at 3.5 percent over the next two years.
Canada Is Preparing Steel Quotas, Tariffs on China and Others (Bloomberg) The Canadian government is preparing new measures to prevent a potential flood of steel imports from global producers seeking to avoid U.S. tariffs, according to people familiar with the plans. The Canadian dollar weakened and shares in Stelco Holdings Inc. soared. The measures are said to be a combination of quotas and tariffs aimed at certain countries including China, said the people, asking not to be identified because the matter isn’t public. The moves follow similar “safeguard” measures being considered by the European Union aimed at warding off steel that might otherwise have been sent to the U.S. It comes alongside Canadian counter-tariffs on U.S. steel, aluminum and other products set to kick in on July 1.
U.S. Stock Futures Resist Wider Sell-Off; EM Falls: Markets Wrap (Bloomberg) U.S. stock futures held their ground amid equity declines across Europe and Asia as investors continued to grapple with America’s strategy toward Chinese trade and investment. Emerging-market assets had another miserable day, while Treasuries were steady and the dollar fell. Contracts on the S&P 500, Nasdaq and Dow Jones were all little changed in the wake of Wednesday’s slump. Technology companies and carmakers were the biggest losers as the Stoxx Europe 600 Index dropped. Asia’s main equity benchmark fell a fourth day, helping drag a gauge of developing-market stocks toward the lowest level in almost a year. West Texas Intermediate crude edged lower and China’s yuan headed for another drop. The British pound weakened, and Italian bonds slipped after a disappointing auction.
Bank of Canada’s Poloz keeps markets guessing on July rate move (Reuters) The effects of U.S. tariffs and tighter mortgage rules will “figure prominently” in the Bank of Canada’s interest rate decision in July but central bank Governor Stephen Poloz kept markets guessing on Wednesday on whether it would be a hike or a hold. With a dovish speech and a hawkish news conference, Poloz whipsawed the Canadian dollar to a one-year low before it recovered ground as he kept the door open for the central bank to raise interest rates on July 11.
Ski-Doo snowmobile maker BRP buys U.S. fishing boat firm Alumacraft (BNN) Recreational vehicle maker BRP Inc. () has signed a deal to buy Alumacraft Boat, a producer of aluminum fishing boats, based in St. Peter, Minn., and announced plans to create a new marine group. Financial terms of the deal were not immediately available. BRP says the deal brings together Alumacraft with its Evinrude outboard motor business.
Amazon enlists delivery startups to help expand shipment volume (BNN) Amazon.com Inc.’s ever-expanding retail empire is going to need more workers and vehicles to get millions of packages to shoppers’ doors. To do so, the web retailer is encouraging people to start their own delivery businesses. For those in the U.S. willing to strike out on their own in the service of the e-commerce giant, Amazon will offer financial and operational support, the Seattle-based company said in a statement. Startup costs can be as low as US$10,000 and they will get access to discounted trucks, uniforms, fuel, insurance and other resources, Amazon said.
Overnight markets
Overview: US 10yr note futures are up 0.026% at 120-14, S&P 500 futures are down -0.11% at 2702, Crude oil futures are down -0.36% at $72.5, Gold futures are down -0.25% at $1252.9, DXY is down -0.11% at 95.185, CAD/USD is down -0.35% at 0.7521.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.833% | 2 Year | 2.496% |
| 5 Year | 1.982% | 5 Year | 2.696% |
| 10 Year | 2.085% | 10 Year | 2.826% |
| 30 Year | 2.165% | 30 Year | 2.967% |
US Economic Data
| 8:30 AM | Initial Jobless Claims, Jun 23rd 227k est 220k (218k prior) |
| Continuing Claims, Jun 16th 1705k est 1717k (1723k prior) | |
| GDP Annualized QoQ, 1Q 2.0% est 2.2% (2.2% prior) | |
| Personal Consumption, 1Q 0.9% est 1.0% (1.0% prior) | |
| GDP Price Index, 1Q 2.2% est 1.9% (1.9% prior) | |
| Core CPE QoQ, 1Q 2.3% (2.3% prior) | |
| 9 :45 AM | Bloomberg Consumer Comfort, Jun 24th (56.5 prior) |
| 11:00 AM | Kansas City Fed Manf. Activity, Jun est 26 (29 prior) |
Canadian Economic Data
| 7:21 AM | CFIB Business Barometer, Jun 62.2 (62.5 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