Market Update
US tsys moving lower despite a big miss on Q1 GDP (0.7% vs 1% exp) thou GDP prices came in stronger 2.3% vs 2.0 exp) 10Y 2.327%% (+3bps). Core Euro bonds sharply lower with the 10Y bund 5bps higher @ 0.343% and the 10Y bund/tsy spd close to three month lows @ 195bps. Eurozone CPI rose 1.9% in Apr vs 1.8% exp. The German 5s30s curve wider for seventh day, another 2bps steeper after the inflation data. Today is the month-end extension , the Euro Aggregate Tsy index extends 0.12yrs vs 0.03 avg. monthly. GOCs lower, spds 2bps tighter vs tsys after Feb GDP missed est , unch vs 0.1% exp, 2.5% y/y vs 2.6% – but keep in mind this comes after three solid mnthly increases.
News headlines
U.S. first-quarter growth weakest in three years as consumer spending falters (Reuters) The U.S. economy grew at its weakest pace in three years in the first quarter as consumer spending barely increased and businesses invested less on inventories, in a potential setback to President Donald Trump’s promise to boost growth. Gross domestic product increased at a 0.7 percent annual rate also as the government cut back on defense spending, the Commerce Department said on Friday. That was the weakest performance since the first quarter of 2014.
UK GDP growth slower than expected as inflation bites (TheGuardian) The UK economy suffered a sharp slowdown in the opening months of this year, as the post-referendum rise in living costs took its toll on British households and hit consumer spending. GDP growth fell more than expected to 0.3% in the first quarter from 0.7% in the previous quarter, the Office for National Statistics said.
ECB nods to euro zone recovery but keeps money taps wide open (Reuters) The European Central Bank stuck to its ultra-easy policy stance on Thursday as inflation continues to undershoot its target but explicitly acknowledged the vigor of the euro zone economy, now on its best run since the global financial crisis.Despite calls from Germany, the euro zone’s economic powerhouse, for a gradual reduction of stimulus, the ECB even left the door open to further rates cuts or an increase in asset buys. But ECB President Mario Draghi noted that the euro zone’s economy had further improved and the risk of a new downturn had receded, a signal seen by many as foreshadowing a bolder change at the next meeting in June.
All for One: Emboldened EU United Against U.K. Over Brexit (Bloomberg) European Union leaders are set to declare that when it comes to Brexit, 27 of them will stand as one against the U.K. A Saturday summit in Brussels called solely to discuss Britain’s departure from the bloc will serve as a stage for the governments the U.K. is leaving behind to talk up unity and warn British officials against sowing division in the hope of securing a better exit deal.
Barclays Shares Fall After Surprise Drop in Trading Revenue (Bloomberg) Barclays Plc dropped the most in almost six months after posting a surprise drop in trading across debt and equity.The firm reported an unexpected decline in fixed-income trading revenue, contrasting with a 24 percent jump achieved by its five largest American counterparts and a smaller increase at Deutsche Bank AG, its biggest competitor in Europe. Income from equities trading also fell more than expected, while investment banking fees surged.
Cloud Produces Sunny Earnings at Amazon, Microsoft and Alphabet (NYTimes) The moneymaking machines at the core of Amazon, Microsoft and Alphabet, the parent company of Google, are notably different. But the respective kings of online retailing, software and internet search should all credit a relatively new line of business for lifting their financial results. In their quarterly earnings reports on Thursday, the three said cloud computing — through which they rent computing services and online access to software hosted in their data centers — was growing faster than their larger, older businesses.
Overnight markets
Overview: US 10yr note futures are down -0.162% at 125-14, S&P 500 futures are up 0.03% at 2386.75, Crude oil futures are up 1.47% at $49.69, Gold futures are up 0.1% at $1267.2, DXY is down -0.13% at 98.946, CAD/USD is up 0.16% at 0.7323.
US Economic Data
| 8:30 AM | Employment Cost Index, 1Q, 0.8% ,est. 0.6% (prior 0.5%) |
| GDP Annualized q/q, 1Q A, 0.7%, est. 1.0% (prior 2.1%) | |
| GDP Price Index, q/q, 1Q A, 2.3%, est. 2.0% (prior 2.1%) | |
| Personal Consumption, 1Q A, 0.3%, est. 0.9% (prior 3.5%) | |
| Core PCE, q/q, 1Q A, 2.0%, est. 2.0% (prior 1.3%) | |
| 9:45 AM | Chicago Purchasing Manager Index, Apr, est. 56.2 (prior 57.7) |
| 10:00 AM | University of Michigan Sentiment, Apr F, est. 98.0 (prior 98.0) |
Canadian Economic Data
| 8:30 AM | GDP, m/m, Feb, 0.0%, est. 0.1% (prior 0.6%) |
| GDP, y/y, Feb, 2.5%, est. 2.6% (prior 2.3%) | |
| Industrial Product Price m/m, Mar, 0.8%, est. 0.3% (prior 0.1%, revised 0.3%) | |
| Raw Materials Price Index, m/m, Mar,-1.6%, est. -0.5% (prior 1.2%) |
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