Market Update
US tsys weaker before May Personal Income/Spending (0.4/0.4 exp) at 8:30, Chicago PMI at 10:00. US 10Y 2.85% (+1.5bps) on above avg volume in TY (445k). Stock futures higher (S&P +11) while the euro spiked on news of EU migration deal. Core EGBs pressured lower, yet well off the lows of the session after upward revision in UK Q1 GDP (0.2% vs 0.1%). Slight risk off after rumour that Trump would seek exit from WTO, since denied by Mnuchin. GOCs higher in the short end, outperforming tsys by 1-2bps before April GDP, IPPI/RMPI and BOC Business Outlook Survey, while the CAD is weaker after yesterday’s rally brought the currency to one week highs.
News headlines
Canada Targets Whiskey, Toilet Paper in Trump Tariff Response (Bloomberg) From mustard to motorboats, Canada’s about to fire back against Donald Trump on its national holiday. Prime Minister Justin Trudeau will mark Canada’s 151st birthday Sunday by imposing tariffs on about C$19.4 billion ($14.6 billion) worth of U.S. imports in response to American levies on Canadian steel and aluminum that went into effect a month ago.
Fed Test Slaps Wall Street Titans, Unleashes Record Payout (Bloomberg) Tougher Federal Reserve stress tests forced some of Wall Street’s top banks to rein in ambitious plans for pumping out cash to shareholders. But even those diminished returns spell a record payout to investors. As the central bank’s annual stress tests ended Thursday, the nation’s four largest lenders — JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. — said they will distribute more than $110 billion through dividends and stock buybacks, sending their stocks higher. Even shares of Goldman Sachs Group Inc. and Morgan Stanley — which the Fed blocked from boosting total payouts — climbed in early trading Friday.
EU Warns Trump That Car Tariffs Would Prompt Retaliation (Bloomberg) European Union leaders vowed an unwavering response to President Donald Trump’s protectionism, signaling a readiness to retaliate should the U.S. escalate a trade war with tariffs on cars. The EU government heads repeated criticism of U.S. duties on foreign metals and expressed support for the bloc’s retaliatory action over those levies, which Trump has justified on national-security grounds. The EU reacted last week by imposing tit-for-tat tariffs on 2.8 billion euros ($3.2 billion) of imports of U.S. goods ranging from motorcycles to orange juice.
Stock Rally Weathers Trump WTO Report; Euro Jumps: Markets Wrap (Bloomberg) Stocks rallied as global markets attempted an upbeat end to what has been a tumultuous quarter, though both European shares and U.S. equity futures pared some gains on a report President Donald Trump wants to withdraw from the World Trade Organization. The Stoxx Europe 600 Index and U.S. futures both wobbled before recovering following a report from Axios that President Donald Trump has repeatedly told top White House officials he wants to withdraw the U.S. from the WTO. Treasury yields edged higher, while the dollar declined a second day.
LNG Canada says local support has cut risk of delays, overruns (Reuters) A strong stakeholder engagement program at a liquefied natural gas export plant on Canada’s West Coast has helped pare the risk of delays and cost overruns for the C$40 billion ($30.1 billion)project, a project executive told Reuters. LNG Canada, currently being reviewed by its joint venture partners ahead of a final investment decision, has focused hard on ensuring government, indigenous people and local communities are on board with the project, Susannah Pierce, LNG Canada’s director of external relations, told Reuters late on Wednesday at the triennial World Gas Conference in Washington, D.C.
Ottawa’s tariffs target the U.S., but will Canadian consumers bear the brunt of higher prices? (BNN) From pickles and plywood to toilet paper, Canada’s retaliatory tariffs on $16.6 billion worth of U.S. goods come into effect July 1. The federal government’s 25 or 10 per cent surtax on a wide-range of U.S. consumer goods and manufacturing products is meant to hurt businesses and the economy south of the border, but how much will the higher cost of importing such goods drive up prices for Canadians? Economists tell BNN Bloomberg that Canada’s tariffs will have an immediate impact on consumer prices, although it will be “very small.” But they warn the impact of higher costs on intermediate goods such as steel or aluminum would be more difficult to see.
Nike sees first North American sales gain in 4 quarters (BNN) Nike Inc.’s home market is getting its mojo back. The sneaker giant’s North American sales rose for the first time in four quarters, a sign that the company’s new products are catching on with U.S. shoppers. The performance beat Nike’s own forecast for flat sales in the region. The shares rose as much as 5.9 per cent in late trading.
Overnight markets
Overview: US 10yr note futures are down 0% at 120-06, S&P 500 futures are up 0.44% at 2731.5, Crude oil futures are down -0.03% at $73.43, Gold futures are up 0.14% at $1252.7, DXY is down -0.55% at 94.791, CAD/USD is down -0.07% at 0.7552.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.842% | 2 Year | 2.52% |
| 5 Year | 2.018% | 5 Year | 2.729% |
| 10 Year | 2.138% | 10 Year | 2.849% |
| 30 Year | 2.206% | 30 Year | 2.975% |
US Economic Data
| 8:30 AM | Personal Income, May est 0.4% (0.3% prior) |
| Personal Spending, May est 0.4% (0.6% prior) | |
| PCE Deflator MoM, May est 0.2% (0.2% prior) | |
| PCE Deflator YoY, May est 2.2% (2.0% prior) | |
| PCE Core MoM, May est 0.2% (0.2% prior) | |
| PCE Core YoY, May est 1.9% (1.9% prior) | |
| 9:45 AM | Chicago Purchasing Manager, Jun est 60.0 (62.7 prior) |
| 10:00 AM | U. of Mich. Sentiment, Jun est 99.0 (99.3 prior) |
| U. of Mich. Current Conditions, Jun (117.9 prior) | |
| U. of Mich. Expectations, Jun (87.4 prior) | |
| U. of Mich. 1Yr Inflation, Jun (2.9% prior) | |
| U. of Mich. 5-10 Yr Inflation, Jun (2.6% prior) |
Canadian Economic Data
| 8:30 AM | Industrial Product Price MoM, May est 0.9% (0.5% prior) |
| Raw Materials Price Index MoM, May est 2.7% (0.7% prior) | |
| GDP MoM, Apr est 0.0% (0.3% prior) | |
| GDP YoY, Apr est 2.5% (2.9% prior) | |
| 10 :30 AM | BoC Business Outlook Future Sales, 2Q (16.00 prior) |
| BoC Senior Loan Officer Survey, 2Q (-5.2 prior) | |
| BoC Overall Business Outlook Survey, 2Q (2.0 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