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Market Update With the US mkt closed for the July 4th holiday, volumes in GOCs, futures expected to be minimal.  Core EGBs lower led by UK gilts, led by the 2-5Y after UK Services PMI surprised to the upside 55.1 in June vs 54. Mkt pricing for a BOE rate hike in August has edged higher following the release to 72% from 64%. In Canada, GOCs are  slightly lower, 10Y 2.144% , CGB volume just  over 7k or ~25% of avg.  An eventful day yesterday which saw CGBs rally 0.55 in the morning on no news (rumour of ‘fat finger’) and Can/US narrow 3-5bps led by the 10Y.  Even after the move yest, Can/US still 2-6bps wider wk/wk in the wake of upbeat the BOC survey last Friday – odds of a BOC rate hike ~82% based on OIS. 

News headlines

China’s Central Bank Faces Policy Bind Over Debt, Growth Goals (Bloomberg) China’s central bank is caught in a bind, as it seeks to tighten monetary policy for some parts of the economy while loosening it for others. Already engaged in the mammoth task of wringing bad debts out of China’s $40 trillion-plus financial system, the People’s Bank of China is now attempting to achieve that while simultaneously being asked to bolster flagging growth and rescue falling stock markets.

Wage Growth Is ‘Missing in Action’ and Workers Are Not Happy (Bloomberg) The weak wage growth that’s characterized global labor markets since the financial crisis has hit poorer workers most, compounding inequalities and fueling dissatisfaction, according to the OECD. The Paris-based body said pay increases are “missing in action,” even with rising employment, and any gains haven’t been equally distributed. In its Employment Outlook, the OECD said real labor incomes of the top 1 percent of earners have risen much faster than those of median full-time workers.

NATO Allies Push Back After Trump Scolds Them on Defense Budgets (Bloomberg) European nations and Canada pushed back against accusations they don’t spend enough on defense after receiving a scolding from U.S. President Donald Trump. Trump, who travels to Brussels next week to attend a potentially testy North Atlantic Treaty Organization summit, sent letters to several allied nations calling on them to increase their military budgets. “It will become increasingly difficult to justify to American citizens why some countries continue to fail to meet our shared collective security commitments,” Trump said in a letter addressed to Norwegian Prime Minister Erna Solberg seen by Bloomberg News. Norway, he wrote, “remains the only NATO ally sharing a border with Russia that lacks a credible plan to spend 2 percent of its gross domestic product on defense.

Europe Stocks, U.S. Futures Rise in Thin Trading: Markets Wrap (Bloomberg) European stocks edged higher and U.S. futures advanced amid holiday-hit trading, shrugging off a more downbeat mood in Asia where shares slipped even as the yuan extended a rebound. The dollar recouped earlier losses. Technology companies were the biggest decliners on the Stoxx Europe 600 Index, though a gain for telecom shares helped offset the move. Trading volumes were more than 40 percent below the 30-day average. Asian shares notched further losses even as China’s currency rose for a second day, though it pared some gains after a Reuters report that the central bank is comfortable with a weaker yuan. The yen nudged higher and the euro slipped, while the pound rose on data showing the U.K.’s services sector grew at the fastest pace in eight months in June. West Texas Intermediate oil gave up earlier gains and most industrial metals declined.

Canada’s Ontario government scraps cap-and-trade program (Reuters) The newly elected Ontario government announced on Tuesday it would end the province’s cap-and-trade program, a policy designed to reduce greenhouse gas emissions, fulfilling one of Premier Doug Ford’s election promises. However, it leaves businesses that bought C$2.8 billion ($2.1 billion) worth of allowances in limbo. Ford’s Progressive Conservative government swept to power last month, ending 15 years of Liberal rule in Ontario, Canada’s most populous province and the country’s economic engine, with a promise to cut corporate and personal taxes.

China presses Europe for anti-U.S. alliance on trade (Reuters) China is putting pressure on the European Union to issue a strong joint statement against President Donald Trump’s trade policies at a summit later this month but is facing resistance, European officials said. In meetings in Brussels, Berlin and Beijing, senior Chinese officials, including Vice Premier Liu He and the Chinese government’s top diplomat, State Councillor Wang Yi, have proposed an alliance between the two economic powers and offered to open more of the Chinese market in a gesture of goodwill.

U.S. auto tariffs could push Canada into recession by 2020, report says (BNN) Canada could slide into recession if Donald Trump carries through on his threat to slap tariffs on auto imports to the U.S., according to a new report by Scotiabank Economics. The U.S. president re-raised the spectre of auto tariffs in a Fox News interview on Monday. “I have a feeling [Mexican President-elect Andres Manuel Lopez Obrador]’s going to be fine. And the reason is because if they’re not fine, I’m going to tax their cars coming into America, and that’s the big one,” Trump said. The Scotiabank report, released Tuesday, labelled retaliatory trade action over autos as “unlikely,” but warned of dire consequences for Canada if it did happen.

Bombardier to recall 67 Toronto streetcars for maintenance (BNN) Bombardier is facing another setback with its streetcars in Toronto. Sixty-seven of the 89 new streetcars that were delivered to the Toronto Transit Commission (TTC) are being recalled to address a welding problem, according to Bombardier.  “An in-depth investigation, started 18 months ago, confirmed that 67 streetcars produced up to 2017 with structural elements originated in Mexico, and in service in Toronto, need preventive welding maintenance,” the company said in a statement Wednesday.

Overnight markets

Overview: US 10yr note futures are down -0.039% at 120-09, S&P 500 futures are up 0.27% at 2720.5, Crude oil futures are down -0.49% at $73.78, Gold futures are up 0.26% at $1256.8, DXY is up 0.08% at 94.666, CAD/USD is up 0.09% at 0.7604.

US Economic Data

Canadian Economic Data

There is no Canadian economic data 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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

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Market Update US tsys  lower, 10Y 2.877%, as equity markets are strong (S&P fut +11, while crude has reached multi year highs despite Saudi reaffirming 1mln bbl production increase. Light data day in the US with auto sales, factory orders and early close for July 4^th holiday.  Bunds/gilts lower – Eurozone producer prices rose 3% in May above 2.7% exp and the largest increase in a year. The Chinese currency (CNY) pared losses after the Chinese central bank made comments meant to reassure investors, saying that China’s fundamentals were strong. GOCs trading slightly higher, underperforming tsys by ~1bp, 10Y 2.15%.  Odds of a rate hike at next week’s BOC have risen to ~84% based on OIS, from 58% a week ago. The latest Business Outlook Survey (BOS) released Friday showed Business optimism rising to the second highest level on record in Q2, even as NAFTA uncertainty , trade tarrifs are expected to weigh on activity somewhat going forward. 

News headlines

Canada Strikes Back at Trump, and Condo Buyers Will Pay the Price (Bloomberg) Condo buyers in Canada’s already pricey markets may be the next to pay up as the trade battle with the U.S. radiates through the construction industry. Canada imposed a 25 percent tariff on U.S. steel imports on July 1, retaliating against levies President Donald Trump slapped on goods from its northern neighbor a month ago. Prime Minister Justin Trudeau’s government is also said to be preparing quotas and tariffs for other countries to prevent a flood of steel rushing in to undercut prices.

China Won’t Weaponize the Yuan in Trade War, PBOC Official Says (Bloomberg) Top Chinese central bank officials on Tuesday vowed to keep the nation’s currency stable, helping to reverse declines, and pledged that yuan devaluation won’t be used as a weapon in the trade conflict with the U.S. People’s Bank of China Governor Yi Gang said China will “keep the yuan exchange rate basically stable at reasonable and balanced level,” a repetition of standard language that helped stoke speculation that policy makers are prepared to take tougher actions to arrest the plunge in the currency.

China’s U.S. Exports Cooled in First Half as Tariffs Approach (Bloomberg) Growth in China’s exports to the U.S. slowed significantly in the first half of 2018, according to official data released Tuesday, indicating that the brewing trade conflict between the two nations may already be taking a toll. China’s exports to the U.S. expanded 5.4 percent in the first half, 13.9 percentage points lower than the same period last year, the General Administration of Customs said in a statement on its website. Chinese exports to the U.S. in June rose 3.8 percent, 23.8 percentage points lower than the same month in 2017.

Stocks Rally as China Talks Up Yuan; Oil Advances: Markets Wrap (Bloomberg) Most stock markets rebounded on Tuesday, with European shares and U.S. futures rallying following a mixed Asian session in which all eyes were on China’s yuan. The euro rose as Germany’s coalition government dodged a crisis over migration. Telecom companies led an advance in the Stoxx Europe 600 Index, while futures on the S&P 500, Dow Jones and Nasdaq all pointed to a firmer open. Miner Glencore Plc headed for the biggest decline in two years, however, after saying it has been subpoenaed by the U.S. Department of Justice. Hong Kong stocks slumped as the city returned from a holiday, but emerging-market shares pared declines as China’s central bank said it won’t use the yuan as a tool in a trade conflict.

Better-than-expected Canada growth boosts rate hike prospects (Reuters) Canada’s economy shrugged off the effects of bad weather to post unexpected growth in April and business optimism rose to near record levels in the second quarter, pushing up the Canadian dollar and boosting odds of an interest rate hike next month. Statistics Canada said on Friday that GDP rose by 0.1 percent from March, the seventh time in the last eight months that the economy has expanded. Analysts in a Reuters poll had predicted no change.

Canadian populist Doug Ford sworn in as Ontario province premier (Reuters) Populist leader Doug Ford was sworn in as Ontario’s new premier on Friday, ending 15 years of Liberal rule in Canada’s most populous province, and he promised to drop a program aimed at reducing greenhouse gas emissions. Ford and his Progressive Conservative party swept to power in Ontario’s parliamentary elections earlier this month with a vow to cut personal and corporate taxes. Ford, 53, is the brother of the late mayor of Toronto Rob Ford, who made headlines in 2013 when he admitted to smoking crack cocaine.

Element AI aims for unicorn status with record Canadian financing (BNN) Element AI Inc., a Montreal-based startup that deploys artificial intelligence software within businesses that don’t have experience with the technology, is looking to raise as much as $250 million in a new round of venture-capital funding, according to four sources familiar with the matter. The people said the Series B financing, if successful, would give Element AI a valuation of $1 billion, placing it among a special class of Canadian startups with valuations north of the billion-dollar mark. It would also be the biggest such venture-capital funding round ever for a startup in Canada and yet another sign of the maturation of the country’s technology sector.

Overnight markets

Overview: US 10yr note futures are down -0.104% at 119-31, S&P 500 futures are up 0.45% at 2739.5, Crude oil futures are up 1.05% at $74.72, Gold futures are up 0.57% at $1248.8, DXY is down -0.28% at 94.608, CAD/USD is down -0.17% at 0.7595.

US Economic Data

Canadian Economic Data

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

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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.

US Economic Data

Canadian Economic Data

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