Commentaires

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

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.

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