Comments

Market Update US tsys weaker, 10Y 2.91 (+1.5bps), light volume in TY futures (240k) risk-on with S&P futures +15, crude higher after OPEC deal to increase supply.  EGBs lower after EU Services PMI came in stronger than exp, also strong French & German PMIs. In Canada, GOCs lower in line with tsys, curve 0.5bps flatter with longs outperforming before Retail Sales/CPI at 8:30.  Can/US spreads little changed yest in the rally which saw 10s move below 2.12% and despite $3.55bln in corp supply – 3 tranche Hydro one, 5Y LB deposit note @ 145, TD 5Y covered & 5Y covered FRN @ 31. The latter looked the most interesting on a RV basis, considering the reopned 1.68/21 trade 17 on ASW, the new 5Y @ 31 seem like a decent pickup on AAA credit curve. 

News headlines

Euro-Area Economy Sees Silver Lining as Growth Momentum Picks Up (Bloomberg) The much awaited rebound in euro-area growth momentum may have finally begun. A gauge measuring private-sector activity unexpectedly increased in June, suggesting the economy is gathering pace after a slow start to the year. With output strengthening in the bloc’s two largest economies, Germany and France, the numbers underpin the European Central Bank’s prediction that a rebound is on the cards, even if it arrives later than expected.

Europe’s Retaliation Takes U.S. Trade Tensions to the Next Level (Bloomberg) The European Union’s retaliatory tariffs on U.S. products came into force on Friday, the latest shots fired in what increasingly looks like a global trade war. The EU, the world’s largest trading bloc, imposed levies on 2.8 billion euros ($3.3 billion) of American products in response to U.S. duties on its steel and aluminum exports that were justified on national security grounds.

Stocks Jump on Data; Oil Gains as OPEC Nears Deal: Markets Wrap (Bloomberg) European stocks rose along with U.S. futures as manufacturing and services data from the euro zone’s largest economies beat analysts’ expectations, also lifting the region’s common currency. Oil jumped as OPEC inched closer to an agreement on output. Risk sentiment also benefited from reports that some U.S. officials were trying to restart trade talks with China before President Trump’s tariffs come into effect next month. Declines in Japanese and Hong Kong equities were offset by advances in their Chinese and Korean counterparts as investors awaited developments. U.S. Treasuries fell and the dollar edged lower.

BlackBerry posts quarterly loss (Reuters) BlackBerry Ltd (BB.TO) reported a quarterly loss on Friday, compared with a year-ago profit when the Canadian software maker received a one-time arbitration payment of $940 million from chipmaker Qualcomm Inc (QCOM.O). The company’s net loss was $60 million, or 11 cents per share, for the first quarter ended May 31, compared with a profit of $671 million, or $1.23 per share, a year earlier. Total revenue fell to $213 million from $235 million.

Stocks set for worst week in three months on trade war worries (Reuters) World shares rose on Friday but were set to end a second week lower amid intensifying worries over the fallout of a trade dispute resulting from U.S. tariffs, while oil prices were higher ahead of an OPEC meeting later in the day. The MSCI All-Country World index .MIWD00000PUS, which tracks stocks in 47 countries, was up 0.2 percent in the European morning but down 1.3 percent on the week, its worst weekly showing since mid-March.

U.S. banks clear Fed’s stress test hurdle (BNN) Big banks cleared the first hurdle of this year’s U.S. stress tests as the Federal Reserve found all 35 lenders examined could withstand a severe economic downturn, though Goldman Sachs Group Inc. () trailed the rest of Wall Street in a key measure of leverage. The results announced Thursday mark the third straight year every bank exceeded the Fed’s minimum capital demands, indicating the industry’s increased comfort with reviews that once triggered headaches. The exams assess how much capital lenders would have left after enduring financial shocks. This year, Goldman Sachs and Morgan Stanley () came closest to the edge among Wall Street behemoths.

Overnight markets

Overview: US 10yr note futures are down -0.117% at 119-23, S&P 500 futures are up 0.49% at 2766, Crude oil futures are up 1.45% at $66.49, Gold futures are up 0.09% at $1271.7, DXY is down -0.27% at 94.605, CAD/USD is down -0.29% at 0.7532.

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 Tsys rallying sharply on heavy volume (625k TY fut), 10Y 2.91 (-2.7bps), buffeted by news of US tariffs on $50bln in Chinese goods, and the concomitant announcement of Chinese retaliatory measures. Core EGBs also higher, outperforming tsys as Germany’s CSU party has threatened to quit Merkel’s coalition govt. Euro equities slightly lower,  S&P futures -10, crude unch, USD index slightly lower. GOCs higher, in line with tsys. Yesterday saw GOCs fully recoup Wednesday’s underperformance vs tsys led by strong buying of CGBs, 10s 7bps richer on the curve over the week. Provis trading down 0.5bps on risk off tone, Ont 28s 65/64. 

News headlines

Wage Anxiety Casts a Shadow Over Canada’s Booming Job Market (Bloomberg) A key indicator of Canada’s labor-market health remains depressed, even with the economy producing some of the biggest pay increases in years and the unemployment rate sitting at a four-decade low. Workers are doubtful switching jobs would leave them better off financially, according to a Nanos Research Group poll conducted for Bloomberg News. Only one in 10 respondents said their wages would increase if they lost their jobs or chose to find a new one, while about seven in 10 said they’d probably be paid the same or less.

Trump’s Tariff Threats Are Paralyzing American Business (Bloomberg) President Donald Trump wants to level the playing field for American companies in the global economy, but his combative stance has unsettled business plans from the Atlantic to the Pacific. From Washington cherry farms to Midwestern chemical plants to New England lobster-trap makers, the risk of global trade war is creating anxiety among executives whose firms rely on foreign markets for revenue or to keep costs down with imported products.

Trump Approves Tariffs on $50 Billion of Chinese Goods (Bloomberg) President Donald Trump has approved tariffs on Chinese goods worth about $50 billion, said a person familiar with the decision, ratcheting up a confrontation on trade with Beijing and triggering losses in the domestic stock market. The Trump administration is preparing to release a refined list of the first batch of Chinese products to be hit with tariffs on Friday that hones in on technologies where China wants to establish itself as a leader, according to people familiar with the matter. In April, the U.S. revealed an initial list targeting about 1,300 products worth $50 billion in Chinese imports.

Stocks Fall as Trade Tensions Boil; Bonds Advance: Markets Wrap (Bloomberg) Stocks fell and bonds gained as trade tensions between the U.S. and China escalated, while investors weighed diverging monetary policies from the Federal Reserve and European Central Bank. Futures on the S&P 500 dropped and the Stoxx Europe 600 Index headed lower, erasing an earlier advance, after a mixed session in Asia. Treasury yields dipped and Italian debt led a rally in European bonds triggered by the ECB ruling out a rise in interest rates until the second half of 2019, a day after the Federal Reserve said American policy makers will continue with gradual hikes. The euro gained and the dollar was steady.

Canada debt-to-income ratio hits two-year low as rates set to rise (Reuters) Canadian household debt as a share of income slipped in the first quarter to a two-year low, a development sure to please policymakers worried about the pain that rising interest rates will cause. The ratio of debt to disposable income – which hit a record 170.0 percent last year – fell to 168.0 percent from 169.7 percent in the fourth quarter, Statistics Canada said on Thursday. This was its lowest since the 165.4 percent recorded in the first quarter of 2016.

Futures drop as oil prices slip (Reuters) Futures pointed to a lower opening for Canada’s main stock index on Friday as oil prices fell after Saudi Arabia and Russia hinted that two of the world’s biggest producers would increase output. Ahead of an OPEC meeting in Vienna on June 22-23, Russian Energy Minister Alexander Novak said on Thursday after talks with Saudi Energy Minister Khalid al-Falih in Moscow that both nations “in principle” supported a gradual increase in production after restricting output for 18 months.

Rogers Media cuts 75 jobs amid industry ‘headwinds’ (BNN) Rogers Media laid off approximately 75 full-time employees Thursday, citing ongoing industry challenges such as print revenue pressure.  “We have reorganized our digital content and publishing structure to reflect the headwinds the industry is facing and make the business sustainable,” a company spokesperson said in a statement.

Overnight markets

Overview: US 10yr note futures are up 0.249% at 119-24, S&P 500 futures are down -0.51% at 2774.25, Crude oil futures are down -0.31% at $66.68, Gold futures are down -0.91% at $1296.4, DXY is down -0.1% at 94.783, CAD/USD is up 0.43% at 0.7597.

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 Tsys higher, yields 0.3-1.5bps lower led by the long end with the 10Y 2.93% , heavy volume in TY futures (465k), off the highs after BOE decision, spike in gilt yields. BOE left rates unchanged at 0.50% in a 6-3 vote as exp, yet decision seen as a ‘hawkish hold’ with BOE Haldane joining dissenters, and new guidance on QE aims to reduce bond holdings when the base rate reaches 1.5% vs 2.0% prev. Odds of an August hike jumped to 67% from 54% pre-meeting, gilt curve 2bps flatter.  Bunds higher, supported by risk -off tone with peripheral yields higher, 2Y Italy +24bps after two euroskeptics were appointed by new govt, CNBC survey found 76% of executives are concerned about Italy leaving the euro zone. GOCs higher, led by the 10Y (2.15, -2.7bps), longs lagging for a second day, 10s30s 6bps vs 4.5bps, 10Y roll unch @ 1.1 from yest 10Y reopening. 

News headlines

Legal Marijuana, Oil Send Canadian Stocks to Record High (Bloomberg) Canadian stocks surged to a record high on Wednesday, driven by soaring cannabis stocks and a rebound in the energy sector. The S&P/TSX Composite Index rose 0.7 percent to 16,424.82 at 10:09 a.m., above the intraday and closing high on Jan. 4. After a bout of volatility that sent global markets plunging in February, it took nearly six months for Canadian stocks to claw their way back to levels last seen at the beginning of the year. The S&P 500 Index is still trading about 3.6 percent below its Jan. 26 high.

U.S. Homes Prices Least Affordable in Almost a Decade (Bloomberg) The American dream continues to fade for many people. Housing affordability dropped this quarter to the lowest since late 2008, according to data released this month by the National Association of Realtors. In May, the median price of a previously owned homes rose to a record $264,800, NAR data show.

Trump’s Metal Tariffs Have Yielded More Than $775 Million So Far (Bloomberg) The Trump administration has collected more than $775 million so far from its metal import tariffs, as lawmakers from both parties blasted the duties and said the process for requests by companies for exclusions must improve. The tariffs President Donald Trump imposed in March have generated $582 million from steel imports and $195 million from aluminum as of last week, and the combined total is expected to top $1 billion within the next six weeks, according to the Commerce Department.

Dollar Gains, Stocks Slip as Italy Adds to Worries: Markets Wrap (Bloomberg) The dollar strengthened, Treasuries climbed and stocks slipped on Thursday as two prominent euroskeptics were handed key roles in the Italian parliament, adding to the worry list for investors already fretting over the outlook for global trade. Italian bonds and stocks slumped on the news before paring some of the drop, while the euro touched the weakest in 11 months. The main European equity gauge, already under pressure in the wake of Daimler AG’s cut to its profit outlook, headed lower and futures on the S&P followed suit. The greenback, which was strengthening after China reiterated threats to retaliate against proposed American tariffs, advanced against most major peers. The pound rose after the Bank of England held interest rates steady in a more hawkish-than-expected vote.

British Columbia cracks down on anonymous ownership amid housing crisis (Reuters) British Columbia said on Wednesday it is preparing legislation to crack down on “hidden ownership” in real estate and pledged Canada’s first public registry of property owners, amid concerns that offshore money and criminal investors are helping fuel a housing crisis in the Pacific Coast province. Real estate investors in British Columbia are able to buy housing using numbered companies, corporations and offshore and domestic trusts, which obscure true ownership and can be used to dodge taxes, the province’s Minister of Finance Carole James said in a statement.

Dollar scales 11-month peak, oil slides ahead of OPEC (Reuters) Simmering trade and political tensions and a pumped-up dollar weighed on world shares on Thursday, while oil prices were under pressure before an OPEC meeting expected to increase the world’s supply of crude. Europe’s main stock markets were back near two-month lows and Wall Street futures had also turned lower [.N], as the jitters that have dominated markets for months began to reassert themselves. [.EU] Europe’s car shares .SXAP fell to a nine-month lows after Mercedes-Benz maker Daimler (DAIGn.DE) warned the global trade tensions were slowing its sales. Italian stocks and bonds also tumbled on reports a eurosceptic had been given a key finance role [.EU][GVD/EUR].

Canadian steel not a national security threat on its own: U.S. commerce secretary (BNN) U.S. Commerce Secretary Wilbur Ross says Canada is not a national security threat to the United States and that a revitalized NAFTA could make the Trump administration’s tariffs on steel and aluminum go away. Ross also acknowledged Wednesday that the U.S. doesn’t have a trade deficit on steel with Canada. In fact, he said it has a surplus with its northern neighbour in terms of dollar value.

Overnight markets

Overview: US 10yr note futures are down -0.026% at 119-19, S&P 500 futures are down -0.05% at 2770.75, Crude oil futures are down -1.43% at $64.77, Gold futures are down -0.74% at $1265.1, DXY is up 0.15% at 95.269, CAD/USD is up 0.09% at 0.7506.

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