Comments

Market Update Tsys trading higher, rising after ECB decision to end QE in Dec yet leave rates unch until summer 2019, US 10Y 2.937% (-3.1bps). Bunds reversed earlier losses, the Sep bund spiking to intra-day high 160.32, thou the contract has since backed off. EUR/USD initially rallied on the ECB taper (15bln from Sep-Dec from 30bln) but reversed sharply lower on dovish pledge to hold rates unch. Bund yields 3-4bps lower, 10Y 0.45% at a one week low.  ECB press conference at 8:30 along with US Retail Sales and Import Prices. Stocks higher, S&P futures +6.5, crude higher (66.88 +0.24). GOCs higher, in line with tsys after ECB, Can/US 2Y which rallied 3bps post FOMC back to only marginally tighter, -62.5bp, indicating Can outperformance may be stretched at this point. Provis closed yest 0.5bps tighter on no supply, City of Montreal 10Y @ 85 (QCs +25) well received. 

News headlines

Powell Solves Some Fed Policy Mysteries, Plot Thickens on Others (Bloomberg) Jerome Powell gave Federal Reserve-watchers some meaningful answers on Wednesday. He also left them scratching their heads over ever-bigger questions. Federal Reserve Chairman Jerome Powell signaled growing optimism on the U.S. economy while trying to reassure investors that the central bank would not derail the country’s second-longest expansion by aggressively tightening monetary policy. Fed officials on Wednesday raised interest rates by a quarter point for the second time this year and upgraded their median forecast to four total increases in 2018, as unemployment falls and inflation overshoots their 2 percent target earlier than previously projected 

ECB says its massive bond-buying program will likely end in December (CNBC) The bank said Thursday that if incoming data followed its forecasts, then its monthly bond purchase program would be extended through to the final quarter of the year.Until now, this quantitative easing (QE) program was scheduled to last until September, carrying monthly purchases of 30 billion euros ($35 billion) of government and private debt.This will now be reduced to 15 billion euros during the last three months of 2018. 

China urges U.S. to make ‘wise choice’ ahead of tariffs decision (Reuters) China urged the United States on Thursday to make a “wise decision” on trade, saying it was ready to respond in case Washington chose confrontation, as U.S. President Donald prepares to decide whether to activate tariffs on Chinese goods. Trump is due to unveil revisions to his initial tariff list targeting $50 billion of Chinese goods on Friday. People familiar with the revisions said the list would be slightly smaller than the original, with some goods deleted and others added, particularly in the technology sector.

China’s Economy Is Slowing Just as Trump Readies a Trade Beating (BLoomberg) China’s economy fell short of expectations and its central bank chose not to follow the Federal Reserve in raising borrowing costs, adding fresh caution on the outlook for global growth as trade tensions with the U.S. escalate. etail sales grew by 8.5% year-over-year in April, making for the weakest reading since June 2003, according to National Bureau of Statistics data released Thursday. Fixed asset investment, industrial output, and mining output also fell short of expectations.

U.S. energy firms chasing oil price rally stumble on old baggage (Reuters) With oil price recovery taking hold, several U.S. oil and gas companies entered 2018 with a compelling plan – sell undeveloped or less essential fields and invest the money to boost returns from their sweetest, most productive spots.

Euro goes up as ECB prepares to wind down (Reuters) The euro rose to its highest in a month but world stocks wilted on Thursday, as the European Central Bank prepared to pull the plug on its 2.55 trillion-euro, three-year stimulus program.

Overnight markets

Overview: US 10yr note futures are up 0.197% at 119-14, S&P 500 futures are up 0.35% at 2788.75, Crude oil futures are up 0.68% at $67.09, Gold futures are up 0.78% at $1311.4, DXY is up 0.33% at 93.856, CAD/USD is up 0.04% at 0.7699.

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 are trading slightly higher out the curve unch in the short end, 10Y 2.96%, ,little reaction to stronger May PPI (0.5% vs 0.3%, ex food & energy 2.4% vs 2.3%).  Equity mkts higher, S&P futures +3, crude under slight pressure, below $66 after Trump’s latest tweet on OPEC. FOMC this afternoon – futures mkts pricing in 85% odds of a 25bp hike., dot plots and press conference will be paid particular attention. Core Euro bonds outperforming tsys ,  UK gilts higher after May inflation came in as exp. German bunds lagging the rally in gilts after a technically uncovered 10Y bund auction. More event risk tomorrow with ECB decision where Draghi may announce the end to QE.  GOCs maintaining outperformance vs tsys across the curve, 2s setting new tights yest as it becomes increasingly more apparent the BOC will lag the Fed in tightening despite last month’s strong rise hourly wages,  reduction in excess capacity.

News headlines

South Africa Retail Sales Rise at Slowest Since February 2017 (Bloomberg) Retail sales in South Africa, the continent’s most-industrialized economy, rose at the slowest pace in 15 months in April. Sales climbed 0.5 percent from a year earlier, Pretoria-based Statistics South Africa said in a statement on its website Wednesday. That’s less than the revised 4.6 percent expansion for March and compares with a median estimate of 4.4 percent in a Bloomberg survey.

Trump Says North Korea Poses No Nuclear Threat, Despite Weapons (Bloomberg) President Donald Trump declared that North Korea no longer posed a nuclear threat, even though Kim Jong Un hasn’t committed to a timetable for giving up his regime’s weapons. “Everybody can now feel much safer than the day I took office,” Trump said on Twitter Wednesday shortly after arriving back in Washington from his meetings in Singapore with Kim. “There is no longer a Nuclear Threat from North Korea.”

Turkey’s Election Is Too Close to Call, Bloomberg Poll Shows (Bloomberg) Turkey’s election this month could go down to the wire, with President Recep Tayyip Erdogan facing a tougher battle to cement power or even an upset, according to a poll commissioned by Bloomberg. Erdogan can win the presidential vote in the first round on June 24 with 50.8 percent support and get the backing of a majority in parliament, the survey by Foresight Danismanlik of 500 people on June 7-11 found. But a surprise victory for the opposition is also within the margin of error.

Anti-U.S. consumer boycott? Canadians may find it hard to pull off (Reuters) Canadians outraged by U.S. President Donald Trump’s attack on their prime minister have called for a consumer boycott targeting the United States, but indignation may be hard to sustain in a nation enamored by U.S. popular culture and larded with American goods. A push for some sort of reprisal in response to Trump’s personal attack on Justin Trudeau has gained force since Canada’s Parliament on Monday condemned weekend broadsides from its ally amid an escalating trade dispute.

AT&T slips after Time Warner buyout gets approval (Reuters) Shares of AT&T Inc fell 2 percent on Wednesday after a federal judge approved the telecom company’s $85 billion buyout of Time Warner Inc, clearing the path for more deals in a rapidly changing media industry. The news lifted shares of other telecom and media companies such as Sprint Corp, CBS Corp and Discovery Inc by around 4 percent in premarket trading. Time Warner was also up about 5 percent. “Once technically driven volatility wears off we expect the stock to move higher as closure will likely provide a new investor catalyst including $1.5 billion in anticipated cost synergies,” said Cowen & Co analyst Colby Synesael. However, at least one analyst raised concerns about the debt AT&T was taking on as part of the deal.

Trump aide Navarro apologizes for ‘inappropriate’ Trudeau comments (BNN) White House trade adviser Peter Navarro apologized for suggesting Canadian Prime Minister Justin Trudeau deserved a “special place in hell” for a perceived breach in protocol against U.S. President Donald Trump. “My job was to send a signal of strength,” he said at a Wall Street Journal CFO Network conference in Washington on Tuesday. “The problem was that in conveying that message I used language that was inappropriate.”

U.S. Fed dots in focus as market awaits interest rate hike (BNN) Federal Reserve Chairman Jerome Powell has repeatedly played down the central bank’s “dot plot” as a guide to future interest rates, but Wall Street just won’t take the hint. While the Federal Open Market Committee is almost certain to raise rates a quarter point at the close of a two-day meeting Wednesday, investors are focused on whether the panel will signal one or two additional 2018 hikes when it releases updated interest-rate forecasts with the policy decision at 2 p.m. Powell will begin his press conference 30 minutes later.

Overnight markets

Overview: US 10yr note futures are down 0% at 119-13, S&P 500 futures are up 0.17% at 2793, Crude oil futures are down -0.53% at $66.01, Gold futures are down -0.08% at $1298.4, DXY is up 0% at 93.822, CAD/USD is up 0.01% at 0.7682.

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 trading lower, near bottom of overnight range on above avg volume (370k TY), 10Y 2.97% (+1.3bps) before May CPI (0.2%/2.8% exp). Equities unch, euro equities mixed, crude slightly lower, USD index unch.  News flow dominated by Trump/Kim meeting, which had little impact on mkts. Fed kicks of two-day meeting with a 25bp rate hike expected tomorrow. Particular attention will be played to the language in the statement and whether the Fed will hike rates 3 or 4 times this year.  GOCs slightly lower, in line with tsys, provis fairly steady along with rates over the past week. Busy session in primary corp issuance yesterday  with 2 deals: (i) 2 tranche $650mln Cdn Tire , 2Y @ 69, 5Y @ 99 – both inside of guidance with very small fills ,(ii) $200mln CWB reopening 2.751% 2020 @ 87.1.

News headlines 

Trump, Kim Sign Historic Pledge Toward Peace (Bloomberg) The U.S. and North Korea agreed to seek complete denuclearization of the Korean peninsula following a historic summit between President Donald Trump and Kim Jong Un, yet the accord set no deadline and left the path to disarmament undefined. Trump defended the two-page document he signed with Kim at the end of their meeting in Singapore earlier Tuesday, saying that he thinks his North Korean counterpart will live up to to it. “It’s very comprehensive,” the president said. “It’s going to happen.”

Trump Auto Tariffs Would Slam Canada as Trade Rhetoric Heats Up (Bloomberg) Donald Trump’s heightened attacks on Canadian Prime Minister Justin Trudeau are raising concerns that he might follow through on threats to impose auto tariffs, a move that would devastate the car industry in Canada and lead to higher U.S. prices. The Trump administration’s pledge to consider tariffs on all imported vehicles took on more urgency last weekend after Trump and his advisers accused Trudeau of “bad faith diplomacy” for his trade comments following a meeting of Group of Seven leaders in Quebec.

U.S. Small-Business Optimism Hits Second-Highest on Record (Bloomberg) A gauge of optimism among U.S. small-business owners rose to a 34-year high amid increasingly sunny expectations for sales and profits, a National Federation of Independent Business survey showed Tuesday. Small-business sentiment has remained elevated since Donald Trump was elected president in late 2016, with tax cuts, reduced regulations and solid economic growth supporting the optimistic outlook. At the same time, owners continued to cite difficulty finding workers with the necessary skills and qualifications and have raised compensation accordingly amid the lowest unemployment rate in 18 years. The report suggests that Trump administration tariffs, along with freight bottlenecks that have pushed up costs for some businesses, have had little effect so far on small-company sentiment.

Stocks Drift as Traders Look Beyond Korea Summit: Markets Wrap (Bloomberg) The meeting between President Donald Trump and Kim Jong Un was met with a collective shrug by global markets, which appear to be more fixated on a host of macro events and data due in a few days. Stocks were little changed, Treasuries edged down, and commodities mixed. The Stoxx Europe 600 Index opened higher, but pared its advance after modest gains for many Asian shares failed to ignite the MSCI Asia Pacific Index. S&P 500 futures fluctuated in a narrow range after the underlying gauge posted a small increase on Monday. Safe-haven assets including the yen and gold edged lower as Trump and Kim signed a document pledging to work toward peace on the Korean peninsula. The pound reversed a decline before Theresa May’s Brexit legislation goes to Parliament, as data showed a surprise moderation in the pace of U.K. wage growth.

Canadian dairy farmers cling to protections as Trump demands concessions (Reuters) Canadian dairy farmers want trade negotiators to keep their hands off the protected sector in increasingly contentious talks with the United States, however loudly U.S. President Donald Trump demands greater access, an executive with Canada’s biggest dairy lobby group said on Monday.

Quebec offers C$100 million in loans, guarantees to firms hit by U.S. metals tariffs (Reuters) The Canadian province of Quebec will offer C$100 million ($77.1 million) in loans and guarantees on loans to steel and aluminum companies hit by recent U.S. tariffs, the province’s economy minister said on Monday. Companies that transform the metals will benefit from the program after the United States recently slapped a 25 percent tariff on steel and a 10 percent tariff on aluminum imports.

DavidsTea losses more than triple in Q1 ahead of proxy battle (BNN)  Embattled beverage retailer DavidsTea says its net loss more than tripled on weaker sales in the first quarter of its fiscal year just days before a proxy battle comes to a head. The Montreal-based company lost $1.2 million for the period ended May 5, compared with a loss of $362,000 a year earlier. That translated into a loss of five cents per diluted share, versus a loss of one cent in the first quarter of 2017.

Province launches two reviews into BC Hydro over costs, future of energy sector (BNN) The British Columbia government has launched a two-phase review of BC Hydro in an effort to find cost savings and direction for the Crown utility. The first part of the review is expected to examine ways to save money within Hydro, create new revenue streams in an effort to keep rates low and give the corporation the resources it needs to provide electricity. An advisory group that includes staff from government ministries and BC Hydro will conduct the first review.

Overnight markets

Overview: US 10yr note futures are down -0.118% at 119-10, S&P 500 futures are down -0.02% at 2786.25, Crude oil futures are down -0.21% at $65.96, Gold futures are down -0.21% at $1300.5, DXY is down -0.01% at 93.594, CAD/USD is up 0.23% at 0.7686.

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