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Market Update Tsys sharply higher in risk off, heavy volume in treasury futures ( 645k TY), US 10Y 2.88% (-3.5bps) lowest since June 1^st. USD index firmer , DXY 95.26 (+0.51) , S&P futures -29 (-1.0%). China/US trade war intensified overnight with US announcing 10% tariff on USD 200bln in Chinese goods. Core EGBs also sharply higher, GOCs outperforming tsys by 0.5-1bps with the CAD at a new year low. Provincial spreads firm despite the move lower in GOC yields. 

News headlines

China Vows to Retaliate as Trump Targets $200 Billion in Tariffs (Bloomberg) Trade tensions between the world’s two biggest economies intensified, with China vowing to retaliate “forcefully” against President Donald Trump’s threatened tariffs on another $200 billion in Chinese imports. “If the U.S. loses its senses and publishes such a list, China will have to take comprehensive quantitative and qualitative measures,” according to a statement from the Ministry of Commerce. It labeled the move “extreme pressure and blackmail,” and said it would retaliate with counter measures.

U.S. Homes Are a Lot Cheaper Than They Look, Harvard Study Finds (Bloomberg) Despite the long, stratospheric rise of home prices in the U.S., the inflation-adjusted monthly payment on the median single-family home in 2017 was less than in 1987, when home prices were lower but interest rates were higher, Harvard University’s Joint Center for Housing Studies found.

Trudeau Has Billions of Reasons to Dig In Against Trump on Dairy (Bloomberg) Justin Trudeau’s defense of Canadian dairy tariffs isn’t just about farmers and politics — it’s about debt, too. The prime minister squared off with Donald Trump this month over Canada’s “supply management” system, which sets quotas for dairy, eggs and poultry and charges high tariffs above that threshold. Despite a U.S. surplus on dairy trade with Canada, the president wants to blow apart the Canadian system.

Deepening Trade Dispute Triggers Risk-Off Moves: Markets Wrap (Bloomberg) Investors dumped riskier assets and headed toward havens on Tuesday as a trade dispute between the world’s two largest economies showed signs of deepening and accelerating. Stocks dropped, Treasuries rallied and the dollar climbed with the yen. The Stoxx Europe 600 retreated for a third day and U.S. equity futures slumped, tracking losses across Asia, where Chinese shares plunged after reopening following a holiday. President Donald Trump warned America will slap tariffs on more Chinese goods, and the Asian nation threatened retaliation. The stock move in Europe was tempered by a weaker euro, however, which dropped after the latest’s dovish message from ECB President Mario Draghi. The British pound was also under pressure as U.K. Prime Minister Theresa May prepares for another knife-edge Brexit vote on Wednesday.

Canada mulls auto firms aid in response to U.S. tariffs threat (Reuters) Canada is considering all options, including providing financial aid to the auto industry, to cope up with possible U.S. tariffs, a senior federal minister said, even as officials expressed doubt Washington would follow through with a threat to impose the punitive measures. U.S. President Donald Trump last month said he might impose tariffs of up to 25 percent on foreign-built automobiles, which could cause major economic damage to Canada and a heavily integrated North American industry.

Futures lower as U.S.-China trade spat escalates (Reuters) Futures pointed to a lower opening for Canada’s main stock index on Tuesday as the latest tariff threat on Chinese goods by the United States intensified a trade dispute between the world’s two largest economies. U.S. President Donald Trump on Monday threatened to impose a 10 percent tariff on $200 billion of Chinese goods to which Beijing warned it would fight back with “qualitative” and “quantitative” measures.

Bombardier shares top $5 for first time since 2013 on Goldman boost (BNN) Shares in Bombardier Inc. surged above $5 for the first time in nearly five years Monday, after a Goldman Sachs analyst upgraded the stock to a “buy” citing an “impressive” operational turnaround.   Goldman Sachs analyst Noah Poponak raised Bombardier’s price target to $7 per share after reinstating coverage of the stock, pointing to the growth potential in Bombardier’s large cabin business jets and high expectations for CSeries orders.

Bank of Canada calls on markets to prepare for benchmark changes (BNN) The Bank of Canada called on financial institutions to get up to speed on changes that global regulators are making to interest rate benchmarks that underpin trillions of dollars in securities. In an update on the Canadian central bank’s work on the issue of benchmarks, Deputy Governor Lynn Patterson said financial organizations need to begin considering their “readiness” for coming changes, including potential enhancements to the current benchmark regime in Canada.

Overnight markets

Overview: US 10yr note futures are up 0.3% at 119-31, S&P 500 futures are down -1.07% at 2750, Crude oil futures are down -1.67% at $64.75, Gold futures are down -0.4% at $1275, DXY is up 0.49% at 95.22, CAD/USD is up 0.56% at 0.7533.

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

Market Update Tsys higher on avg volume (257k), US10Y 2.905% (-1.5bps), escalation in US/China trade , USD index slightly lower, equities weaker (S&P fut -18).  German bunds bid on back of Merkel immigration crisis, while trade war also supporting EGBs, 10Y bund below 0.40% @ 0.39% a two-week low.  Crude 65.00 rallying $2 over the course of the o/n session in advance of OPEC meeting , rumours of more modest output hike (300-600k), also Goldman sees oil back over $80 despite OPEC increase. GOCs higher in lines with tsys, Can/US 4-6bps tighter over the week, this week relatively quiet in terms of data unti Friday retail sales/CPI. Provis closed 1-1.5bps weaker Friday, this morning spds another 1-1.5bps wider. 

News headlines

OPEC Discusses Output Hike of Up to 600,000 Barrels a Day (Bloomberg) OPEC members are discussing a compromise agreement that would see an oil production increase of between 300,000 and 600,000 barrels a day over the next few months, according to people briefed on the talks.

Xi to Counter Trump Blow for Blow in Unwanted Trade War (Bloomberg) The first punches have been thrown in a potential trade war and now Xi Jinping is poised to match Donald Trump blow for blow. The next flurry of jabs may be imminent. In his announcement of tariffs on Chinese goods on Friday, Trump vowed additional duties if China retaliated — which Beijing immediately did. Details of U.S. restrictions on investments from China will follow in the next two weeks, according to Trade Representative Robert Lighthizer.

Head of VW’s Audi arrested in Germany over diesel scandal (Reuters) German authorities arrested the head of Volkswagen’s luxury arm Audi on Monday, the most senior company official so far to be detained over the carmaker’s emissions test cheating scandal.

China’s tariffs on U.S. oil would disrupt $1 billion monthly business (Reuters) China’s threat to impose duties on U.S. oil imports will hit a business that has soared in the last two years, and which is now worth almost $1 billion per month.

Emerging Asia hit by biggest foreign investor exodus since 2008 (BNN) A falling tide lowers all boats, it seems. Amid an exodus from emerging markets, investors are even pulling out of Asian economies with solid prospects for growth and debt financing. Overseas funds are withdrawing from six major Asian emerging equity markets at a pace unseen since the global financial crisis of 2008 — yanking US$19 billion from India, Indonesia, the Philippines, South Korea, Taiwan and Thailand so far this year, according to data compiled by Bloomberg.

Magnitude 6.1 earthquake kills three people, shutters factories in Japan’s Osaka (CNBC) A magnitude 6.1 earthquake hit Japan’s Osaka on Monday morning, with three people reported dead, according to government officials and broadcaster NHK. No tsunami warning was issued. Prime Minister Shinzo Abe said authorities were assessing damage and that its top priority was the safety of residents.

Trump says he requested end to ‘war games’ in talks with North Korea’s Kim Jong Un (NBC News) “Holding back the “war games” during the negotiations was my request because they are VERY EXPENSIVE and set a bad light during a good faith negotiation,” Trump said on Sunday morning.

U.S. lawmakers warn Canada about Chinese telecom giant Huawei (The Globe and Mail) Senior lawmakers on U.S. intelligence committees are warning the Trudeau government that Chinese smartphone maker Huawei – which has turned Canada into a key research centre for next-generation mobile technology – is a national-security threat to a network of Canada’s allies.

U.S. auto tariffs could spark global trade war, Scotiabank warns (The Globe and Mail) U.S. tariffs on vehicles and auto parts would harm Ontario and key auto producing regions of the United States, but the greater danger is that they could spark an all-out trade war, Bank of Nova Scotia economists say.

Trump Policy of Separating Migrant Families Threatens to Engulf Immigration Talks (WSJ) Divided GOP lawmakers on Capitol Hill are trying to show results on the issue of illegal immigration ahead of midterm elections.

Overnight markets

Overview: US 10yr note futures are up 0.131% at 119-24, S&P 500 futures are down -0.69% at 2765.25, Crude oil futures are up 0.17% at $65.17, Gold futures are up 0.34% at $1282.8, DXY is down -0.02% at 94.768, CAD/USD is down -0.15% at 0.7584.

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 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