Commentaires

Market Update Tsys are weaker, trailing the decline in European bonds, thou to a lesser extent, the US 10Y 2.985% (+1.3bps).  USD index weaker, EUR higher for a 4th day , stocks firmer (S&P fut +3), crude higher (65.32 +0.62). Core EGBs weaker,  German bund curve ~3bps steeper and the 10Y bund back to 0.50%, a two week high from 0.25% in the aftermath of the Italy crisis a week ago. Eurozone Q1 GDP came in at 0.4% as expected, the lowest since Q3 2016, from 0.7% in Q4. GOCs lower & steeper, 0.5bps wider vs tsys  – 10Y 2.325%  Provis well bid on ‘risk on’ tone, continued reinvestment flows from early June. Ontario election day – polls pointing to a conservative win, if not an outright majority. 

News headlines

It’s Trump Against the Developed World as G-7 Frays Over Tariffs (Bloomberg) President Donald Trump will cut a lonely figure at a meeting of the world’s club for wealthy nations this week. From steel tariffs to Iran sanctions and climate change, the president will find himself isolated from other Group of Seven leaders at the summit in Quebec. The meetings on Friday and Saturday will be the first opportunity for America’s closest allies to express their frustration in face-to-face meetings with Trump after he imposed steel and aluminum tariffs last week.

Fed on Track to Raise Rates Regardless of Emerging-Market Woes (Bloomberg) Emerging markets struggling with higher U.S. interest rates are likely to get little sympathy from the Federal Reserve. Currencies of such nations have been hammered in a spreading selloff amid worries that their economies won’t cope with higher U.S. borrowing costs. That’s prompted central bankers in India and Indonesia to raise interest rates and urge Fed caution, while officials in Brazil are bracing for challenging times too.

Brexit Showdown Pits U.K. Premier Against Her Top Ministers (Bloomberg) U.K. Prime Minister Theresa May is facing a major cabinet rebellion over Brexit, in a conflict that could destabilize the whole government, according to people familiar with the matter. Brexit Secretary David Davis is said to be furious over May’s plan to tie the U.K. into European Union customs rules for an open-ended period of time after the country leaves the bloc next March. She argues it’s a necessary step to break the deadlock in talks with the EU.

Stocks Edge Up as Momentum Eases; Treasuries Slip: Markets Wrap (Bloomberg) European stocks nudged higher alongside S&P 500 futures as equity markets fought to maintain the momentum from a record-breaking rally in tech shares. Treasuries added to recent losses, with 10-year yields crawling toward 3 percent. The Stoxx Europe 600 Index gave up much of its advance as the euro strengthened again and after disappointing data on euro-area exports and German factory orders. The common currency was up for a fourth straight day amid talk of an end to the European Central Bank’s quantitative easing program. Earlier, shares rose from Tokyo to Sydney in the wake of another record finish for the Nasdaq, but futures contracts for the gauge were little changed on Thursday. The dollar slipped, while the Turkish lira jumped after the central bank raised interest rates by more than expected.

Ontario goes to the polls, with populist Doug Ford in lead (Reuters) Canada’s most populous province votes on Thursday, with populist Doug Ford’s Progressive Conservative party leading in opinion polls, in an election likely to end 15 years of Liberal rule. The election in Ontario, Canada’s economic engine and home to Toronto, the country’s largest city, has been reduced to a fight between Ford and the left-learning New Democratic Party, after Liberal leader Kathleen Wynne, premier since 2013, conceded on Saturday she would not be re-elected.

CP Rail deal will give workers 9 percent raise over four years (Reuters) Canadian Pacific Railway Ltd conductors and locomotive engineers will get a 9 percent salary hike over four years as part of a tentative agreement reached last week with the Teamsters, spokesmen from both the union and CP said on Wednesday. The agreement, which must first be ratified by members to go into effect this year, would give the 3,000 workers an increase of 2 percent for the first three years and 3 percent during the last year, Teamsters Canada spokesman Chris Monette told Reuters by phone.

Canada’s Dollarama reports 7.3 percent rise in quarterly profit (Reuters) Canada’s dollar-store chain Dollarama Inc (DOL.TO) on Thursday reported a 7.3 percent rise in quarterly profit as customers spent more at its stores during the Easter holiday. Net income rose to C$101.6 million ($78.46 million), or $92 cents per share in the first quarter ended April 29, from C$94.7 million, or 82 cents per share, a year earlier. Total sales rose to C$756.1 million from C$704.9 million.

Scheer rejects one-on-one trade talks with U.S. as long as NAFTA can be saved (BNN) Conservatives say it might help Canada’s bargaining position on the North American Free Trade Agreement if the Liberal government were to agree to American demands that it join the U.S. continental missile defence system. However, leader Andrew Scheer said Wednesday he still thinks there is a chance to preserve NAFTA as a trilateral trade deal between Canada, the U.S. and Mexico, and that Canada shouldn’t give in to one-on-one trade talks with the U.S. yet.

Overnight markets

Overview: US 10yr note futures are down -0.065% at 119-07, S&P 500 futures are up 0.08% at 2778.25, Crude oil futures are up 1.08% at $65.43, Gold futures are up 0.16% at $1303.5, DXY is down -0.29% at 93.341, CAD/USD is up 0.05% at 0.7722.

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 weaker, near lows of o/n session on heavy volume (490k TY), 10Y 2.955 (+2.7bps), USD index lower, thou US$/Yen is higher closing in on 200D MA a two-week high.  Core EGBs sharply lower on more hawkish ECB talk – ECB Praet and Weidmann confirming reports next week’s meeting is ‘live’ in terms of discussing QE exit, 10Y bund 8bps higher, gilts lower outperforming bunds on news opposition labor party proposing to stay in the EU single market after Brexit. GOCs lower, 1-2 bps wider vs tsys, curve 1bp steeper. BOC auctions $3bln in reopened 1.75 August 1 2020s with the toll to 2Y 3.7bps vs 3bps for the current 2Y roll (May/Feb). 2s yields are ~3bps lower than the last auction on May 9th (1.95% vs 1.985%)  after reaching close to 2.10% on May 18th, buoyed by FTQ rally on Italy and a lower Q1 GDP print. 

News headlines

U.S. and China Haggle Over Trade Gap, ZTE (Bloomberg) The U.S. and China continued to haggle over the shape of a deal to fend off an impending trade war, with China offering to boost purchases of American goods and the U.S. finalizing a deal to allow China’s ZTE Corp. to resume purchases from American suppliers. Ahead of a mid-June deadline for imposing tariffs on Chinese imports, China has offered to boost purchases of U.S. goods by about $25 billion this year, according to two people familiar with the matter, who spoke on condition of anonymity because the negotiations aren’t public. Crude oil, coal and farm products are among the goods that the Chinese are willing to buy more of, according to the people briefed on the talks.

ECB Chief Economist Confirms June Meeting Is Crucial for QE Decision (Bloomberg) European Central Bank policy makers anticipate holding a pivotal discussion at their meeting next week that could conclude with a public announcement on when they intend to cease asset purchases, according to euro-area officials familiar with the matter. President Mario Draghi’s Governing Council is likely to treat the June 14 gathering in Latvia as an opportunity to debate winding down bond-buying, said the officials, who asked not to be named because such matters are confidential. Purchases are currently intended to run until at least September.

India Joins Emerging Markets by Raising Key Interest Rate (Bloomberg) India’s central bank raised its benchmark interest rate for the first time since 2014 to curb rising price pressures and calm financial markets as policy tightening in the U.S. rattles emerging markets. All six members of the Monetary Policy Committee voted to increase the repurchase rate to 6.25 percent from 6 percent, the Reserve Bank of India said in a statement in Mumbai on Wednesday. The move was predicted by 14 of the 44 economists in a Bloomberg survey, with the rest seeing no change.

Stocks Rise as Trade Fears Ebb; Bonds Drop on ECB: Markets Wrap (Bloomberg) Stocks across the globe extended gains on signs that major economies will step back from the brink of a trade war. European bonds declined and the euro strengthened amid hawkish messages from the region’s central bank.U.S. futures advanced following gains across Asia after China was said to offer to buy more American products and on reports the Treasury Department favors less sweeping investment limits on the Asian nation. Most commodities rallied.

Canada labor productivity falls 0.3 percent in first quarter (Reuters) The labor productivity of Canadian businesses dipped in the first quarter as business output decelerated even as hours worked picked up, Statistics Canada reported on Tuesday. Labor productivity fell 0.3 percent in the quarter after rising by an unrevised 0.2 percent in the fourth quarter. Growth of business activity cooled to 0.2 percent from the previous quarter’s 0.4 percent gain, dampened by a slowdown in output among companies in the service sector, particularly in real estate and retail.

Air Canada, Air China sign deal to expand cooperation (Reuters) Air Canada and Air China Ltd entered a joint venture on Wednesday, with the Canadian carrier saying the deal would significantly increase its presence in the Chinese market which is set to be the world’s largest by 2022. The two airlines said the joint venture, which they have been discussing since 2014, would allow them to increase commercial cooperation on flights. It is also Air China’s first such deal with a North American airline.

Trade uncertainties have led to end of ‘Goldilocks years’: Caisse CEO (BNN) The head of Quebec’s largest pension fund said investors have emerged from the “Goldilocks years” of 2016 and 2017 into an uncertain period for businesses due to a number of global trade tensions. “2018 is a very different world and we’re seeing it in the volatility this year,” said Michael Sabia, president and chief executive of Caisse de dépôt et placement du Québec, in an interview with BNN Bloomberg Tuesday.

Tim Hortons pulls back on U.S. expansion amid franchisee fracas (BNN) When Tim Hortons was acquired by Burger King owner 3G Capital in late 2014, the company’s new owners had big plans to make the coffee chain as ubiquitous south of the border as it is in its home base of Canada. But with crowded competition in the fast-food space and tensions with its franchisees, Tim Hortons is pulling back in some of its biggest U.S. markets, threatening to stall its American expansion efforts, according to documents obtained by BNN Bloomberg.

Overnight markets

Overview: US 10yr note futures are down -0.222% at 119-14, S&P 500 futures are up 0.18% at 2756.5, Crude oil futures are down -0.4% at $65.26, Gold futures are down -0.17% at $1300, DXY is down -0.3% at 93.592, CAD/USD is down -0.63% at 0.776.

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, US 10Y 2.91 (-3.5bps), on heavy volume in TY futures (440k), following core EGBs higher on renewed weakness in Euro peripherals, Italy 2Y 22bps higher. Gilts trading mixed, curve flatter, UK service PMI surprising to the upside for May, 54 vs 53 exp. GOCs higher, slightly lagging the rally in tsys, , long end trading heavy so far.. 10s30s close to 5bps.  A new P3 issue just announced – Montreal Ring Road Project -$1.2bln in 4 tranches.

News headlines

Trump Said to Plan Meeting With GOP Concerned on China Stance (Bloomberg) President Donald Trump plans to meet Tuesday with Senate Republicans concerned about restrictions he’s weighing on Chinese investments in the U.S., two people familiar with the matter said. The meeting, called by the administration, includes Senate Majority Whip John Cornyn of Texas and Mike Crapo of Idaho, the chairman of the Banking, Housing and Urban Affairs Committee, according to the people. The lawmakers want to discuss Trump’s 301 investigation into Chinese violations of intellectual-property rights that has prompted U.S. threats of tariffs on imports of a range of products from the world’s second-largest economy, they said.

European Central Bank Boosts Purchases of German Bonds (Bloomberg) The European Central Bank’s buying of German bonds surged in May to a record relative to the so-called capital key, a guideline that dictates purchases corresponding to the size of a country’s economy. The share of Italian and French securities bought dropped below the capital key, but the shift in purchase patterns was due to technical factors rather than the recent sell-off in Italian debt, the ECB said.

BOE Gets Big Signal U.K. Economy Is Starting to Bounce Back (Bloomberg) The biggest part of the U.K. economy grew more than forecast in May, backing up the Bank of England’s view that a recent slump was temporary and keeping it on track for a rate hike in the summer. A measure of services jumped to a three-month high of 54 from 52.8, beating the reading of 53 predicted in a Bloomberg survey. Taken with manufacturing and construction, it suggests the economy is on course for growth of 0.3 to 0.4 percent this quarter, said IHS Markit, which publishes the indexes. Expansion slowed to just 0.1 percent in the first three months of the year.

Futures Point to Higher U.S. Open; Crude Declines: Markets Wrap (Bloomberg) U.S. futures pointed to a higher open on Tuesday, tracking gains in Europe as investors tried to keep the recent risk-on mood going. Amid trade headlines and political risks some caution was on show, however, and Treasuries rose while Italian bonds fell. Contracts for the S&P 500 signaled the underlying gauge will extend gains following its highest finish since mid-March, though momentum looks set to ease. After a shaky start the Stoxx Europe 600 Index advanced for a third day with technology companies and automakers leading the way. Italian bonds were poised for the first retreat since they blew up a week ago as Prime Minister Giuseppe Conte pledged in his maiden speech to pursue a program of fiscal expansion.

Canada vows to protect metals sector but resists call for quick action (Reuters) Canada’s government vowed on Monday to do all it could to protect its steel and aluminum sectors from U.S. tariffs but sidestepped an industry call to strike back quickly, saying it needed time to study the issue. President Donald Trump’s administration last week imposed U.S. tariffs of 25 percent on steel and 10 percent on aluminum from Canada – the No. 1 steel exporter to the United States – as well as on Mexico and the European Union.

Tech stocks on a tear as FAANGs and BATTS bite (Reuters) World tech stocks hit a record high on Tuesday, spurred on by a new all-time peak for Apple, a 17-year top for European tech firms and news that Twitter and Netflix were set to join Wall Street’s flagship S&P 500 index. MSCI’s global tech index .dMIWO0IT00PUS scored the milestone after the FAANGs — Facebook, Apple, Amazon, Netflix and Google — drove the technology-heavy Nasdaq to a new closing high in New York on Monday.

Canadian oil has record day after Enbridge scraps new rules (BNN) Canadian crude surged by the most ever after Enbridge Inc. said it won’t implement a new procedure to stop shippers from claiming more space than they can use on a key pipeline linking Alberta’s oil sands with U.S. refineries. Western Canadian Select jumped as much as US$12.20 a barrel to US$13.80 below the U.S. benchmark Monday, the narrowest spread since May 16. Canadian crudes have weakened to historically low levels in recent weeks as growing production overwhelms available pipeline capacity to transport Alberta’s supplies south of the border.

‘Mother Nature’ driving Vancouver, Toronto housing: Stephen Poloz (BNN)After years of hand-wringing over foreign investment in Canada’s most-scrutinized housing markets, Bank of Canada Governor Stephen Poloz argues fundamentals are at work as prices climb back in Vancouver and Toronto.“A year-and-a-half ago we had the changes in the Vancouver market and there was an initial effect and then a bounce back, and that just shows you that Mother Nature is still there – that the fundamentals for housing remain quite strong,” Poloz said in an interview with BNN Bloomberg late Friday in Whistler, B.C.

Overnight markets

Overview: US 10yr note futures are up 0.17% at 119-23, S&P 500 futures are up 0.11% at 2748.5, Crude oil futures are down -0.77% at $64.25, Gold futures are down -0.15% at $1295.3, DXY is up 0.08% at 94.111, CAD/USD is up 0.44% at 0.77.

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