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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

Market Update Tsys trading lower, yields 0.5-2bps higher with the US 10Y 2.91%(+0.7bps), equities higher (S&P fut +9.5), EU peripheral yields rallying, Italy 2Y -36bps @0.59% from 2.64% last Tuesday.   German bund yields higher, thou well of early European highs, 10Y bund 0.38% after reaching 0.42% as Italy bond rally has faded somewhat. AUD up sharply (+1.2% highest since Apr 23rd) on stronger Aus retail sales data, with RBA meeting tomorrow. GOCs lower, outperforming tsys in the short end, curve unch , 10Y 2.244%. Friday late afternoon saw profit taking/outright selling in GOCs, mostly longs, in what appeared to be flattener unwinds with 10s30s widening 2bps after 3:00pm and the long end ~$1.00 lower.  Poloz over the weekend said the BOC is ‘data dependent’ at the G7 fin min meeting in Whistler, but also pointed to strengthening capex. Provis another 0.5bps tighter after closing 2bps narrower Friday, bouyed by index buying, risk on and a marked slowing in corp issuance due to hightened volatility. 

News headlines

Trump and Allies Set for Showdown Over Trade (Bloomberg) President Donald Trump is headed for a showdown with America’s allies at a Group of Seven summit this week in Quebec, with the European Union and Canada threatening retaliatory measures unless he reverses course on new steel and aluminum levies. China, while open to talks to resolve the dispute, is warning it will withdraw commitments it made on trade if the president carries out a separate threat to impose tariffs on the Asian country. While China doesn’t want an escalation in trade tensions, it will defend its core interests, according to a commentary published Monday by the state-run Economic Daily.

Turkey Inflation Accelerates in May on Weak Currency (Bloomberg) Turkey’s consumer inflation accelerated to the highest level in six months ahead of a landmark presidential election, fueled by a slump in the lira that triggered an emergency hike in interest rates. The annual inflation rate rose to 12.2 percent in May from 10.9 percent the previous month, matching the median estimate in a Bloomberg survey. Turkey’s state statistics office said monthly inflation was 1.6 percent, in line with the median estimate in a separate survey. The lira gained.

Stocks Extend Gain on Growth Outlook; Dollar Slips: Markets Wrap (Bloomberg) U.S. equity futures and European stocks advanced on Monday, tracking peers in Asia as optimism over the world’s largest economy helped investors put protectionist fears to one side. Treasuries edged lower, the dollar fell, and the pound and euro rose. The Stoxx Europe 600 Index climbed as almost every industry group traded in the green, with utility companies leading the way. S&P 500 contracts pointed to the U.S. benchmark extending Friday’s advance, while the MSCI Asia Pacific Index surged even as China warned it will withdraw from commitments it made on trade if President Donald Trump carries out a separate threat to impose tariffs on the Asian country. The dollar pulled back after completing a seventh week of gains. The 10-year Treasury yields traded above 2.90 percent.

Ontario premier concedes defeat ahead of next week’s polls (Reuters) The premier of Canada’s most populous province, Ontario, conceded defeat on Saturday ahead of next week’s election, but called on voters to vote for her party anyway to keep the next government in check. Kathleen Wynne, who has been premier since 2013 and whose Liberal Party has governed for 15 years, told reporters she will not be premier after the June 7 election. “This is a hard thing to do,” 64-year-old Wynne told reporters tearfully, while urging party followers to vote for as many Liberals as possible to prevent the other two parties from forming a majority government.

Global shares shrug off trade tensions as U.S. data reassures (Reuters) The MSCI world equity index, which tracks shares in 47 countries, rose 0.4 percent, while European stocks enjoyed a positive start to the day’s trading as tensions calmed in Italy and Spain. “The mood is mainly positive due to better U.S. job creation seen in (Friday’s) NFP data, which has carried stocks higher despite headwinds such as escalating trade disputes,” analysts at FX Pro Insights said. “The risk is that sentiment shifts and catches traders off balance as volatility increases.”

TSX futures up as global trade war concerns ease (Reuters) Stock futures pointed to a higher opening for Canada’s main stock index on Monday, tracking gains in Asian and European markets, after last week’s strong U.S. jobs report helped ease investor jitters over a potential global trade. June futures on the S&P/TSX index SXFc1 were up 0.19 percent at 7:15 a.m. ET. The Toronto Stock Exchange’s S&P/TSX .GSPTSE fell 17.96 points, or 0.11 percent, to 16,043.54.

Trudeau: U.S. metals tariffs in the name of national security ‘insulting’ (BNN) Prime Minister Justin Trudeau says it is “insulting” that President Donald Trump says Canada’s steel industry poses a national security risk to the United States. Speaking on NBC’s Sunday morning news show Meet the Press, Trudeau said he wants to make sure Americans, and more specifically Trump supporters, hear the message that they are going to feel financial strain and pain from the steel tariffs Trump imposed on Canada last week. “The fact that the president has moved forward with these tariffs is not just going to hurt Canadian jobs, it’s going to hurt U.S. jobs as well and neither of those things is something Canada wants to see,” Trudeau said.

Toronto home prices climb for fifth straight month in May (BNN) There was further sign of stabilization in Canada’s largest housing market in May, with the average selling price rising for a fifth consecutive month as the region’s real estate board warned competition is intensifying among buyers. Selling activity plunged 22.2 per cent year-over-year across the Greater Toronto Area in May as 7,834 properties traded hands. However, that was a slight uptick from the previous month when 7,792 sales were recorded in the GTA.

Overnight markets

Overview: US 10yr note futures are down -0.117% at 119-23, S&P 500 futures are up 0.34% at 2743, Crude oil futures are down -0.52% at $65.47, Gold futures are up 0.11% at $1300.7, DXY is down -0.5% at 93.684, CAD/USD is down -0.37% at 0.7749.

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