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Market Update Tsys lower before May payrolls, US 10Y 2.90% (+4bps), curve 1bp steeper 2s10s.  Trump tweeted “looking forward to the employment numbers” (195k headline exp, 3.9% unemp rate, 2.6% AHE), which led to additional selling in rates, along with sharply lower gilts/bunds, rally in Italian bonds. BOJ surprise cut in bond purchases weakened the belly of the JGB curve, yields ~1bps higher. S&P futures +13.75, crude lower for a second day, USD index rebounding from losses after Trump’s tweet.  GOCs lower, 1bp narrower vs tsys, 10Y 2.27% vs 2.19% post Italy crisis low from Tuesday, still 25bps off the four year highs above 2.50%  two weeks ago. Month end flows supportive for the long end of the GOC curve, 10s30s narrowing 1bp to 1.4bps before some selling of longs in the aft pushed it back out to 2bps. Provincials trading up to start the morning, Ont 48s, 49s lifted on screen at 78,78.5. Ont 28s @69< ont 48/28 9.4/9.2.

 News headlines

Trump Appeasement Fails, So Trudeau Takes the Gloves Off (Bloomberg) After more than a year of trying to make nice, Justin Trudeau finally looks fed up with Donald Trump. Canada had pushed for an exemption from Trump’s tariffs — thinking, now naively, there’d be a perk to being a neighbor, ally and largest buyer of U.S. goods. Trudeau had bitten his tongue through skirmishes over airplanes, lumber and North American Free Trade Agreement talks.

Outrage Over U.S. Steel Tariffs Set to Spill Over Into G7 Meeting (Bloomberg) Treasury Secretary Steven Mnuchin received an earful from global finance chiefs Thursday after the Trump administration imposed steel and aluminum duties that sparked swift trade responses. Canadian Finance Minister Bill Morneau acknowledged that trade has taken center stage at a meeting of finance ministers and central bankers from the G-7 nations in a Canadian ski resort near Vancouver. On his arrival, German Finance Minister Olaf Scholz said the U.S. levies on imported metals from the European Union, Mexico and Canada are probably illegal.

Draghi’s Understudy Starts Work as ECB Navigates Italian Turmoil (Bloomberg) The new man who would step into Mario Draghi’s shoes in an emergency has just taken office. Former Spanish Finance Minister Luis de Guindos starts his job as European Central Bank vice president on Friday. He replaces Vitor Constancio on the same day that the Frankfurt-based institution celebrates its 20th anniversary, in troubled times.

Stocks Jump as Politics Ease; Treasuries Decline: Markets Wrap (Bloomberg) Stocks headed for a positive end to a tumultuous week in which political developments in Europe and escalating trade tensions roiled markets. Treasuries and the dollar edged lower as the focus shifted to U.S. jobs data due Friday. The Stoxx Europe 600 gauge headed for the biggest gain in a month, led by banks and basic-resources stocks, while S&P equity-index futures pointed to a higher U.S. open. Italy’s benchmark index rallied the most since early February as populist parties surged to power, bringing to an end a three-month political deadlock though opening the way to a period of friction with Europe.

TSX futures trade higher on global cues (Reuters) Stock futures pointed to a higher open for Canada’s main stock index on Friday, tracking gains in world stocks as political uncertainties in Italy and Spain ended. In Italy, anti-establishment parties revived coalition plans on Thursday, while in Spain Socialist Pedro Sanchez took over as prime minister on Friday, after outgoing leader Mariano Rajoy lost a confidence vote. However, the prospects of a full-blown trade war with the United States continues to loom over the markets.

Scotiabank buys MD Financial for $2.5B (BNN) The Bank of Nova Scotia () made a big play to expand its customer base on Thursday with a deal to acquire financial adviser MD Financial Management for $2.5 billion. The company provides financial planning, insurance, banking, investment and estate and trust services to 45,000 Canadian doctors and 65,000 of their family members with more than $49 billion in assets under management and administration.

Canada’s economic growth slowed in Q1 amid housing chill (BNN) The pace of economic growth in Canada slowed in the first quarter of this year to its lowest rate in nearly two years as housing investment pulled back amid new mortgage stress test rules and a cooling housing market. Statistics Canada said Thursday the economy grew at an annualized pace of 1.3 per cent for the first three months of the year. That compared with an annual pace of 1.7 per cent in the final three months of 2017.

Overnight markets

Overview: US 10yr note futures are down -0.506% at 119-27, S&P 500 futures are up 0.49% at 2718.75, Crude oil futures are down -0.85% at $66.47, Gold futures are down -0.45% at $1298.8, DXY is up 0.18% at 94.144, CAD/USD is up 0.14% at 0.7706.

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, curve flatter, US 10Y 2.87% (+1.5bps) amid continued relief rally in Italian bonds, Italy 2Y ~50bps lower @ 1.0% from 2.64% on Tuesday. Bunds lower, slightly outperforming tsys despite better than expected Eurozone CPI (1.9% vs 1.6%) after strong regional German CPI data released yesterday. News that Trump may impose tariffs on Canadian steel and aluminum today, no real impact on CAD, thou GOCs 0.5bps wider vs tsys, 10Y 2.274%. March GDP expected to have risen 0.2% vs 0.4% in Feb, Q1 forecast at 1.8% vs 1.7%. Yesterday the BOC left rates unch yet raised the odds of a July hike with the removal of the ‘cautious’ language in favor of ‘gradual approach’, adding that incoming data suggests Q1 growth is stronger than expected while inflation is running higher than the Bank forecast in April. Provincial spreads improving since yest, Quebec reopened Dec 48s @ 75.5 , now 74.5/74, Qc/ont 48 -4.6/-5.2 from -4.5 at issue yest. 

News headlines

Bank of Canada Lays Ground for More Rate Hikes (Bloomberg) Canada’s central bank is paving the way for a new round of rate increases in the second half of the year as the nation’s economy runs up against capacity constraints and inflation hovers at the highest in seven years. Bank of Canada Governor Stephen Poloz left rates on hold for a third straight decision Wednesday, but gave an upbeat assessment of the economy and removed some cautious language. The currency and bond yields popped higher after the statement from Ottawa.

Euro-Area Inflation Picks Up to Fastest in More Than a Year (Bloomberg) Euro-area inflation hit the fastest pace in more than year, some good news for European Central Bank officials debating the future policy path just as turmoil in Italy revives memories of the debt crisis. The 1.9 percent rate, effectively in line with the ECB’s goal, was up from just 1.2 percent in April and above the 1.6 percent reading forecast by economists. The core measure rose to 1.1 percent, also better than anticipated.

Imperial Professor Haskel Appointed to BOE Rates Committee (Bloomberg) Jonathan Haskel will join the Bank of England’s Monetary Policy Committee in September, giving it an expert in an issue that has vexed officials for years. The Imperial College Business School professor will replace Ian McCafferty, who is known for voting for tighter policy. He begins a three-year term on Sept. 1, according to the Treasury. Oxford Economics said he’s likely to be more dovish than his predecessor.

Stock Rebound Loses Steam on Italy, Trade Worries: Markets Wrap (Bloomberg) U.S. stock futures fluctuated and European equities struggled for traction as investors sought to rebuild their confidence amid a muddled political outlook in Southern Europe and uncertainty over global trade. The dollar fell while the euro climbed, and Italian bond yields declined. The Stoxx Europe 600 Index traded in the green but pared an earlier gain as Italy’s populists battled to revive plans for a coalition government, Spain’s prime minister teetered on the brink and the region braced for potential U.S. tariffs. The euro strengthened as inflation in the bloc hit the fastest pace in more than year. In Asia, Hong Kong and Chinese stocks outperformed after China’s official factory gauge underscored robust growth despite ongoing trade tensions. S&P 500 futures swung between gains and losses while the yield on 10-year Treasuries rose.

TSX futures flat ahead of first-quarter GDP data (Reuters) Canada’s main stock index futures was trading flat on Thursday, with investors awaiting the country’s gross domestic product data for the first quarter. June futures on the S&P TSX index were down 0.21 percent at 7:15 a.m. ET. The Canadian economy is expected to have grown at an annualized 1.8 percent pace in the first quarter, largely in line with the previous quarter as growth was likely restrained by weak exports and a slowdown in housing. The GDP data is scheduled to be released at 8:30 a.m. ET.

Rising oil prices bring hope to gloomy Canada sector (Reuters) Years of low oil prices and high costs spurred a stampede by multinational majors out of Canada’s oil sands last year, leaving the remaining crude producers struggling to weather painful drops in profit. Environmentalists derided the “tar sands” as too dirty for investment, and analysts said the region’s high production costs made little sense in a world of $50-a-barrel oil. But this month, global benchmark prices rebounded to $80 per barrel, cheering oil executives in the Canadian energy capital of Calgary, Alberta, who are shifting from survival mode to cautious expansion to capitalize on healthier cash flow expected this year.

‘Game-changer’: BMO data breach reportedly included SIN data (BNN) New details about the data breach at the Bank of Montreal have emerged. CTV News reported Wednesday it discovered an online document that included 100 BMO client names, along with crucial data including those customers’ social insurance numbers, dates of birth, and bank account information. Those details, according to CTV News, were included in a dataset posted to an online forum called Postbin on May 28, and was accessible for about five hours, between 2 p.m. and 7 p.m. ET before it was removed.

Soros view on global crisis is ‘ridiculous,’ Morgan Stanley CEO says (BNN) Morgan Stanley Chief Executive Officer James Gorman said that investor George Soros’s contention another major global crisis may be in store is unrealistic, and that the Federal Reserve will probably hike interest rates three more times in 2018 despite recent volatility. “Honestly I think that’s ridiculous,” Gorman said in an interview with Bloomberg Television in Beijing Thursday when asked about Soros’s comments this week, which included a warning that the European Union is at risk of breaking up amid Italy’s challenges. “I don’t think we’re facing an existential threat at all,” Gorman said of the EU.

Overnight markets

Overview: US 10yr note futures are down -0.156% at 120-04, S&P 500 futures are up 0.03% at 2725.25, Crude oil futures are down -0.88% at $67.61, Gold futures are up 0.13% at $1308.2, DXY is down -0.23% at 93.855, CAD/USD is down -0.14% at 0.7779.

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 sharply lower, 10Y 2.875% (+9bps), ‘risk on’ with Italy/bund 10Y 34bps tighter, successful Italy 10Y auction. USD index -0.54%m, gold lower, crude higher (+0.45% 67.07), S&P futures +13pts. US Eco calendar includes ADP & Q1 GDP (2.3% exp unch from prelim est). Core EGBs lower, unwind of yest safe haven rally, 10Y bund ~10bps higher @ 0.35% – still ~28bps off the highs of May. GOCs lower, outperforming 1-3bps vs tsys in the pullback, the 2s10s curve 2.5bps steeper before this mornings BOC decision – no chg expected and there is no statement. Provis spds opening 0.5bps tighter, supply expected as mkts are calmer. New polls showing NDP rising popularity in Ontario – expanding their lead over PCs in latest Macleans poll.  

News headlines

Crisis-Weary Central Banks Brace for Turmoil as Italy Slips (Bloomberg) Just when central bankers thought they were about to get out of the business of emergency economic stimulus, jittery financial markets are threatening to pull some of them back in. For the European Central Bank, the latest threat requiring vigilance is political turmoil in Italy that’s reviving memories of the debt crisis that threatened to fracture the euro area. The Bank of England’s path is complicated by Brexit and, across emerging markets, central banks are trying to push back against the strong dollar.

Trudeau Plays Longer Game Against ‘Ruthless’ U.S. Bottom Line (Bloomberg) Justin Trudeau wants to build a Canadian economy that will thrive a decade or more from now — if that means losing a short-term edge to Donald Trump, so be it. The Canadian prime minister outlined his economic vision Tuesday, championing investments in education and healthcare, targeted immigration and responsible borrowing as ways to quell populist unrest and build a thriving society. Noticeably absent was any talk of tax cuts mirroring those in the U.S., which he called a more “ruthless” economy propped up by unsustainable deficits.

Treasuries Slide as Italy Panic Fades; Euro Jumps: Markets Wrap (Bloomberg) Global markets regained some composure on Wednesday as panic over the Italian political crisis subsided and encouraging economic data helped steady nerves in Europe. Treasuries fell back with the dollar as the haven bid ebbed, and the euro jumped. Italian bonds rebounded, with the 10-year yield falling as much as 32 basis points as the country successfully passed a key test of appetite for its debt and rifts emerged between populist leaders. German jobs data topped estimates and there were CPI beats in several states in the nation as well as in Spain, all of which added momentum to a bounce in the euro.

Teamsters members go on strike at Canadian Pacific (Reuters) More than 3,000 locomotive engineers and conductors at Canadian Pacific Railway (CP) have gone on strike on Tuesday night, trade union Teamsters Canada said in a statement. The negotiations between the union and the company are currently ongoing and Teamsters is working with federal mediators to reach a negotiated agreement, according to the statement. The workers, whose collective agreement expired late last year, are asking for more predictable schedules to combat crew fatigue, among other demands.

How Kinder Morgan won a billion-dollar bailout on Canada pipeline (Reuters) U.S. energy firm Kinder Morgan’s C$4.5 billion sale of an oil pipeline to Canada’s government marked an extraordinary escape from months of fraught negotiations among warring camps of Canadian officials. But even before the bailout, the company had little to lose – despite the C$1.1 billion it has spent so far on a plan to add a second pipeline from Alberta’s oil sands to British Columbia’s coast, according to a Reuters review of the project’s bank financing and oil-shipping contracts with producers reserving space on the proposed line.

TSX set for higher open as oil prices rise (Reuters) Stock futures pointed to a higher opening for Canada’s main stock index on Wednesday as Brent crude prices rose towards $76 a barrel, supported by tight supplies. June futures on the S&P TSX index were up 0.33 percent at 7:15 a.m. ET. Investors will watch out for the Bank of Canada’s interest rate decision scheduled at 10:00 a.m. ET. The central bank is expected to hold rates steady at 1.25 percent, but firmer price and wage inflation will prompt two increases in the second half of 2018, according to a Reuters poll.

Risks ‘loom large’ in global economy that’s seeing best growth in years (BNN) The OECD presented another upbeat set of projections in its latest assessment of the global economy, but was very clear that there are a growing number of threats. “Risks loom large” was the headline of its latest outlook, published in Paris on Wednesday, and the global backdrop this week provided plenty of reason to heed their warnings. Political turmoil in Italy has revived memories of the euro crisis, sending yields on the nation’s debt surging and European stocks tumbling.

Overnight markets

Overview: US 10yr note futures are down -0.67% at 120-14, S&P 500 futures are up 0.48% at 2705.25, Crude oil futures are up 0.64% at $67.16, Gold futures are down -0.07% at $1303.2, DXY is down -0.61% at 94.246, CAD/USD is down -0.38% at 0.7709. 

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