Commentaires

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

Market Update Tsys trading sharply higher, catch up mode with EGBs after yesterday’s US mkt close, risk off tone as Italy elections loom, US 10Y thru 2.90% , 2.87% (-6.4bps). Italy 2Y yields jumped 152bps the largest one day chg on record, now 2.23% vs -0.30% on May 1st. Core EGBs seeing FTQ bid, German 10Y yield 0.29% (-5bps), a six month low. S&P futures -18pts, gold firmer, crude another 1.3% lower @ 66.96. GOCs higher, 2bps wider vs tsys, 10Y 2.275%, ~3bps narrower on the curve as 10s have led the rally , 15bps tighter since last week vs 2s30s, while 10s30s @5bps from flat last week. Provis ~5bps wider vs Friday’s cls, Ont 28s 70/69 from 66 on Friday. Ont 48/27 crv narrowing from ~15bps last week, trading up @12.7 this morn – more supply (10Y Ont, QC) expected going into month end cpn payment/extension. Data calendar picks up with BOC decision tomorrow (15% prob of hike, 55% for July from 72% last week), March GDP Thursday.  

News headlines

Italy Could Lose Irreplaceable Asset of Trust, Visco Says (Bloomberg) Italy is always just a few steps away from the “very serious risk of losing the irreplaceable asset of trust,” Bank of Italy Governor Ignazio Visco said as a political crisis in the euro area’s third-largest economy sent debt yields soaring and bank shares tumbling. While European rules can be debated, criticized and improved, Italy cannot disregard constitutional constraints that protect savings, balance accounts and ensure the respect of international treaties, Visco said at the central bank’s annual meeting in Rome on Tuesday. “Italy’s destiny is that of Europe.”

Saudis, Kuwait, U.A.E. Plan Saturday Meeting on OPEC (Bloomberg) Energy ministers from Saudi Arabia, the United Arab Emirates and Kuwait plan to meet on Saturday to discuss OPEC matters, about a week after the Saudis and Russia announced a new policy to revive oil production. Saudi Energy Minister Khalid Al-Falih will meet with Kuwait’s Bakheet Al-Rashidi and the U.A.E.’s Suhail Al Mazrouei — also the holder of OPEC’s rotating presidency — in Kuwait City, according to people with direct knowledge of the matter who asked not to be identified because the information isn’t public. Oman’s Oil Minister Mohammed Al Rumhi may join, they said.

Italy Woes Rock Global Assets as Traders Dump Risk: Markets Wrap (Bloomberg) The escalating political crisis in Italy engulfed markets on Tuesday, triggering risk-off moves and a flight to safety worldwide. Treasuries rallied with core European debt as gold and the yen gained, while Italian bonds plunged and the euro retreated. The benchmark U.S. bond yield briefly dipped below 2.8 percent, while the yield on 10-year gilts and bunds also tumbled. American equity futures retreated alongside the Stoxx Europe 600 Index. The MSCI Asia Pacific Index fell as shares of iPhone screen makers slumped on a report that Apple Inc. is shifting to next-generation technology. The Topix index posted its longest losing streak since September 2016 as Japan’s currency jumped.

Trump says top North Korean official headed to New York to discuss summit (Reuters) A senior North Korean official is headed to New York to discuss an upcoming summit, U.S. President Donald Trump said on Tuesday, the latest indication that an on-again-off-again meeting between Trump and North Korea’s leader may go ahead next month. “We have put a great team together for our talks with North Korea. Meetings are currently taking place concerning Summit, and more. Kim Young Chol, the Vice Chairman of North Korea, heading now to New York. Solid response to my letter, thank you!” Trump said in a Twitter post.

Ontario polls shift to left in two-way race to replace Liberals (Reuters) The left-leaning New Democrats have gained ground in Canada’s most populous province, Ontario, ahead of a June 7 provincial election, according to opinion polls, setting up a two-way race with the right-leaning Progressive Conservatives to take power. While plain-spoken populist Doug Ford looked set to lead the PCs to victory in Ontario when the campaign began nearly three weeks ago, momentum in the fight to unseat Liberal Premier Kathleen Wynne has shifted to the left.

TSX futures mirror global stocks fall (Reuters) Futures prices pointed to a lower opening for Canada’s main stock index on Tuesday following a sell-off in global equities triggered by a worsening Italian political crisis. Investors fear that repeat elections – which now seem inevitable in Italy – may become a de facto referendum on Italian membership of the currency bloc and the country’s role in the European Union

Feds said ‘increasingly likely’ to buy Trans Mountain pipeline (BNN) Canada is likely to buy Kinder Morgan Canada Ltd.’s Trans Mountain oil pipeline and its controversial expansion project in a bid to ensure it gets built amid fierce opposition, according to a person familiar with the talks. Buying the pipeline outright has become increasingly likely and is now the most probable option for the Canadian government, the person said, speaking on condition of anonymity because the discussions are private. The deal, a value for which hasn’t been publicly reported, will be announced as soon as Tuesday when Prime Minister Justin Trudeau’s cabinet is due to meet in Ottawa.

Scotiabank tops Q2 expectations on strong international earnings (BNN) Scotiabank reported a nearly four cent jump in profit in the latest quarter, beating market expectations with a boost from its international operations in Latin America. The bank said Tuesday it earned $2.04 billion in net income attributable to common shareholders for its second quarter, up 3.9 per cent from $1.97 billion a year ago.

Overnight markets

Overview: US 10yr note futures are up 0.417% at 120-12, S&P 500 futures are down -0.67% at 2700, Crude oil futures are down -1.31% at $66.99, Gold futures are down -0.2% at $1306.4, DXY is up 0.4% at 94.797, CAD/USD is up 0.26% at 0.7675. 

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 With the US mkt closed for holiday, risk off tone from Italian upheaval reflected in bid tone in German bunds, 10Y bund at a six-month low 0.35% (-4.5bps), 28bps lower in just the last ten days. Two year BTP/bund spd 48bps wider, Italy 2Y which yielded -0.32% two weeks ago, now 0.90%. Former Italian IMF official known for fiscal discipline, has been asked to form a new govt after the coalition govt collapsed. Crude oil lower for a fifth day, WTI fell below 66.00, three week low, on prospect of OPEC supply increase. GOCs sharply higher, 10Y 2.315%, ~20bps off the highs of last week 2.52%. 

News headlines

Poloz’s Holding Pattern on Canadian Rates Can’t Last Much Longer (Bloomberg) It’s no longer an issue of if, but when the Bank of Canada raises interest rates. Governor Stephen Poloz heads into a rate decision Wednesday where he’s expected to once again refrain from lifting borrowing costs, even as the economy shows signs of strength and is running up against capacity constraints. It’s a cautious stance driven by a wait-and-see approach to a long list of uncertainties — everything from Nafta to the housing market — rather than any concerns about fundamental economic momentum.

ECB Tests Flavor of Inflation as Big Policy Discussion Looms (Bloomberg) This isn’t the inflation the European Central Bank is looking for — but it is inflation. Figures this week are forecast to show euro-area consumer-price growth could have reached its fastest since early 2017 on the back of more expensive oil and a rebound in travel costs. The cost of crude and a weaker euro are also set to bolster a more significant set of numbers out in June — new ECB projections that will help policy makers determine whether the time has come to scale back asset purchases.

Italian Banks Lead Stock Declines After Government Plan Unravels (Bloomberg) Italian banks led European financial stocks lower as the growing likelihood of new elections shook investor confidence. Banca Monte dei Paschi di Siena SpA, the habitually-volatile state-rescued bank, led declines with a drop of as much as 7.8 percent. The eight worst performers on the Bloomberg Europe Banks Index were all Italian lenders as of 12:07 p.m., with UniCredit SpA losing almost 4 percent and Intesa Sanpaolo SpA down about 3 percent.

U.S. Stock Futures Rise on Korea Hopes; Oil Slumps: Markets Wrap (Bloomberg) U.S. equity futures followed Asian shares higher on signals an America-North Korea summit is back on track, but risk appetite waned in Europe as Italy’s political outlook darkened. The region’s stocks and common currency both surrendered gains. S&P 500 futures advanced, as did South Korean stocks, after President Donald Trump appeared to confirm that his June meeting with Kim Jong Un was back on. National gauges in Europe turned lower, led by Italy’s benchmark, as populist leaders pulled the plug on their attempt to form a government and the country lurched toward fresh elections. The nation’s bonds tumbled. Oil losses deepened after Saudi Arabia and Russia said they are discussing reviving output.

Canadian Pacific Railway union serves strike notice (Reuters) Union members representing Canadian Pacific Railway Ltd’s (CP) (CP.TO) conductors and locomotive engineers have served a notice to go on strike as early as May 29, according to a union statement released on Saturday. The strike notice comes a day after the union rejected the company’s latest contract offer. “After workers at CP voted to reject the last contract offers, the company is still refusing to negotiate seriously,” the statement said. CP is the country’s second-largest railroad.

Futures little changed amid a dip in oil prices (Reuters) Stock futures pointed to a flat opening for Canada’s main stock index on Monday even as oil prices extended losses as Saudi Arabia and Russia said they may raise output. June futures on the S&P TSX index were down 0.03 percent at 7:15 a.m. ET. The Toronto Stock Exchange’s S&P/TSX fell 37.95 points, or 0.24 percent, to 16,075.67 on Friday, its fourth straight decline, as a drop in oil prices weighed on the energy sector.

Oil slips below US$66 as Saudis, Russia hint at supply hike (BNN) Oil in New York headed for its longest run of losses in almost four months as Saudi Arabia and Russia said they are discussing raising output to ease consumer anxiety after prices jumped to levels last seen in 2014. West Texas Intermediate dropped as much as 3.1 per cent, while Brent crude futures traded above US$80 a barrel last week slumped near US$75 in London on Monday. Saudi Arabia and Russia signaled they’ll restore some of the output they cut as part of a deal between OPEC and its allies that took effect in January last year. Potential opposition from several producers could complicate the group’s effort to reach a consensus when it meets next month in Vienna.

Trudeau government says 2017 deficit is in line with projections (BNN) Prime Minister Justin Trudeau’s government released interim results for the 2017 fiscal year that it says shows are “broadly” in line with its deficit projections. The shortfall for the fiscal year ended March 31 came in at $16.2 billion, the Canadian finance department said Friday in Ottawa. Department officials indicated the final numbers, to be released later this year, would be closer to the $19.4 billion deficit projection forecast by the government in its February budget.

Overnight markets

Overview: US 10yr note futures are up 0.261% at 120-06, S&P 500 futures are up 0.17% at 2723, Crude oil futures are down -1.5% at $66.86, Gold futures are down -0.31% at $1304.9, DXY is up 0.07% at 94.318, CAD/USD is up 0.06% at 0.7702.

US Economic Data

There is no US economic data for today.

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