Commentaires

Market Update US Treasuries have rallied with higher during the European morning session, underpinned by risk-off sentiment on a combination of Italian political concerns, a renewal of US-China trade tensions, weak data, and emerging market assets under pressure. 10-yr Tsy yield is -5.1bp at 3.008%- The 5-yr and 7-yr part of the yield curve has led the rally, leading to 2s5s flattening by 3.5bps to 29.1bps, and 5s30s steepening by 1.5bps to 32.2bps. US Tsys edged higher in the main, as risk off trade dominated the Asia-Pacific session on US/China trade differences and that talk of US summit with North Korean leader Kim Jung-Un might be delayed. Data on tap includes home sales, $36B 5Y auction followed by May FOMC minutes at 1hpm.  Sentiment has deteriorated due to multiple factors, including the continuing saga over the appointment of a new Italian Prime Minister and potential eurosceptics in line for Finance; hawkish US President Trump comments Tuesday on China and North Korea; and emerging markets` continuing meltdown (esp Turkey).

News headlines

Stocks Fall, Bonds Gain as Risks Mount; Euro Drops: Markets Wrap (Bloomberg) Shares in Europe followed Asian counterparts lower as storm clouds gathered from Turkey to North Korea and data cast doubts on economic growth prospects for the euro area. Treasuries advanced with the dollar, while oil dropped with most commodities. The Stoxx Europe 600 Index sank by the most in two months alongside U.S. equity-index futures, as optimism over U.S.-China trade talks faded together with prospects for President Donald Trump’s summit with North Korea’s leader. Concerns over Turkey’s financial-market stability drove the lira to successive record lows and weighed on emerging-market assets. The yen and core European bonds gained and gold jumped as traders sought havens after equity benchmarks from Hong Kong to Sydney declined.

Fed Minutes to Detail Views on Inflation Overshoot, Yield Curve (Bloomberg) Divisions among Federal Reserve officials over the yield curve and inflation will be under scrutiny on Wednesday when the U.S. central bank releases minutes of its policy meeting at the start of the month. While the Federal Open Market Committee left interest rates unchanged at the May 1-2 session, new information on how officials discussed those topics could help analysts gauge how many additional hikes are likely this year. The Fed lifted its benchmark rate in March and another move is widely expected in June. Odds are currently about split between the probabilities for three and four increases over the year as a whole, according to pricing of federal funds futures contracts.

Euro-Area Economy Awaits Rebound Suppressed by Temporary Factors (Bloomberg) The euro-area economic rebound expected this quarter remains out of reach for now. After bad weather, strikes and a flu epidemic weighed on growth at the start of the year, manufacturing and services suffered another setback in May, when an unusual number of public holidays damped orders. In a sign that investors are getting impatient with the 19-nation economy, the single currency fell to the lowest level since November.

North Korea Gets Ready to Destroy Its Main Nuclear Test Site (Bloomberg) North Korea is preparing blow up its main nuclear-weapons test site in the next day or two, even as U.S. President Donald Trump raises new doubts about the prospects of a nuclear deal with Kim Jong Un. A selection of journalists representing Chinese, Russian, South Korean, U.K. and U.S. media organizations were traveling to the site in mountainous area of Punggye-ri to witness the event. North Korea said the detonations were intended to put out of use the tunnels used for all six of the isolated nation’s nuclear tests.

Canada says top NAFTA officials in constant contact on trade talks (Reuters) Top U.S., Canadian and Mexican officials are in constant contact about slow-moving talks to revitalize NAFTA and are ready to meet at any time to push the process forwards, Canada’s foreign minister said on Tuesday. Negotiations to update the North American Free Trade Agreement have stalled as Canada and Mexico try to digest U.S. demands for major changes.

TSX futures drop as oil prices slip (Reuters) Futures for Canada’s main stock index were lower on Wednesday as oil prices dropped on expectations that OPEC may increase crude output to cover any supply shortages from Venezuela and Iran. June futures on the S&P TSX index were down 0.44 percent at 7:15 a.m. ET. Canada’s main stock index edged lower on Tuesday, breaking its longest winning run in more than four years as shares of energy and materials companies lost ground.

CIBC blows past estimates as second-quarter profit surges 26% (BNN) Canadian Imperial Bank of Commerce kickstarted bank earnings season on Wednesday with a big profit beat powered by double-digit growth in its core Canadian banking division. CIBC earned $1.32 billion in its fiscal second quarter. On an adjusted basis, profit surged 26 per cent year-over-year to $1.35 billion.

Turkey heads toward a currency crisis as lira goes into freefall (BNN) Turkey is entering the grips of a full-blown currency crisis. The lira was already on course for its worst month since 2008 when it plunged to a new record Wednesday, a sign that the central bank’s apparent refusal to step in is giving traders free rein to bet against it. It sank as much as 5.2 per cent. Policy makers “must hike now,” said Cristian Maggio, the head of emerging-market strategy at TD Securities in London. “There’s no limit to how far this could go because this is becoming a currency crisis.” Eventually, Turks will start selling too, and then there will be “total loss of confidence,” he said.

Overnight markets

Overview: US 10yr note futures are up 0.368% at 119-10, S&P 500 futures are down -0.63% at 2708.75, Crude oil futures are down -0.64% at $71.74, Gold futures are up 0.17% at $1299.6, DXY is up 0.44% at 94.02, CAD/USD is up 0.74% at 0.7744.

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 trading lower, US 10Y 3.074% (+1.5bps), on heavy volume in TY futures (475k), risk-on as Italian bonds rally and news that China will cut import tariffs on imported autos to 15% from 20-25%.  Euro equities/S&P futures are higher, USD index 0.25% lower.  Core EGBs selling off on positive sentiment re periphery, 10Y BTP/bund spd ~12bps narrower @173bps, 10Y bund +4bps @ 1.51%.  Rally in crude weighing on fixed income as well, WTI extending three year high, now 72.60 after new US sanctions announced on Venezuela. The US auctions $22bln in 2Y notes this afternoon. In Canada, GOCs are lower, underperforming tsys across the curve , GOC curve 1bp steeper 2s10s, 10s30s barely positive 0.5/0.2, Can 27s continuing to cheapen on the butterfly vs 26s/28s with the 10Y roll 0.3/0.2.  The BOC will auction $1bln in 30Y bonds tomorrow, reopening the 2% Dec 51 issue ($1.5bln out), 51/48 roll -0.2/-0.3 – we expect the auction to go relatively smoothly given the roll has been fairly stable in a flattening environment while the June1/2nd extension supports the bid in the back end. 

News headlines

Trump Willing to Wait for Good Nafta Deal, Whatever That Is (Bloomberg) With about two weeks left until what may be the final deadline for a new Nafta this year, Mexico and Canada are signaling there’s a deal to be had — if President Donald Trump wants one. U.S. Treasury Secretary Steven Mnuchin, speaking in an interview on Fox News Sunday, said Trump’s priority is getting a good deal, even if it means disregarding “any deadlines” to let current lawmakers approve it. That would leave a vote to the next Congress, which Trump’s Republican Party may no longer control after November’s midterm elections.

China Makes Massive Cut to Car Tariffs After Truce With Trump (Bloomberg) China will cut the import duty on passenger cars to 15 percent, further opening up a market that’s been a chief target of the U.S. in its trade fight with the world’s second-largest economy. The Finance Ministry said Tuesday the levy will be lowered effective July 1 from the current 25 percent that has been in place for more than a decade, boosting shares of automakers from India to Europe. Bloomberg News reported last month that China was weighing proposals to reduce the car import levy to 10 percent or 15 percent.

Trump Set to Meet South Korea’s Moon as Doubts Shroud Kim Summit (Bloomberg) South Korean President Moon Jae-in, a champion of talks between the U.S. and North Korea, will look to restore momentum for an unprecedented summit between the foes in a White House visit on Tuesday. Optimism for next month’s meeting in Singapore between President Donald Trump and leader Kim Jong Un was punctured last week by a North Korean threat to walk away if the U.S. makes a “one-sided demand” for the regime to surrender its nuclear weapons. The New York Times reported that Trump was “surprised and angered” by that statement, and indicated he could pull out.

Stocks Rise as Risk-On Creeps Back; Italy Bonds Up: Markets Wrap (Bloomberg) A degree of risk appetite returned to global markets on Tuesday, with developing-nation stocks and currencies rebounding and the euro climbing with Italian bonds. The dollar fell as Treasury yields climbed, and the pound advanced. U.S. equity futures pointed to a higher open and the Stoxx Europe 600 Index nudged upward after the MSCI Asia Pacific gauge eked out a gain in a mixed session earlier. Emerging stocks were the stand out, ending a three-day losing streak. The euro swung from a loss to a gain as investors weigh the chances Italy’s president will seek to curtail a potential populist government, while the country’s bonds rebounded from a two-day slide. The Turkish lira fell to yet another record low. Sterling strengthened amid speculation there could be another U.K. election and after upbeat comments from a Bank of England policymaker.

TSX futures lifted by higher oil prices (Reuters) Stock futures pointed to a higher opening for Canada’s main stock index on Tuesday as oil prices rose toward $80 per barrel on concerns about declining Venezuelan output and a possible fall in Iranian exports. June futures on the S&P TSX index were up 0.25 percent at 7:15 a.m. ET. Wholesale trade data for March is due at 8:30 a.m. ET and is expected to show a rise of 0.6 percent. The Toronto Stock Exchange’s S&P/TSX rose 18.76 points, or 0.12 percent, to 16,162.31 on Friday, extending its recent streak of higher closes to an 11th day. Canadian markets were closed on Monday for Victoria Day.

Canada granting refugee status to fewer illegal border crossers (Reuters) Canada is rejecting more refugee claims from people who crossed the border illegally as Prime Minister Justin Trudeau’s government seeks to dissuade, block and turn back thousands more, according to new data obtained by Reuters.

Canadian retail sales post strongest gain in five months on autos (BNN) Canadian retailers recorded their largest sales gain in five months in March, as the nation’s households continued their car buying binge. Receipts were up 0.6 per cent during the month, as sales in the auto sector jumped 3 per cent, Statistics Canada reported Friday. Economists were anticipating a 0.3 per cent gain in sales. It was a strong end to a quarter for retailers, after a sluggish start to a year — a rebound that may ease concerns about any dramatic pullback in spending by consumers. Even with the higher sales in March, receipts in the first quarter were down from the last three months of 2017, the first quarterly decline since 2015.

Overnight markets

Overview: US 10yr note futures are down -0.066% at 118-25, S&P 500 futures are up 0.18% at 2738, Crude oil futures are up 0.26% at $72.43, Gold futures are up 0.26% at $1294.3, DXY is down -0.31% at 93.39, CAD/USD is down -0.15% at 0.7831.

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 slightly higher, 10Y 3.10% (-1.7bps), avg volume in TY futures. USD index reaching a new high 93.64, crude/equities slightly higher as well. Core EGBs higher led by UK gilts, safe haven bid as Italian 10Y yields hit a ten-month high 2.22% (+33bps this week) spread 10 bunds ~10bps wider, on news of a deal to form a populist coalition govt.  US data calendar thin (only GDP now forecast), multiple Fed speakers.  In Canada, GOCs weaker, 1.5-2bps wider vs tsys before March Retail Sales/April CPI, 10Y near yest high 2.52%. CPI expected to remain unch at 2.3% y/y, with the core also unch at 2.1%. Provincials well bid, part in  longs,  Mani 48 deal yest @ Ont +11 now 10.5 bid, Ont 48/27  14.1/13.8, 0.5bps narrower  wk/wk despite  $2.3bln of long provi supply this week 

News headlines

China’s Greatest Ally in Trump Trade Talks May Be North Korea (Bloomberg)  North Korea may turn out to be Chinese President Xi Jinping’s greatest ally in negotiating a trade deal with President Donald Trump. As Trump heads toward a high-stakes summit with North Korean leader Kim Jong Un next month, the president will look for all the help he can get, especially from Beijing — Pyongyang’s closest ally. That’s giving China added leverage in simultaneous talks with the Trump administration aimed at averting a trade war.

EU Acts to Counter U.S. Sanctions on Iran, Preserve Nuclear Deal (Bloomberg) The European Union started to activate measures to preserve the Iran nuclear agreement and to protect EU companies operating in the country, as the bloc reiterated support for the landmark deal after President Donald Trump’s decision to withdraw from it. The European Commission, the EU’s executive arm in Brussels, on Friday began putting a so-called blocking statute in place to shield European companies doing business with Iran from U.S. sanctions. It’s the first time in more than two decades that the measure is being invoked.

Long End of Canada Yield Curve Inverts for First Time Since 2007 (Bloomberg)  How much is 20 years of extra risk worth? Nothing, at least in Canada. The yield on Canada’s 10-year government bond briefly rose above the nation’s 30-year securities for the first time in more than a decade Thursday. The shorter-maturity notes have sold off in the last few days, pushing yields above 2.5 percent for the first time since 2014. Canada is the only developed economy with that part of its yield curve inverted, according to data compiled by Bloomberg.

Europe Stock Rally Stumbles; Treasury Yield Steady: Markets Wrap (Bloomberg)  Stocks in Europe slipped, failing to follow Asian peers higher amid conflicting reports over progress on trade talks between the world’s largest economies. U.S. futures and the dollar both gained while Treasury yields edged lower after reaching the highest level since 2011. The euro retreated and Italian 10-year bond yields jumped to the highest since October amid uncertainty over the Five Star Movement-League coalition’s policy platform as they attempt to form a government. Risk sentiment was dampened earlier after Chinese state media described reports that it would attempt to slash its trade surplus as “nonexistent.”

Canada adds 30,200 jobs in April: ADP (Reuters) Canada added 30,200 jobs in April, led by hiring in professional and business services, trade, and manufacturing, according to a report from ADP released on Thursday. The report, which is jointly developed with Moody’s Analytics, is derived from ADP’s payrolls data of about 40,000 companies.

Futures flat ahead of inflation, retail sales data (Reuters) Futures for Canada’s main stock index were little changed on Friday as investors awaited inflation and retail sales data. Canada’s annual inflation rate is expected to have remained at 2.3 percent in April while retail sales are likely to have increased by 0.3 percent in March. Both the reports are scheduled to release at 8:30 a.m. ET.

U.S.’s Lighthizer says NAFTA deal ‘nowhere near close’ (BNN) The United States declared the NAFTA countries were nowhere close to a deal in a statement Thursday designed to douse expectations that an agreement might be just a few minor adjustments away. It rebuffed an effort from Prime Minister Justin Trudeau, Foreign Affairs Minister Chrystia Freeland, and several high-ranking staffers who were in the U.S. on Thursday urging a quick deal.

Quebec rejects restaurateurs’ request to add tip-pooling to labour code (BNN) The Quebec government is nixing a proposal by restaurant owners to have a tip-pooling clause added to the province’s labour code to address a considerable wage gap among their employees. The association representing the restaurant owners made the request earlier this week, citing an income discrepancy between servers and kitchen workers. 

Overnight markets

Overview: US 10yr note futures are up 0.079% at 118-20, S&P 500 futures are up 0.09% at 2721.25, Crude oil futures are up 0.18% at $71.62, Gold futures are down -0.12% at $1287.8, DXY is up 0.13% at 93.593, CAD/USD is down -0.03% at 0.781. 

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