Comments

Market Update

Tsys continuing higher , US 10Y 2.965 (-1.5.bps) , on above avg volume in TY futures, ahead of Q1 GDP (2.0% vs 2.9% Q4) and ECI.  USD index higher for a third day, the euro declining to the lowest since Jan 12th.  Core EGBs higher led by sharp rally in UK gilts in the wake of a much weaker than exp prelim Q1 GDP report – 0.1% the lowest q/q increase since 2012. Odds of  a May BOE hike collapsed to 20% from 56% yest and 100% last week.  Bunds higher, lagging the rally in gilts,  the 10Y bund erasing this week’s losses.  In Canada,  GOCs are higher, in line with tsys, new 10Y roll (28/27) 0.2 wider 1.7/1.5, 10s30s unch @ 9.5. 

News headlines

Kim Urges Frequent Talks After Declaring Korean ‘Era of Peace’ (Bloomberg) Kim Jong Un called for more meetings with his South Korean counterpart after becoming the first North Korean leader to cross the border to hold talks over his nuclear weapons program. Kim made the offer to South Korean President Moon Jae-in as the pair met Friday on their militarized boundary for the first summit between the rival governments in 11 years. Both men basked in symbolism of the moment. Kim declared “a new history” and an “era of peace,” while Moon said the “weight on our shoulders is heavy.”

European Economy Loses Thrust in Risk for Global Expansion (Bloomberg) Europe’s economy lost momentum in the first quarter as expansions slowed from France to the U.K., threatening to undermine the global growth the continent previously helped power. Figures from across the region pointed to a softer trend in the early part of the year, and U.S. first-quarter data due shortly is also set to show activity weakening. The world’s largest economy is forecast to have grown an annualized 2 percent, a step down from the pace seen through 2017.

Oil Steadies as Traders Weigh Impact of Korea Summit, Iran Deal (Bloomberg) Oil traded near $68 as investors weighed the impact of a potential U.S. pull-out from the Iran nuclear deal and the historic meeting between the leaders of North and South Korea. Futures in New York slipped 0.4 percent, on course for a 0.7 percent drop this week. French President Emmanuel Macron earlier this week predicted President Donald Trump will exit the Iran agreement, while U.S. Defense Secretary Jim Mattis said Thursday a decision on a withdrawal hasn’t been made. North Korean leader Kim Jong Un and South Korean President Moon Jae-in agreed to finally end seven decades of hostile relations this year.

BOJ’s Kuroda Starts New Term With Fresh Commitment to Easing (Bloomberg) Governor Haruhiko Kuroda began his new term at the Bank of Japan much as he did the first one — emphasizing his commitment to hitting 2 percent inflation. The BOJ left its policy settings intact, vowing to push ahead with stimulus even as other major central banks move further toward policy normalization, though at a moderating pace amid signs of slowing economic growth. Still there was a twist — not uncommon in Kuroda’s tenure — as the BOJ’s policy statement omitted mention of the projected time frame for hitting his longstanding 2 percent target.

Amazon Jumps After Posting First-Quarter Earnings Beat (Bloomberg) Shares of Amazon.com Inc. rose in extended trading after the company reported net sales in the first quarter that beat analyst estimates.

No risk of NAFTA termination despite Trump’s bravado: economists (Reuters) U.S. President Donald Trump’s threats to scrap the North American Free Trade Agreement (NAFTA) will soon be a distant memory, likely to be supplanted by only slight changes to the 24-year-old pact, a Reuters poll of economists suggested. None of the 80 forecasters – most based in Canada, the United States and Mexico – polled by Reuters April 16-24 expect NAFTA to be terminated. A large majority said the most likely outcome is a marginally different agreement, with only six expecting radical changes.

Airbus says aims to cut CSeries costs, sell ‘big volumes’ (Reuters) Airbus said on Friday it aims to reduce recurring costs of Bombardier’s CSeries so that it can sell the jetliner in “big volumes” as soon as a deal to buy the loss-making program from Canada’s Bombardier is completed. “We are ready to hit the market” using the global Airbus sales force as soon as the deal closes, Airbus executive Harald Wilhelm told analysts. People familiar with the matter told Reuters in Canada earlier this week that the deal is expected to clear the final regulatory hurdles by the end of May.

CETA’s extended drug patents could cost Ottawa $270M a year (BNN) An extension of drug patent protections in the Canada-EU free trade deal could end up costing Canadians an estimated $392 million a year, and federal coffers up to $270 million more annually, says a new report from the parliamentary budget officer. The report released Thursday sets out to put a price tag on a central — and controversial — element of the Comprehensive Economic and Trade Agreement, or CETA, that went into effect last September.

Overnight markets

Overview: US 10yr note futures are up 0.131% at 119-15, S&P 500 futures are down -0.13% at 2671, Crude oil futures are down -0.28% at $68, Gold futures are up 0.15% at $1319.9, DXY is up 0.37% at 91.904, CAD/USD is up 0.09% at 0.7761.

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 higher, US 10Y back below 3.0% (2.994 -3.4bps), along with core Euro bonds after ECB/ Swedish Riksbank. Equity futures higher after positive earnings from FB, Qualcomm, and crude is higher for a 2nd day (68.89 +1.0%) after Macron said the US is likely to withdraw from the Iran nuclear deal and before EIA Nat. gas storage data later this morning. ECB left rates unch as expected, attention turns to Draghi press conf – any hints the ECB is closer to pulling back on stimulus. GOCs  higher, slightly wider vs tsys, June 2028 now benchmark 10Y, 10Y roll 0.1bp wider @ 1.6/1.5. 

News headlines

Macron Says He Thinks Trump Will Pull Out of Iran Nuclear Deal (Bloomberg) French President Emmanuel Macron said he thinks U.S. President Donald Trump will withdraw from the Iran nuclear accord, dealing a blow to the six-nation agreement reached in 2015 and endorsed by world powers. “My view — I don’t know what your president will decide — is that he will get rid of this deal on his own for domestic reasons,” Macron told journalists Wednesday in Washington, adding that he encouraged the American president to stay in the accord during his three-day visit to the U.S. capital.

Investors Want to Know Whether Draghi Is Worried About Economic Momentum (Bloomberg) Mario Draghi’s press conference on Thursday may well feature repeated versions of the same question: how worried is he? From sagging business confidence to falling industrial output, the region seems to be losing economic momentum after the best performance in a decade last year. Yet the European Central Bank president and his colleagues say the expansion in the 19-nation bloc is stabilizing rather than slowing down.

Deutsche Bank Cuts Wall Street Ambition to Focus on Europe (Bloomberg) Deutsche Bank AG is abandoning its ambitions to be a top global securities firm as it embarks on possibly the most sweeping overhaul yet of its struggling investment bank. Germany’s largest lender will scale back U.S. rates sales and trading, reduce the corporate finance business in the U.S. and Asia, and review its global equities business with a view toward cutting it back, the bank said in a statement Thursday. The measures will lead to a “significant reduction” in the roughly 97,100-person workforce this year, it said.

Stocks Advance as Results Roll In; Treasuries Jump: Markets Wrap (Bloomberg) U.S. equity futures pointed to a higher open with strong earnings lifting Facebook Inc. and Qualcomm Corp., though gains were muted as investors remained cautious about the prospects for future growth. The euro stayed higher as the ECB kept interest rates unchanged. With the common currency holding gains ahead of a press conference from ECB President Mario Draghi, the dollar pulled back from a three-month high. The pound gained alongside the yen. European bonds tracked a jump in Treasuries, with the yield on 10-year U.S. notes falling below 3 percent.

Facebook Sales Top Estimates, Fueled by Ads; Shares Jump (Bloomberg) Facebook Inc. has been embroiled in one controversy after another. But ad sales are near records and users keep flocking to the social network. First-quarter revenue rose 49 percent to $11.97 billion, beating the $11.4 billion average analyst projection, according to data compiled by Bloomberg. In a statement Wednesday, Facebook said it now has 1.45 billion daily users, matching estimates on this key measure of engagement. Shares surged more than 5 percent in extended trading.

TSX futures higher as oil prices rise (Reuters) Stock futures pointed to a higher opening for Canada’s main stock index on Thursday as oil prices gained on concerns over renewed U.S. sanctions on Iran and falling Venezuelan output. June futures on the S&P TSX index SXFc1 were up 0.11 percent at 7:15 a.m. ET. Canada’s main stock index rose on Wednesday as higher oil prices boosted energy shares, offsetting investor worries about higher bond yields. Dow Jones Industrial Average e-mini futures 1YMc1 were up 0.15 percent at 7:15 a.m. ET, while S&P 500 e-mini futures Esc1 rose 0.22 percent and Nasdaq 100 e-mini futures NQc1 were 0.62 percent higher. [.N]

Freeland slams U.S. on sunset clause, steel as NAFTA talks heat up (BNN) Canada and the U.S. have had a testy exchange over the idea of including a termination clause in NAFTA, with this idea of a so-called sunset clause emerging as a late-stage sticking point in the negotiations. The U.S. has revived the sunset proposal. In the late stages of bargaining, with hopes of a deal within days, sources say the United States has made clear it wants some sort of additional mechanism allowing the easy termination of NAFTA after several years.

Canada’s economy is ‘finally positive’: Poloz (BNN) Bank of Canada Governor Stephen Poloz said on Wednesday the economy was “finally positive” after a long adjustment to a sharp fall in oil prices, but he added there was still softness in several areas of the country. Poloz also told the Senate’s banking committee that while interest rates would go up from their current low levels, moving too quickly could create a financial stability risk. The central bank has hiked three times since last July as the economy improves and the unemployment rate hovers around 40-year lows. It held rates steady last week at 1.25 per cent. 

Overnight markets

Overview: US 10yr note futures are up 0.197% at 119-10, S&P 500 futures are up 0.31% at 2652.75, Crude oil futures are up 0.88% at $68.65, Gold futures are up 0.17% at $1325.1, DXY is up 0.07% at 91.233, CAD/USD is down -0.12% at 0.7793.

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 lower on heavy volume in TY futures (>500k) , 10Y above 3.0% @ 3.026% (+2.6bps), yield curve slightly steeper. USD index at high since Jan 12th  (DXY + 0.46%), above key 91 resist, equities adding to yesterday’s selloff, S&P futures -8.0. Core Euro bonds weaker, bund/gilt yields 1-3bps higher, bund curve 2bps steeper, 10Y bund 0.64%.  The bund/tsy spd broke to new wides @ 238bps as bunds continue to lag the decline in tsys.  With USD hedging  costs significantly higher than the last time the US 10Y was at 3.0% in Jan2014,( both in terms of the libor-euribor spd and the cross-currnecy basis), US tsys offer very little pickup for european as well as Japanese buyers. And there is more supply to deal with as  the US auctions $17bln in 2Y FRNS & $35bln in 5Y notes this aft . In Canada, GOCs are lower , outperforming tsys out the curve, the 10Y GOC/tsy spd at one month narrows. Provis closed 1-2 bps wider yest on weaker stocks, Ont 27s 65.5, Ont 38 78.5.  The BOC auctions $2.3bln in June 2028s at noon, with the 28/27 roll 1.7/1.4 vs ~3.0bps when the June 28s were last auctioned on Feb 21st , thou this time amount being auctioned is $700mln less. The 10Y yield @ 2.35% should offer some support as it is close to 2.38% high reached in Feb, and 27bps higher since the end of March. 

News headlines

Macron’s Pitch to Trump on a ‘New’ Iran Deal Surprises EU Allies (Bloomberg) French President Emmanuel Macron is pushing the limits of international diplomacy, as his last-ditch appeal to salvage the Iran nuclear deal wrong-footed European allies and was met with intransigence by U.S. President Donald Trump. Macron, who has sought to cultivate a personal bond with Trump, made his Iran pitch the centerpiece of his visit to the White House. If the U.S. preserved the existing nuclear accord, that could serve as the cornerstone of a new, expanded deal that would address the Islamic Republic’s ballistic missile program and destabilizing behavior across the Middle East.

Google’s Results Spark an $85 Billion Rout for FANG Stocks (Bloomberg) A bad earnings season for the tech industry just got worse with Google’s parent joining the ranks of stocks tumbling after results. Shares of Alphabet Inc. slumped almost 5 percent as of 1:10 p.m. in New York after first-quarter results sparked concern that the internet company is embarking on a new spending binge to keep up with its biggest rivals. Other tech giants fell in tandem, with the FANG complex that also includes Facebook, Amazon and Netflix seeing almost $85 billion in market value wiped out.

Dollar Gains as Treasury Yield Hits 3%; Stocks Dip: Markets Wrap (Bloomberg) The dollar resumed its rally on Wednesday, climbing to the highest in three months as the yield on benchmark U.S. Treasuries extended an advance to pierce 3 percent a second day. Pressure grew on stocks as investors digested a slew of earnings. The greenback strengthened against almost every major peer, with the euro among the losers a day before the European Central Bank’s next rate decision. The region’s currency weakness was no tonic for equities, and the Stoxx Europe 600 Index fell along with U.S. futures and the MSCI Asia Pacific Index after less-than-optimistic earnings forecasts Tuesday from bellwethers including Caterpillar Inc.

Takeda Closes in on $64 Billion Shire Deal to Join Pharma Elite (Bloomberg) Takeda Pharmaceutical Co. reached a preliminary agreement to buy Shire Plc with a sweetened takeover offer of about 46 billion pounds ($64 billion), closing in on a bold transaction to gain a foothold in one of the pharma industry’s most coveted niches. The U.K.-listed company’s board said it was willing to recommend the latest offer to shareholders on Wednesday, capping a month-long tug of war in which its Japanese suitor made five successively higher proposals, two of them in the last few days.

Futures lower on rising U.S. yields, cost worries (Reuters)  Canada’s main stock index was set to open lower on Wednesday, tracking losses in global shares, due to rising U.S. bond yields and warnings from top global companies about increasing costs. June futures on the S&P TSX index SXFc1 were down 0.11 percent at 7:15 a.m. ET. Canada’s main stock index fell on Tuesday as lower oil prices weighed on energy shares, while investors worried about the prospect of higher global borrowing costs after the benchmark U.S. 10-year Treasury note US10YT=RR yield hit 3 percent for the first time in four years.

China’s Dagong downgrades Canada’s sovereign credit outlook to negative (BNN) China’s Dagong Global Credit Rating Co, one of the country’s major ratings firms, on Wednesday cut the credit outlook of Canada to negative, citing a slowdown in the Canadian economy and relatively high risks in its real estate market. A persistently high fiscal deficit was also one of the reasons for the downgrade, Dagong said in a statement. The agency kept its ratings for Canada’s local and foreign currency ratings at AA+.

Trump says NAFTA talks going ‘nicely,’ Canada sees progress on auto rules (BNN) U.S. President Donald Trump said on Tuesday a new North American Free Trade Agreement could be agreed on quickly, as Canada hailed progress on forging new rules for the auto industry, the pivotal issue in talks to revamp the 24-year-old accord. Ministers from the United States, Canada and Mexico responsible for NAFTA met in Washington to try to narrow differences on regional content rules for autos in the hope of tying up a deal in the coming days. 

Overnight markets

Overview: US 10yr note futures are down -0.236% at 119-02, S&P 500 futures are down -0.28% at 2628, Crude oil futures are down -0.07% at $67.65, Gold futures are down -0.9% at $1321, DXY is up 0.42% at 91.151, CAD/USD is up 0.45% at 0.7757.

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