Commentaires

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

Market Update Tsys trading lower in recent trade, 10Y 2.99% (+1bp) after rangebound o/n session.  Equity futures higher (S&P +14.75), earnings from Caterpillar, Verizon & UTX beat exp – Cat  +6% higher pre-mkt. Crude follow thru after yesterday’s rebound, now 68.85 (+0.20) before API inventories this aft (-2.25m bbl exp) . Core EGBs mixed, gilts higher, having given up early gains after the UK DMO raised its estimate for planned gilt issuance by GBP3.1bln for 2018-19. Same story for bunds, 10Y unch, weighed by supply from Germany, Italy and Finland, despite weaker German April IFO sentiment. GOCs lower, lagging the decline in tsys, provi spds opening 0.5bps wider this morn, Ont 27 63.5/63. CWB reopened the 2.788% 2021 @99, a 3bp concession from second lvls.  

News headlines

After Weeks of Chaos, U.S. Throws Aluminum Industry Lifeline (Bloomberg) After two weeks of convulsions caused by U.S. sanctions against United Co. Rusal, the metals market was braced for more mayhem: many traders were betting the Russian aluminum giant was just days away from having to shut plants from Sweden to Jamaica.

How 3% Yields Could Reshape the Investing Landscape (Bloomberg) Ten-year Treasury yields sit closer to 3 percent than at any time in the past four years, prompting investors to dust off their playbooks for how to trade in an era of relatively higher rates. Rising rates isn’t exactly a new problem for markets — the 10-year yield jumped 30 basis points in January alone — but this time the spike’s driven by surging commodity prices, not heady economic gains. And that’s thrown a wrinkle into the discussion, particularly when it comes to equities.

Deutsche Bank Is Weighing Massive Cuts in Its U.S. Cash Equities Unit (Bloomberg) Barely two weeks into the job, Deutsche Bank AG’s Chief Executive Officer Christian Sewing is considering a retreat that could mark the end of the bank’s two-decade quest to compete with Wall Street. Sewing is weighing extensive cuts to the lender’s cash equities business in the U.S. and may announce details as part of a wider restructuring of its investment bank when he reports earnings on Thursday, people familiar with the matter told Bloomberg. They asked not to be identified because the details are confidential.

Bonds Steady as Dollar Rally Cools; Stocks Mixed: Markets Wrap (Bloomberg) The rise in U.S. Treasury yields appeared to stall on Tuesday, with the benchmark rate trading sideways after a selloff this week took it to within a whisker of 3 percent. Stocks in Europe struggled for traction following gains for most Asian markets as the earnings season gathered pace.

Xi Ready to Respond as China Rattled by Trade, Debt Risks (Bloomberg) China’s leaders are giving their strongest signal since 2015 that growth in the world’s second-largest economy could slow — and that they’re prepared to tweak policy if trade or financial risks threaten a sharp deceleration.

At least 10 dead, multiple people injured in ‘horrific’ Toronto van attack (BNN) The death toll rose to at least 10 late Monday following a « horrific attack » in which a young man drove a van into a crowd of pedestrians along a stretch of one of Toronto’s busiest streets, authorities said. The federal public safety minister said the incident, which also left 15 people injured, did not appear to be connected in any way to national security. However, the city’s police Chief Mark Sanders said investigators would be exploring all avenues and asked for any witnesses to contact the force with information.

Bank of Canada sees economy improving, plays down inflation risk (Reuters) Bank of Canada Governor Stephen Poloz on Monday gave an upbeat assessment of the economy’s prospects after a sluggish first quarter and said that while inflation this year would rise above the central bank’s target, it would be temporary.

TSX futures higher as oil prices rise (Reuters) Canada’s main stock index looked set to open higher on Tuesday as oil prices rose above $75 per barrel to their highest since November 2014. June futures on the S&P TSX index SXFc1 were up 0.34 percent at 7:15 a.m. ET. Canada’s benchmark stock index ended higher on Monday, with gains in the price of U.S. crude oil driving up shares of companies in the energy sector. Dow Jones Industrial Average e-mini futures 1YMc1 were up 0.57 percent at 7:15 a.m. ET, while S&P 500 e-mini futures Esc1 were 0.53 percent higher and Nasdaq 100 e-mini futures NQc1 rose 0.54 percent. [.N].

Overnight markets

Overview: US 10yr note futures are down -0.013% at 119-10, S&P 500 futures are up 0.58% at 2686.75, Crude oil futures are up 0.32% at $68.86, Gold futures are up 0.28% at $1327.7, DXY is down -0.07% at 90.881, CAD/USD is down -0.15% at 0.7795.

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 weaker, 10Y close to 3.0% for the first time since Jan 2014, currently 2.975% vs 2.995% high, on heavy volume in TY futures (>500k,. ~2x avg daily vol), USD surging higher for a 5^th day, DXY highest since March 1^st. EGBs lower, weighed by better than exp Eurozone PMI  – German 10Y +3.7bp @ 0.623%, 10Y gilt +3.8bps . Ahead of ECB meeting Thursday, Euribor futures lower-  consensus is for no change in the ECB language just yet. GOCs lower, narrower vs tsys beyond 2yrs, 10Y 2.35% high since feb 21^st. BOC governor Poloz and deputy Wilkins are scheduled to discuss monetary policy before the House of Commons this afternoon. Over the weekend Poloz said he is wiling to be patient and overlook the rise in inflation above 2.0%, commenting that the BOC does not raise rates ‘mechanically’  when inflation rises above a certain target. Provis 2-3bps tighter last week despite heavy supply ($3.75bln) and a downgrade of Ontario by Moody’s. 

News headlines

U.S. Hints at China Truce as World Warns of Trade-War Threat (Bloomberg) U.S. Treasury Secretary Steven Mnuchin said he’s considering a trip to China amid a trade dispute with Beijing that finance chiefs warn could derail the global economic upswing. Mnuchin said he’s “cautiously optimistic” of reaching an agreement with China that bridges their differences over trade.

Dollar Strengthens as U.S. Treasury Yields Near 3%: Markets Wrap (Bloomberg) The dollar rallied at the start of a week packed with catalysts, from economic data to new debt supply, as the yield on benchmark U.S. Treasuries climbed toward 3 percent. European stocks edged lower after equities across Asia retreated.

Euro-Area Economy Stays in Lower Gear as Order Growth Weakens (Bloomberg) Economic momentum in the euro area kept a steady pace in April after softening earlier in the year, in a sign that growth in the region is set to continue albeit at a slower pace. A composite Purchasing Managers’ Index remained unchanged at 55.2, IHS Markit said on Monday. Economists surveyed by Bloomberg predicted a decline to 54.8. While activity in services picked up, growth in manufacturing slowed to the weakest in more than a year.

Walmart Is Close to $12 Billion-Plus Deal for Flipkart (Bloomberg) Walmart Inc. is close to finalizing a deal to buy a majority stake in India’s leading e-commerce company for at least $12 billion and may complete the agreement in the next two weeks, according to people familiar with the matter. All the major investors in Flipkart Online Services Pvt are now on board with the Walmart purchase, after an earlier debate over an Amazon.com Inc. acquisition, said the people, asking not to be named because the matter is private. Tiger Global Management will sell nearly all its 20 percent stake in Flipkart, while SoftBank Group Corp. will offload a substantial part of its 20 percent-plus holding, the people said. Walmart will likely end up with 60 percent to 80 percent of Flipkart, valued at about $20 billion, they said.

TSX futures flat as U.S. yields hover near critical mark (Reuters) Futures for Canada’s main stock index were little changed on Monday as investors weighed U.S. bond yields approaching the critical 3 percent barrier. June futures on the S&P TSX index were up 0.08 percent at 7:15 a.m. ET. Canadian wholesale trade data for February is due at 8:30 a.m. ET and is expected to show a 0.5 percent rise. Canada’s main stock index rose on Friday as higher bond yields boosted financials, while shares of Rogers Communications jumped after the telecommunications company reported profits that beat estimates.

China opposes all forms of protectionism, commerce minister says (Reuters) China opposes all forms of protectionism and will firmly safeguard the world’s multilateral trading system, its commerce minister wrote on Monday in the ruling Communist Party’s official newspaper.

CP Rail strike postponed, while unions urge workers to reject offer (BNN) A rail strike has been temporarily averted after the federal labour minister ordered employees of Canadian Pacific Railway Ltd. to vote on the company’s final offers, just hours before they were set to walk off the job. Statements from both CP Rail and two unions representing workers say the minister’s order to administer a ratification vote on each of the two offers follows advice of federal mediators.

Overnight markets

Overview: US 10yr note futures are down -0.196% at 119-10, S&P 500 futures are up 0.19% at 2676.5, Crude oil futures are down -0.29% at $68.2, Gold futures are down -0.74% at $1328.4, DXY is up 0.39% at 90.669, CAD/USD is up 0.17% at 0.7821.

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