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Market UpdateUS tsys trading lower, US 10Y 2.757 (+2.7bps), reversing most of yest rally which saw the 10Y move below 2.72% as US equities rebound, S&P futures +18, Nasdaq + 60.  European equities also reversing losses after reopening from the long weekend, Euro stoxx -0.50%. Quiet day on the data front with only Vehicle sales, Redbook and ISM NY, Fed Kashkari speaks at 9:30.  The CAD continuing to rise on yest Nafta news, up 0.75% 1.2838.  GOCs lower, outperforming tsys by 1-2bps. Tomorrow the BOC will auction $3bln of new Sep 2023s with the WI/5Y roll 3.6/3.4. Provi spds steady after widening another ~0.5bps yest, Ontario 27s 10bps wider over the past two weeks.

News headlines

Stocks’ Second-Quarter Start Is the Worst Since the Great Depression (Bloomberg) If you feel like the second quarter began badly, you’d be right. U.S. stocks had their worst April start since 1929, according to data compiled by Bloomberg. The S&P 500 index slumped 2.2 percent, a rout exceeded only by its 2.5 percent decline 89 years ago, a prelude to the devastating crash later that year that brought on the Great Depression. (Back then, the index only comprised 90 stocks.)

Trump Pushing for Preliminary Nafta Deal by Mid-April, Sources Say (Bloomberg) The Trump administration is pushing for a preliminary Nafta deal to announce at a summit in Peru next week, and will host cabinet ministers in Washington to try to achieve a breakthrough, according to three people familiar with the talks. The White House wants leaders from Canada and Mexico to join in unveiling the broad outlines of an updated pact at the Summit of the Americas that begins April 13, while technical talks to hammer out the finer details and legal text could continue, according to the people. They asked not to be identified because the talks are private.

America’s Libor Replacement Is Ready for Its Debut (Bloomberg) Regulators around the globe began work on replacements for Libor, the London interbank offered rate, well before the U.K.’s Financial Conduct Authority set to put the beleaguered interest-rate benchmark out of its misery. In the U.S., enter the Secured Overnight Financing Rate, or SOFR, a new reference rate being introduced next week by the Federal Reserve Bank of New York in cooperation with the U.S. Treasury Department’s Office of Financial Research. The debut of SOFR is a critical step in a quest to wean more than $350 trillion of securities off Libor.

Euro-Area Manufacturers Rein in Output Amid Capacity Constraints (Bloomberg) Euro-area manufacturing expanded at the weakest pace in eight months in March as factories delayed production due to increasing capacity constraints. A Purchasing Managers’ Index dropped to 56.6 from 58.6 — in line with a previous flash estimate — IHS Markit said on Tuesday. Activity slowed across countries and industries in the region but remained indicative of solid growth nonetheless, it said.

Provincial stimulus can kick Canada into a higher gear: economists (Reuters) Fiscal stimulus from major provinces is set to give Canada’s economy a shot in the arm, which could boost the case for further Bank of Canada interest rate hikes over the coming months despite slow growth at the start of the year, economists said on Monday.

Disappointing Canada growth data for January heralds under par Q1 (Reuters) The Canadian economy unexpectedly shrank by 0.1 percent in January, Statistics Canada data indicated on Thursday, in a clear sign that first-quarter growth is likely to be weaker than the Bank of Canada had predicted. Analysts in a Reuters poll had expected gross domestic product to increase by 0.1 percent after a revised 0.2 percent gain in December. January’s drop was the first since a 0.1 percent decline in August 2017.

RBC chief McKay warns investment capital fleeing Canada in ‘real time’ (BNN) The head of one of Canada’s largest banks is urging the federal government to stem the flow of investment capital from this country to the United States — because, he warns, it’s already leaving in “real time.” RBC president and CEO Dave McKay discussed some of his biggest concerns about Canadian competitiveness, particularly those related to recent U.S. tax reforms, during a recent interview. Ottawa has come under pressure from corporate Canada to respond to a U.S. tax overhaul that’s expected to lure business investments south of the border.

Overnight markets

Overview: US 10yr note futures are down -0.18% at 121-02, S&P 500 futures are up 0.54% at 2589, Crude oil futures are up 0.24% at $63.16, Gold futures are down -0.34% at $1342.3, DXY is down -0.01% at 90.04, CAD/USD is down -0.33% at 0.777.

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 UpdateUS tsys higher, 10Y 2.765% (-1.5bps), curve flattening to new cycle lows before PCE data, 2s10s below 50bps narrowest since Nov 2007. US equity futures higher, the USD index slightly lower, crude little changed 64.27. Core EGBs showing little direction, 10Y gilt 1.362%. This afternoon will  likely see month end flow connected to extension in the Bloomberg-Barclays Sterling Agg 0.30Y. GOCs higher in line with tsys before Jan GDP, provi spreads unch after closing 1-1.5bps wider yest. The Broad TMX Universe sees small decline in duration today – 0.05 , with the provi index -0.08.

News headlines

Tech, Once Again, Weighs on Stocks as Dollar Jumps: Markets Wrap (Bloomberg) Megacap tech shares slumped again Wednesday as pessimism about the sector showed few signs of letting up. The dollar jumped while Treasury yields held below 2.8 percent as data showed American economic growth beat estimates. Volatility measures spiked as the Nasdaq 100 Index fell, with Netflix Inc. and Amazon.com Inc. among the biggest losers. The gauge is heading for its worst month in two years. The S&P 500 Index edged lower, hovering just above its average price for the past 200 days — a level that’s set a line in the sand in the selloffs last week and in early February.

Nissan, Renault in Talks to Merge, Create New Company (Bloomberg) Renault SA and Nissan Motor Co. are in talks to merge, seeking to solidify their two-decade-old alliance under a single stock as an unprecedented shift toward electric and shared cars transforms the industry, people with knowledge of the matter said. A deal would end the current alliance between the companies and marry them as one corporation, said the people, who asked not to be identified as the details aren’t public. Renault currently owns 43 percent of Nissan while the Japanese carmaker has a 15 percent stake in its French counterpart. Carlos Ghosn, the chairman of both companies, is driving the negotiations and would run the combined entity, the people.

Two Koreas Set April 27 for Kim Jong Un’s Historic Walk South (Bloomberg) Kim Jong Un could become the first North Korean leader in history to enter South Korea in just over four weeks, when he steps across the heavily fortified border for a summit with President Moon Jae-in. The April 27 meeting on the southern side of the demilitarized zone will be the first between leaders of the two nations in 11 years. Leaders of the two nations — which are still technically at war — have only met twice since the peninsula was divided in 1948.

How Theresa May Will Navigate the Perilous Road to Brexit (Bloomberg) Prime Minister Theresa May has nine months to define what Brexit will actually mean and she’ll have to do battle on three fronts to get there—in Brussels, in Parliament and with her own Conservative Party.

U.S. upbeat about fast NAFTA deal, Canada says much work is left (Reuters) U.S. Trade Representative Robert Lighthizer on Wednesday expressed optimism that talks to modify NAFTA could be wrapped up quickly, but a top Canadian official was more downbeat, saying much work remained.

TSX futures flat ahead of GDP data (Reuters) Canada’s main stock index futures were little changed on Thursday as investors awaited a report on gross domestic product for January to gauge the health of the economy. June futures on the S&P TSX index SXFc1 were down 0.04 percent at 7:15 a.m. ET. GDP data for January and producer prices data for February are due at 8:30 a.m. ET. The GDP data is expected to show a rise of 0.1 percent.

Ontario promises new spending, deficits as election looms (BNN) As it braces to fight for re-election this spring, Ontario’s Liberal government has rolled out a spending package that targets nearly every demographic while plunging the province back into deficit, with the books expected to stay in the red for six years. The 2018-2019 budget, tabled Wednesday by Finance Minister Charles Sousa, pumps billions into health care, child care, and support for seniors, though many of the spending promises had been announced by Premier Kathleen Wynne in recent days.

Overnight markets

Overview: US 10yr note futures are up 0.052% at 120-31, S&P 500 futures are up 0.31% at 2615.5, Crude oil futures are down -0.11% at $64.31, Gold futures are down -0.08% at $1328.9, DXY is down -0.1% at 89.97, CAD/USD is down -0.21% at 0.7754.

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

US tsys lower after Q4 GDP was revised higher -2.9% vs 2.5%, way off the o/n highs which saw the 10Y dip below 2.75% (low since Feb 6^th), now 2.78, tsys rising with gilts & bunds in European trade.  S&P futures +7.75, USD index unch, crude lower for a third day, 64.45 (-0.60%).  UK gilts sharply higher, yields 3-5bps lower, curve steeper – significant m/e extension and large cash flows in April with the BB Pan-Euro agg projected to rise 0.10 while the UK Sterling agg extension is 0.22 vs .08 last March. US month end tsy extension 0.06 vs 0.08 last March. The US Treasury auctions $29bln in 7Y notes and $15bln in 2Y FRNs this aft – 5Y auction yesterday well received with highest b/c (2.5) since Sep, indirect bidders 63.5 vs 58.5 Feb. GOCs unch, in line with tsys, 10Y 2.14% – lowest since Jan 8th after falling 9bps yest

News headlines

Tech Rout Punishes U.S. Stocks as Treasuries Surge: Markets Wrap (Bloomberg) A selloff in technology shares sent U.S. equity benchmarks lower, with losses accelerating late in the day. Bonds surged on demand for safe havens, pushing the yield on 10-year Treasuries below a key level. Trade angst weighed on leading tech companies with the Nasdaq 100 Index erasing most of Monday’s gain after a report the Trump administration is considering a crackdown on Chinese investments in technologies the U.S. considers sensitive. Facebook’s woes mounted and Nvidia Corp. spooked investors in chipmakers. The Chicago Board Options Exchange Volatility Index — Wall Street’s fear gauge — spiked.

Trump Urges Pressure Against North Korea After Kim’s China Trip (Bloomberg) U.S. President Donald Trump called for continued pressure against Kim Jong Un, after China said the North Korean leader expressed an openness to disarmament talks during a surprise visit to Beijing. Trump struck an optimistic tone after the unexpected summit with Chinese President Xi Jinping, saying in a pair of early morning tweets Wednesday that Kim might “do what is right for his people and for humanity” and give up his nuclear weapons. “In the meantime, and unfortunately, maximum sanctions and pressure must be maintained at all cost!” Trump said.

Shire Surges on News of Possible Takeda Bid (Bloomberg) Takeda Pharmaceutical Co. is considering its biggest takeover ever — a bid for Shire Plc that could approach $50 billion and propel the Japanese company into the ranks of the world’s top drugmakers. A combination would boost Takeda’s position in drugs for cancer, gastrointestinal diseases and nervous-system ailments, adding key treatments that are in the late stages of testing, according to a statement Wednesday. Shire, based in Lexington, Massachusetts, and listed in London, gained as much as 26 percent.

Brexit Bulletin: Divide and Wait (Bloomberg) The fishermen can’t wait, the public don’t want to wait, but Prime Minister Theresa May says she might need more time. Just like Brexit itself, the question of how long the U.K. should spend getting ready before finally leaving the European Union’s political and legal structures is dividing the country. First there was the argument about the transition period, which was agreed to last week. Brexit-backing fishermen aren’t happy that the U.K. won’t “take back control” of its waters – escaping the quotas of the Common Fisheries Policy – until Jan. 1, 2021. Yet it could have been worse for them, as May was exploring a longer transitional phase.

Oil Heads for Longest Slide in a Month as Fears of Glut Increase (Bloomberg) WTI falls 66 cents to $64.59 a barrel, sliding for a third day

Oil headed for its longest losing streak in almost a month on signs a global glut may persist. Futures in New York fell as much as 1.3 percent after dropping about 1 percent over the previous two sessions. An industry report was said to show a 5.32 million-barrel gain in U.S. crude inventories last week, far higher than the median estimate in a Bloomberg survey before government data later Wednesday. European stockpiles rose the most in five months last week.

Hudson’s Bay posts first profit in eight quarters but misses expectations (Reuters) Canadian department store Hudson’s Bay Co (HBC.TO) on Wednesday posted its first profit in eight quarters, but missed expectations as comparable sales and margins declined in some divisions. The owner of the Saks Fifth Avenue luxury retailer said it had net income of C$84 million ($65.23 million) in the fourth quarter, which ended Feb. 3, compared with a net loss of C$152 million a year earlier.

Quebec sets aside big money for health and debt repayment, taxes Netflix in 2018-19 budget (BNN) he final Quebec budget before the provincial election sets aside big money for health and education as well as more help for families — areas expected to become campaign battlegrounds in the lead-up to October’s vote. While annual spending growth has averaged 2.4 per cent since 2014-15, the 2018-19 budget increases it by 5.2 per cent and promises $16 billion in additional money over the next five years. Despite the substantial hike, Finance Minister Carlos Leitao maintains his budget is not political and that the Liberal government is not trying to buy votes.

Overnight markets

Overview: US 10yr note futures are up 0.09% at 121-01, S&P 500 futures are up 0.32% at 2624.25, Crude oil futures are down -0.69% at $64.8, Gold futures are down -0.59% at $1340, DXY is up 0.13% at 89.492, CAD/USD is down -0.04% at 0.7762.

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