Commentaires matinaux

Market Update

Risk-off rally in tsys resumes after President Trump’s latest move to impose tariffs on Mexico, heavy volume in TY futures (925k), 10Y 2.16% (-4bps),  rate cut prob 92%, with three rate cuts priced in over the next year based on FF futures.  S&P futures -1.2% (GM -5%, Ford -4%) crude another 2% lower, -6% wk/wk lowest since March. GOCs higher in line with tsys, 10Y below 1.50% for the first time since June 2017. Provis opening 1-1.5bps wider, CMBs 1bp wider , 10Y Ontario still only 3 bps off recent tights.

News headlines

Stocks Sink, Havens Gain on Sparring Over Trade: Markets Wrap (Bloomberg) U.S. equity futures slumped as the trade-war rhetoric heated up, with Beijing saying it’s ready to restrict the sale of rare-earth minerals to America and President Donald Trump threatening to place escalating tariffs on Mexico. Bund yields sank to a record as investors sought havens.

TSX futures fall on lower oil prices (Reuters) Futures for Canada’s main stock index were lower on Friday as oil prices fell with U.S. President Donald Trump’s new trade threat weighing on the demand outlook.

Oil Heads for Biggest Monthly Slump This Year on Trade-War Fears (Bloomberg) Oil headed for its biggest monthly slump this year as fears that the U.S.-China trade war will hurt demand overshadowed concern over rising political tensions in the Persian Gulf.

Trump vows rapid, high tariffs on Mexico unless illegal immigration ends (Reuters) U.S. President Donald Trump, responding to a surge of illegal immigrants across the southern border, vowed on Thursday to impose a tariff on all goods coming from Mexico, starting at 5% and ratcheting much higher until the flow of people ceases.

China threatens corporate hit-list on eve of new tariffs on U.S. imports (Reuters) China threatened on Friday to unveil an unprecedented hit-list of “unreliable” foreign firms, groups and individuals that harm the interests of Chinese companies, as a slate of retaliatory tariffs on imported U.S. goods was set to kick in at midnight.

U.S. wants new trade pact with Canada, Mexico passed by summer: Pence (Reuters) U.S. Vice President Mike Pence said on Thursday he was pushing to get the U.S. Congress to ratify the new North American trade agreement this summer after both Canada and Mexico signaled they are ready to start the approval process.

Trump poised to lift curbs on E15 gasoline in latest boost to U.S. farmers (Reuters) The Trump administration will announce an end to a summertime ban on sales of higher ethanol blends of gasoline as early as Friday, a spokesman for a federal regulator said, keeping a campaign promise to farmers suffering from the trade war with China, but inviting a legal challenge from the oil industry.

Overnight markets

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.476%	2 Year	1.99%
5 Year	1.401%	5 Year	1.957%
10 Year	1.502%	10 Year	2.158%
30 Year	1.766%	30 Year	2.597%

US Economic Data

08:30 AM	Personal Income, Apr Survey 0.30% Prior 0.10%
	Personal Spending, Apr Survey 0.20% Prior 0.90%
	Real Personal Spending, Apr Survey 0.00% Prior 0.70%
	PCE Deflator YoY, Apr Survey 1.60% Prior 1.50%
	PCE Core Deflator MoM, Apr Survey 0.20% Prior 0.00%
	PCE Core Deflator YoY, Apr Survey 1.60% Prior 1.60%
09:45 AM	MNI Chicago PMI, May Survey 54.0 Prior 52.6
10:00 AM	U. of Mich. Sentiment, May F Survey 101.5 Prior 102.4

Canadian Economic Data

08:30 AM	Quarterly GDP Annualized, 1Q Survey 0.70% Prior 0.40%
	GDP MoM, Mar Survey 0.40% Prior -0.10%
	GDP YoY, Mar Survey 1.20% Prior 1.10%
	Industrial Product Price MoM, Apr Survey 0.70% Prior 1.30%
	Raw Materials Price Index MoM, Apr Survey — Prior 2.80%

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, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

US tsys flat to slightly higher in the long end, 10Y 2.26%, S&P futures higher (+6), crude oil unch @ 58.80.  Core EGBs lower led by 10Y gilts after BOE Ramsden said rates should move higher if Brexit goes smoothly. US data includes Q1 GDP & initial claims.  GOCs unch ,10Y 1.58% after falling to 1.52% post BOC rate decision yest, spreads vs tsys narrowing 4bps, maintaining outperformance after the relatively upbeat BOC statement.  BOC Senior Deputy Wilkins to give an economic progress report at 2:15ET.

News headlines

S&P Futures, Europe Stocks Advance; Bonds Steady: Markets Wrap (Bloomberg) U.S. equity futures climbed with European stocks on Thursday as investors awaited the latest developments in the outlook for global growth and trade. Treasury yields steadied near their lowest since 2017.

TSX futures little changed after last session’s fall (Reuters) Futures for Canada’s main stock index were little changed on Thursday, a day after Toronto Stock Exchange’s S&P/TSX fell more than one percent.

Oil Rises as U.S. Inventory Decline Offsets Angst Over Trade War (Bloomberg) Oil recovered in New York as signs of tighter supplies in the U.S. offset concerns that the prolonged trade war between America and China will hurt demand.

Taking aim at U.S., China says provoking trade disputes is ‘naked economic terrorism’ (Reuters) Provoking trade disputes is “naked economic terrorism”, a senior Chinese diplomat said on Thursday, ramping up the rhetoric against the United States amid a bitter trade war that is showing no signs of ending soon.

China willing to meet reasonable rare earth demand from other countries (Reuters) China is willing to meet reasonable demand for rare earths from other countries, but it would be unacceptable that countries using Chinese rare earths to manufacture products would turn around and suppress China, its commerce ministry said.

Bump in the night: FX flash crashes put regulators on alert (Reuters) The increasing frequency of flash crashes in the $5.1 trillion-a-day foreign exchange market has regulators scrambling for answers.

Bank of Canada signalling it won’t cut rates anytime soon: CIBC’s Tal (BNN) The Bank of Canada is signalling that it won’t be cutting interest rates in the near future, despite some economists and investors betting that it will, according to CIBC Capital Markets Deputy Chief Economist Benjamin Tal.

Overnight markets

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.539%	2 Year	2.107%
5 Year	1.476%	5 Year	2.071%
10 Year	1.584%	10 Year	2.261%
30 Year	1.827%	30 Year	2.684%

US Economic Data

08:30 AM	GDP Annualized QoQ, 1Q S Survey 3.00% Prior 3.20%
	Personal Consumption, 1Q S Survey 1.20% Prior 1.20%
	GDP Price Index, 1Q S Survey 0.90% Prior 0.90%
	Core PCE QoQ, 1Q S Survey 1.30% Prior 1.30%
	Initial Jobless Claims, May 25 Survey 214k Prior 211k
	Continuing Claims, May 18 Survey 1662k Prior 1676k
	Wholesale Inventories MoM, Apr P Survey 0.10% Prior -0.10%
09:45 AM	Bloomberg Consumer Comfort, May 26 Survey — Prior 60.3
10:00 AM	Pending Home Sales MoM, Apr Survey 0.50% Prior 3.80%

Canadian Economic Data

08:30 AM

Current Account Balance, 1Q Survey -$18.10b Prior -$15.48b

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, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

US tsys higher across the curve, 10Y 2.23% lowest since Sep 2017, tsy 3M10Y curve inverted to new lows  -12.5bps.  Carry over risk-off on US/China trade, S&P futures -19pts. China considering cutting off exports of rare earths to the US.   Core EGBs higher, 10Y bund -.17% multi-year lows with the bund 2Y10Y 2.5bps flatter- German unemployment rose 60k (sa) vs -8k exp, Aussie 10Y fell below the o/n rate for first time since 2015. GOCs higher, 3bps wider vs tsys, before BOC decision at 10:00ET.  GOC 2s5s curve inverted  @-7bps – a level not seen since the depths of the 2007 crisis.   BOC expected to hold rates unch at 1.75%, no press conference but Deputy Wilkins speaks tomorrow before Q1 GDP Friday.  Poloz has been fairly upbeat lately despite trade developments and weaker crude, implying the next move in rates is likely higher once the trade picture clears.

News headlines

Stocks Slump as Bond-Market Warning Rings Louder: Markets Wrap (Bloomberg) Stocks extended their global retreat on Wednesday as investors fled to bonds, driving yields down to multi-year lows in a fresh wave of risk aversion. Gold advanced.

Oil Slumps Below $58 as U.S.-China Trade Hostilities Escalate (Bloomberg) Oil slumped as escalating trade hostilities between the U.S. and China stoked fears of slowing global growth, overshadowing forecasts for a drop in American crude inventories.

Bank of Canada likely on hiatus before federal election (BNN) Bank of Canada Governor Stephen Poloz will probably keep interest rates unchanged Wednesday in what looks to be a prolonged hiatus, at least until after elections in October.

China ready to hit back at U.S. with rare earths: newspapers (Reuters) China is ready to use rare earths to strike back in a trade war with the United States, Chinese newspapers warned on Wednesday in strongly worded commentaries on a move that would escalate tensions between the world’s two largest economies.

Huawei challenges legality of U.S. defense bill as sanctions fight ramps up (Reuters) China’s Huawei Technologies Co Ltd has filed a motion for summary judgment in its lawsuit against the U.S. government, in the telecoms equipment maker’s latest bid to fight sanctions from Washington that threaten to push it out of global markets.

Bond bulls get a boost as trade tensions fan recession fears (Reuters) The global bond rally accelerated on Wednesday, sending 10-year U.S Treasury yields to 20-month lows, as investors fearful of the fallout from the Sino-U.S. trade war sold shares and scurried for the safety of German and U.S. government debt.

U.S. Treasury says nine trade partners deserve scrutiny over currency practices (Reuters) The Trump administration said on Tuesday that no major trading partner met its currency manipulation criteria but nine countries, including China, required close attention as Washington presses tariffs and negotiations to address trade deficits.

Overnight markets

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.527%	2 Year	2.079%
5 Year	1.46%	5 Year	2.026%
10 Year	1.562%	10 Year	2.231%
30 Year	1.819%	30 Year	2.67%

US Economic Data

07:00 AM	MBA Mortgage Applications, May 24 Survey – Actual -3.3% Prior 2.4%
10:00 AM	Richmond Fed Manufact. Index, May Survey 7 Prior 3

Canadian Economic Data

10:00 AM

Bank of Canada Rate Decision, May 29 Survey 1.75% Prior 1.75%

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, Émile Bordeleau

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230