U.S. retail sales for April increased by 0.3%

Posted: Tuesday, May 15, 2018 - 09:05 EDT

U.S. retail sales for April increased by 0.3%, which was in-line with expectations.  April’s increase was driven by rising fuel costs in the U.S. with gasoline prices nearing the highest prices since 2014.  Outside of fuel prices, nine of the 13 major categories also saw increases driven by apparel and furniture retailers.  Stripping out auto and gas, core retail sales increased by 0.3%.  The pace of consumer spending has rebounded from earlier this year, as tax cuts and higher wages continue to drive customer demand.  First quarter Eurozone GDP was also released this morning that came in at consensus of 0.4% for Q1 2018.  The increase was lower than the four prior quarters, Germany grew at the slowest pace over the past three years driven by decreased trade and government spending.  The slower growth is being blamed on the colder weather with ECB members expressing confidence that the weakness is expected to dissipate.

Despite the calm in the broader Canadian corporate credit market, geopolitical concerns lingered in the background over issues in the Middle East coupled with slower growth in Europe.  Again this morning, ten year U.S. Treasury yields have broken above the 3% mark and oil was back above $71/barrel.  Volumes in corporate credit were lower with flows mostly mixed between buyers and sellers.  Great West Life issued a two tranche 10-year and 30-year bond in the U.S. yesterday with proceeds used to redeem $500mil of their subordinated debentures.  Although the new bonds looked cheap on a swapped backed basis to Canada, spreads did not materially change on the Canadian dollar denominated debt.  As a result of the slower activity, corporate credit spreads were mostly unchanged to end the day.

Equity Markets:

 

  Index Level % Change QTD YTD Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
S&P 500 2,730.13 0.09% 3.60% 2.82% 3.82% 6.07% 3.09% 4.48% 6.64% -0.76%
TSX

16,085.61

0.64%

5.03%

0.28%

4.53% 2.41% -1.64% 3.68% 4.44% -4.52%

Rates:

 

Today

% Change

QTD change

YTD change

Q4 2016

Q1 2016

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Canada 5 Year

2.290%

0.08% 0.32% 0.42% 1.150% 1.119% 1.393% 1.753% 1.866% 1.969%
Canada 10 Year 2.472% 0.09% 0.38% 0.43% 1.750% 1.625% 1.762% 2.099% 2.045% 2.091%
Canada 30 Year 2.501% 0.09% 0.27% 0.24% 2.350% 2.302% 2.148% 2.472% 2.266% 2.228%
30yr Generic Corporate A rated Spread 1.240% 0.00% 0.00% 0.03% 1.390% 1.330% 1.210% 1.240% 1.210% 1.240%
30yr All-in Corporate A rated Yield

3.741%

0.09% 0.27% 0.27% 3.740% 3.632% 3.358% 3.712% 3.476% 3.468%
US 10 Year 3.014% 0.01% 0.27% 0.61% 2.50% 2.39% 2.31% 2.33% 2.41% 2.74%
CDX IG 60.444 0.796                

The information contained herein is intended for advisors for general information only and is compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy. All opinions contained in the commentary and expressed by the portfolio manager are subject to change without notice and are provided in good faith without legal responsibility. All market data is sourced from Bloomberg.