Market Update Stronger than expected ADP leads to Tsy trading lower, moderate volume, curves steepening, reversing Tuesdays bull flattening; dealers see lighter buying from overseas accounts as weakness; Tsy ylds higher 10Y 99-01.5 (2.986%) vs. 99-08 (2.962%) late Tuesday; 30YY 3.113, lighter data today with ADP and FOMC announcement leading todays outlook. US Tsy to announce next week’s 3s, 10s and 30s auction details at 8h30. Markets starting to feel more confident that there will be a 4th Fed rate hike this year as odds rise for a December hike after the one in September. European markets have started to think of the possibility that ECB may raise hikes earlier than expected as inflation ticks higher.
News headlines
China Slams U.S. ‘Blackmailing’ as Trump Weighs Higher Tariffs (Bloomberg) China warned the U.S. against « blackmailing and pressuring » it over trade as the Trump administration mulls trying to force officials back to the negotiating table through threats of even higher tariffs. President Donald Trump’s officials are considering more than doubling planned tariffs on $200 billion in Chinese imports, people familiar with the deliberations said. The U.S. had threatened an additional $200 billion with levies of 10 percent, a level the administration may raise to 25 percent in a Federal Register notice in coming days, one of the people said.
Factories From Asia to Europe Put on the Brakes Amid Trade Spats (Bloomberg) Manufacturers in some of the world’s biggest economies are putting the brakes on production as they watch trade disputes with the U.S. unfold. Reports on Wednesday showed factory activity from the Asia Pacific region to Europe slowed last month. With companies issuing warnings about the impact of tit-for-tat battles over import tariffs on their profits, the data suggest that protectionist threats are starting to weigh on global growth.
Stocks Slip, Bonds Drop as Trade Fears Hit Metals: Markets Wrap (Bloomberg) Stocks struggled on Wednesday as the world’s two biggest economic powers once again ratcheted up rhetoric over trade, sinking commodities in the process. The dollar strengthened and Japanese bonds led sovereign debt lower. Futures for the Dow fell and contracts for the S&P 500 edged lower, tracking losses in the Stoxx Europe 600 Index after China vowed to retaliate if the U.S. follows through on threats to increase its import tariffs. Nasdaq futures bucked the trend, pointing to a higher open in the wake of Apple Inc.’s strong results.
Encana adjusted operating profit rises on higher production (Reuters) Canadian oil and gas producer Encana Corp (ECA.TO) on Wednesday posted a 10 percent rise in adjusted operating profit, helped by an increase in production and higher selling prices for crude. Total oil and gas production rose 7 percent to 337,900 barrels of oil equivalent per day (boe/d). Its four core assets – Montney and Duvernay oilfields in western Canada and Eagle Ford and Permian in the United States – contributed 96 percent of total volumes in the second quarter, the company said.
Canada’s Enercare to be bought by Brookfield Infrastructure for C$4.3 billion (Reuters) Canadian homeservices company Enercare Inc (ECI.TO) said on Wednesday it would be bought by Brookfield Infrastructure Partners (BIP.N) for C$4.3 billion ($3.30 billion) as the asset management firm looks to expand its business across Canada. Brookfield Infrastructure’s offer of C$29 per Enercare share represents a 53 percent premium to Enercare Tuesday’s close. On Tuesday, Brookfield Infrastructure’s parent company, Brookfield Asset Management Inc (BAMa.TO), said it would buy Forest City Realty Trust Inc (FCEa.N) in a deal valued at $11.4 billion.
Molson Coors teams up with Hydropothecary on pot drinks (BNN) Molson Coors has found its pot partner. The brewer announced early Wednesday it’s teaming up with The Hydropothecary Corporation on a joint venture to develop cannabis-infused, non-alcoholic beverages. BNN Bloomberg recently reported Molson had engaged in talks with as many as four marijuana producers over a six-month period to explore opportunities in Canada’s soon-to-be legal recreational cannabis market.
Canada not getting frozen out of NAFTA: Former industry minister (BNN) A former Canadian industry minister thinks too much is being made about the country being ‘frozen out’ of NAFTA talks as the U.S. and Mexico have planned head-to-head discussions. “I think the news out of yesterday that’s being covered today about Canada being frozen out is not frankly quite the truth,” James Moore, who served as federal industry minister from 2013-2015 told BNN Bloomberg in an interview on Tuesday. “These are complex and intense negotiations with a lot at stake.” “Any time there’s a tripartite agreement, there’s always going to be voices domestically, I can assure you, in Mexico, in the United States and in Canada who are going to say that we’re being bullied by the other two partners… There’s certainly maneuvering and debate amongst all three partners.”
Overnight markets
Overview: US 10yr note futures are down -0.17% at 119-07, S&P 500 futures are up 0.01% at 2817.25, Crude oil futures are down -1.32% at $67.85, Gold futures are down -0.19% at $1231.2, DXY is down 0% at 94.552, CAD/USD is up 0.14% at 0.7677.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.085% | 2 Year | 2.676% |
| 5 Year | 2.248% | 5 Year | 2.87% |
| 10 Year | 2.348% | 10 Year | 2.99% |
| 30 Year | 2.365% | 30 Year | 3.114% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Jul 27th -2.6% (-0.2% prior) |
| 8:15 AM | ADP Employment Change, Jul 219k est 186k (177k prior) |
| 9:45 AM | Markit US Manufacturing PMI, Jul est 55.5 (55.5 prior) |
| 10:00 AM | Construction Spending MoM, Jun est 0.3% (0.4% prior) |
| ISM Manufacturing, Jul est 59.1 (60.2 prior) | |
| ISM Employment, Jul (56.0 prior) | |
| ISM Prices Paid, Jul est 75.3 (76.8 prior) | |
| ISM New Orders, Jul (63.5 prior) | |
| 14:00 AM | FOMC Rate Decision (Upper Bound), Aug 1st est 2.00% (2.00% prior) |
| FOMC Rate Decision (Lower Bound), Aug 1st est 1.75% (1.75% prior) | |
| 08/01 | Wards Total Vehicle Sales, Jul est 17.00m (17.38m prior) |
Canadian Economic Data
| 8:30 AM | MLI Leading Indicator MoM, Jun (0.2% prior) |
| 9:30 AM | Markit Canada Manufacturing PMI, Jul (57.1 prior) |
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
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230