Market Update
US tsys continuing higher after Trump’s new round of China tariffs, and China’s pledge to retaliate, the US 10Y 1.86% (-3.5bps), lowest since Nov 2016. Long term bunds at new low yields with the 10Y bund -0.50% and the 30Y at zero for the first time. July Non farm payrolls expected at 165k vs 224k with the unemployment rate forecast to fall further to 3.6%, a new low. GOCs lagging tsys by 5-7bps since yesterday’s rally, 10Y 1.39%. Trade data for June expected to show reversal to a $300mln deficit from the $760mln surplus recorded in May. CAD weaker for a 3rd day, 1.3245 in the wake of broad based strength in the USD, weakness in commodities, thou crude has rebounded somewhat from yesterday’s huge losses.
News headlines
Stocks Slump, Bonds Rally as Trade Tensions Rise: Markets Wrap (Bloomberg) Stocks slumped and bonds rallied in the wake of President Donald Trump’s move to escalate the trade war, with China pledging “countermeasures” if the U.S. steps up tariffs on its goods.
TSX futures set to open lower on fresh Trump tariff threat (Reuters) Stock futures pointed to a lower opening for Canada’s main stock index on Friday after U.S. President Donald Trump rattled global markets with fresh tariff threats on China.
Oil Set for Weekly Loss After Biggest Slump in 4 Years on Tariff (Bloomberg) Oil is set for a weekly loss after the steepest one-day drop in more than four years as U.S. President Donald Trump abruptly escalated the trade war with China, deepening concerns over slowing growth.
China pledges countermeasures as Trump escalates trade war again (BNN) Beijing pledged to respond if the U.S. insists on adding extra tariffs to the remainder of Chinese imports, after President Donald Trump’s abrupt escalation of the trade war.
U.S. pulls out of Soviet-era nuclear missile pact with Russia (Reuters) The United States formally withdrew from a landmark nuclear missile pact with Russia on Friday after determining that Moscow was in violation of the treaty, something the Kremlin has repeatedly denied.
Fed, trade confusion upending Wall Street investment playbooks (Reuters) As Federal Reserve Chair Jerome Powell on Wednesday described why the central bank’s interest rate cut should not be seen as the start of a lengthy easing cycle, the U.S. stock market was losing value at a rate of over $25 billion a minute.
U.S. employment growth seen slowing in July; wage gains steady (Reuters) U.S. job growth likely slowed in July after outsized gains in the prior month, with wages probably maintaining their moderate pace of increase, which could boost market expectations for another interest rate cut from the Federal Reserve next month.
Entire German govt bond yield curve turns negative for first time (Reuters) The 30-year German government bond yield turned negative for the first time ever on Friday, leaving the euro zone member’s entire yield curve in negative territory as investors scrambled for safer assets.
Market Overview: US 10yr note futures are up 0.182% at 128-30, S&P 500 futures are down -0.36% at 2941.5, Crude oil futures are up 2.56% at $55.33, Gold futures are up 1.22% at $1449.9, DXY is down -0.18% at 98.196, CAD/USD is up 0.07% at 0.7564.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.466% | 2 Year | 1.71% |
| 5 Year | 1.358% | 5 Year | 1.657% |
| 10 Year | 1.385% | 10 Year | 1.855% |
| 30 Year | 1.615% | 30 Year | 2.395% |
US Economic Data
| 08:30 AM | Change in Nonfarm Payrolls, Jul Survey: 165k Prior: 224k |
| Change in Private Payrolls, Jul Survey: 165k Prior: 191k | |
| Change in Manufact. Payrolls, Jul Survey: 5k Prior: 17k | |
| Unemployment Rate, Jul Survey: 3.60% Prior: 3.70% | |
| Average Hourly Earnings MoM, Jul Survey: 0.20% Prior: 0.20% | |
| Average Hourly Earnings YoY, Jul Survey: 3.10% Prior: 3.10% | |
| Trade Balance, Jun Survey: -$54.6b Prior: -$55.5b | |
| 10:00 AM | Factory Orders, Jun Survey: 0.70% Prior: -0.70% |
| Durable Goods Orders, Jun F Survey: — Prior: 2.00% | |
| Durables Ex Transportation, Jun F Survey: — Prior: 1.20% | |
| Cap Goods Orders Nondef Ex Air, Jun F Survey: — Prior: 1.90% | |
| Cap Goods Ship Nondef Ex Air, Jun F Survey: — Prior: 0.60% | |
| U. of Mich. Sentiment, Jul F Survey: 98.5 Prior: 98.4 |
Canadian Economic Data
| 08:30 AM | Int’l Merchandise Trade, Jun Survey: -0.30b Prior: 0.76b |
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