Market Update Tsys weaker yet off the lows despite weak stocks/emer mkts, strong USD, 10Y 2.87(+0.5bps), heavy volume in Ty futures (508k). Emerging mkt stocks lower for a 4th day, MSCI index -0.84%, with the DXY +0.44% @ 95.53. Turkish lira 0.3% lower on doubts the central bank will hike rates to stem inflation. Core EGBs hanging on to slight gains, gilts rising after weak Aug Construction PMI, bund curve flattening 2s10s to 92.9 close to lows of last week. 10Y bund future reversing lower as Italy BTPs rallied on comments from Deputy PM saying 2% deficit rule will be respected. In Canada, GOCs mixed, short end higher before BOC, notable steepening in 10s30s 3bps over the past week as corp calendar builds for Sept. Expectations have the BOC holding rates steady tomorrow with a 25bp hike priced in for October 24th. Provis opening steady after spds widened 2bps last week.
News headlines
Trump’s Fight With Canada Over Nafta Faces New Hurdles (Bloomberg) President Donald Trump’s effort to force Canada into signing on to a new Nafta on his terms is facing new hurdles thanks to growing opposition at home to his threat to proceed without the U.S.’s northern neighbor. Trump’s frustration spilled into the open over the holiday weekend as he railed against Canada on Twitter — as well as its many supporters in both political parties. The president has threatened to leave Canada out of a new trade deal already negotiated with Mexico, but without congressional support he lacks leverage to force Ottawa to make concessions in talks that are due to resume Wednesday.
U.K. Construction Growth Slows to Weakest in Three Months (Bloomberg) U.K. construction growth slowed more than forecast in August, providing further evidence that the nation’s economy is losing momentum. IHS Markit’s Purchasing Managers’ Index for the industry fell to 52.9 last month from a 14-month high of 55.8 in July, the firm said Tuesday. The reading was the lowest since May and below the 54.9 forecast by economists in a Bloomberg survey. A reading above 50 indicates expansion. Markit’s survey showed a “sharp slowdown” in house building in August, while work on civil engineering projects decreased for the first time in five months. New business growth also ebbed, with some respondents noting Brexit-related uncertainty was holding back investment.
ECB Endgame Has Governments Thinking About Rate-Hike Damage (Bloomberg) European finance ministers and central bankers will gather in Vienna this week to discuss a key test for the euro zone’s expanding economy — whether it can cope with interest-rate hikes. The debate reflects the currency bloc’s relatively solid economic health after a decade of crises and recessions, but also marks a new challenge. The European Central Bank’s plan to gradually unwind years of extraordinary monetary stimulus comes with the risk of destabilizing asset markets such as stocks and real estate if they’re bloated by cheap money.
Dollar Advances as Stocks Fall With EM Currencies: Markets Wrap (Bloomberg) The dollar advanced and stocks fell as trade tensions persisted and emerging markets came under pressure, with turmoil in currencies spreading from Turkey and Argentina to South Africa. Declines in the yen and gold left investors with few havens. Miners and chemical companies led declines on the Stoxx Europe 600 Index, and contracts on the Dow, S&P 500 and Nasdaq pointed to a lower open before U.S. trading resumes after Labor Day. Nike fell in the pre-market on a politically controversial advertising campaign. Stocks in Japan slipped with the yen. Italian 10-year notes jumped, extending Monday’s advance on the government’s more conciliatory stance toward European Union spending limits.
Pipeline politics leave Canada’s prime minister in peril (Reuters) With one surprise court ruling, Canadian Prime Minister Justin Trudeau faces the risk of contesting next year’s election with key pieces of his economic and environmental plans in ruins. The Federal Court of Appeal overturned on Thursday the Liberal government’s 2016 approval to expand Trans Mountain, a critical pipeline to link Canadian crude with foreign markets, followed hours later by Alberta’s tit-for-tat withdrawal from Trudeau’s climate plan.
Laurentian Bank buys back $103 million of mortgages after review (Reuters) Laurentian Bank of Canada (LB.TO) said on Tuesday it had repurchased mortgages worth C$135 million ($103 million) after a review found they had been incorrectly sold to Canada’s federal housing agency. The bank said in February that it was reviewing mortgages sold to the Canada Mortgage and Housing Corporation’s (CMHC) securitization programs after an audit found “documentation issues and client misrepresentations.”
Canadian Natural acquires Joslyn oil sands project for $225M (BNN) Canadian Natural Resources Ltd. has signed a deal to buy the Joslyn oil sands project for $225 million from Total SA and its partners. Paris-based Total, which is Joslyn’s operator, currently owns 38.25 per cent of the project, which is directly south of Canadian Natural’s Horizon oil sands operation. A further 36.75 per cent of Joslyn is owned by Calgary-based Suncor Energy, while the Joslyn Partnership holds 15 per cent and Inpex Canada Ltd. owns 10 per cent.
Alberta projects deficit drop of $1B in first-quarter update (BNN) Alberta’s finance minister says the court decision putting the Trans Mountain pipeline expansion in legal limbo won’t affect the long-term plan to rid the province of red ink by 2024. Joe Ceci says the province is relying on revenues not just from the Trans Mountain expansion but other pipeline projects as well, such as the Line 3 expansion from Alberta to Wisconsin and the Keystone XL line to the U.S. Gulf Coast.
Overnight markets
Overview: US 10yr note futures are down -0.065% at 120-06, S&P 500 futures are down -0.17% at 2897, Crude oil futures are up 1.83% at $71.08, Gold futures are down -0.62% at $1199.2, DXY is up 0.42% at 95.543, CAD/USD is up 0.59% at 0.7591.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.056% | 2 Year | 2.629% |
| 5 Year | 2.159% | 5 Year | 2.74% |
| 10 Year | 2.227% | 10 Year | 2.866% |
| 30 Year | 2.258% | 30 Year | 3.033% |
US Economic Data
| 9:45 AM | Markit US Manufacturing PMI, Aug est 54.5 (54.5 prior) |
| 10:00 AM | Construction Spending MoM, Jul est 0.4% (-1.1% prior) |
| ISM Manufacturing, Aug est 57.6 (58.1 prior) | |
| ISM Employment, Aug (56.5 prior) | |
| ISM Prices Paid, Aug est 69.5 (73.2 prior) | |
| ISM New Orders, Aug (60.2 prior) | |
| 09/04 | Wards Total Vehicle Sales, Aug est 16.80m (16.69m prior) |
Canadian Economic Data
| 8:30 AM | MLI Leading Indicator MoM, Jul (0.2% prior) |
| 9:30 AM | Markit Canada Manufacturing PMI, Aug (56.9 prior) |
| 10:00 AM | Bloomberg Nanos Confidence, Aug 31st (56.7 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