Market Update
US tsys lower, yields 1-3bps higher led by the long end, 10Y 1.485% (+3bps), ‘risk on’ with US stock futures higher, S&P +26, crude +1.5%, gold -10, DXY -0.40%. The Hang Seng index rose 3.9%, largest one day gain since nov 2018 as tensions recede after HK leader Lam backed down on extradition. UK gilts reeling with 10Y jumping +10bps – UK Parliament’s vote to block no-deal Brexit will likely trigger a delay or general election. GOCs lower, 1bp tighter vs tsys before BOC decision. The BOC is not expected to cut rates after last week’s strong Q2 GDP (3.7% vs 2.5%) , while inflation has hovered close to target 2.0% and core prices have moved steadily higher. Yet forward looking indicators such as the August Markit PMI have weakened in line with recent signs of a global manufacturing recession and exports had a disproportionate influence on Q2 (5.5%), which is unlikely to be sustained.
News headlines
Stocks Jump as Risks Recede From Hong Kong to U.K.: Markets Wrap (Bloomberg) U.S. equity-index futures rallied alongside European and Asian stocks as traders cheered a reduction in political tension from Italy and Britain to Hong Kong. Treasuries and gold retreated, while the dollar slipped.
TSX futures rise on higher oil prices (Reuters) Futures for Canada’s main stock index edged higher on Wednesday, as oil prices recovered, helped by a wider market pickup on upbeat data from China’s services sector.
Oil Rises as Tight U.S. Supplies Counter Trade War Pessimism (Bloomberg) Oil rose as a forecast decline in U.S. crude inventories countered pessimism driven by a surprise contraction in American manufacturing and a warning to China from President Donald Trump.
Hong Kong leader withdraws extradition bill, but some say too little too late (Reuters) Hong Kong leader Carrie Lam on Wednesday withdrew an extradition bill that triggered months of often violent protests so the Chinese-ruled city can move forward from a “highly vulnerable and dangerous” place and find solutions.
For Bank of Canada, the trade war is getting harder to ignore (BNN) The Bank of Canada is expected to open the door further to interest rate cuts at a decision Wednesday, amid worries U.S.-China tensions will curb a relatively robust expansion at home.
U.S. investment in Malaysia up sharply as trade row with China drags on (Reuters) Malaysia approved U.S. investment worth $5.62 billion in the first half of the year compared with $113 million the previous year, the government said on Wednesday, a possible sign of a diversion of U.S. business as a trade row with China drags on.
Malaysia had plan to use Chinese money to bail out 1MDB, court hears (Reuters) Malaysia’s former leader Najib Razak approved a plan to bail out troubled state fund 1MDB by offering stakes in several big infrastructure projects to Chinese firms in 2016, a former aide told a court on Wednesday.
Alberta overspending on health, education services: Panel (BNN) A panel looking into Alberta’s finances says the province habitually overspends on its services and needs to get tough on schools, have university students pay more and force doctors to charge less.
Market Overview: US 10yr note futures are down -0.106% at 131-32, S&P 500 futures are up 0.88% at 2931.5, Crude oil futures are up 1.56% at $54.78, Gold futures are down -0.65% at $1545.8, DXY is down -0.38% at 98.62, CAD/USD is down -0.12% at 0.7507.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.322% | 2 Year | 1.464% |
| 5 Year | 1.147% | 5 Year | 1.351% |
| 10 Year | 1.137% | 10 Year | 1.488% |
| 30 Year | 1.408% | 30 Year | 1.984% |
US Economic Data
| 07:00 AM | MBA Mortgage Applications, Aug 30 Survey: — Actual: -3.10% Prior: -6.20% |
| 08:30 AM | Trade Balance, Jul Survey: -$53.4b Prior: -$55.2b |
| 02:00 PM | U.S. Federal Reserve Releases Beige Book |
Canadian Economic Data
| 08:30 AM | Labor Productivity QoQ, 2Q Survey: 0.10% Prior: 0.30% |
| Int’l Merchandise Trade, Jul Survey: -0.35b Prior: 0.14b | |
| 10:00 AM | Bank of Canada Rate Decision, Sep 4 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