Market Update Tsys trading higher, yields 0.5-1.5bps lower, 10Y 2.88%, prices recovering from yesterday’s selloff which saw the 10Y rise above 2.90% for the first time since August 10th. Emerging mkt extending weakness – Asian stock markets all lower – Hang Seng -2.6%, Jakarta comp -3.8% while USD strength continues DXY +0.24. Risk off with $200bln in US tariffs on Chinese goods expected to go into effect by the end of the week trade Crude lower after rising to 2014 highs yest 71.50 on Iran supply squeeze,oil analyst on CNBC yest saying sanctions could push crude back above $100. GOCs slightly lower, 1bp wider vs tsys, curve 1bp flatter before BOC decision (no change expected, no press conf). Yesterday looked like some short covering esp at the short end pre BOC, possibly a rethinking of odds for an October hike in light of the lack of progress on NAFTA.
News headlines
Nafta Talks Restart Under Pressure from Trump and Congress (Bloomberg) Talks to revamp the North American Free Trade Agreement are set to resume as U.S. and Canadian negotiators push to strike a deal amid President Donald Trump’s threats to walk away. Canadian Foreign Affairs Minister Chrystia Freeland is scheduled to meet U.S. Trade Representative Robert Lighthizer in Washington Wednesday after a series of back-to-back meetings last week failed to yield an agreement. They were rushing to bridge their differences by the end of August so Canada could join a preliminary pact the U.S. had struck with Mexico just days earlier.
As Trump Weighs Tariffs, China’s Industrial Ambitions Loom Large (Bloomberg) Conflict over China’s industrial policies is at the center of a trade war that’s set to escalate should President Donald Trump go ahead with planned tariffs on another $200 billion of Chinese goods as soon as this week. The core of those industrial policies is the Made in China 2025 plan to dominate industries from robotics to new-energy vehicles and aerospace. A key element of that blueprint is an unofficial document that’s slipped largely under the radar: The Made in China 2025 Major Technical Roadmap, better known as the Green Book after the color of its original cover.
Democrats Poised to Grill Kavanaugh at Supreme Court Hearing (Bloomberg) Democrats spent the first day of Brett Kavanaugh’s U.S. Supreme Court confirmation hearings criticizing Republicans. Now they will turn to the nominee himself. Kavanaugh closed out a day of rancor among senators Tuesday by promising in his opening remarks to be a « neutral and impartial arbiter who favors no litigant or policy. » He said the court « must never be viewed as a partisan institution. »
Stocks Retreat Amid EM Turmoil; Dollar Advances: Markets Wrap (Bloomberg) U.S. stock futures followed European shares lower Wednesday after a broad sell-off in Asia, as enduring pressure in emerging markets intensified concerns of contagion. With investors seeing no let-up in trade tensions, the dollar strengthened for a fifth session and commodities slipped, led by oil. Futures on the S&P 500 pointed to losses after the Stoxx Europe 600 Index dropped to its lowest since April before paring some of the decline. A day after developing-market currencies tumbled, it was the stock market’s turn in the hot seat. Shares slid from Japan to Australia and were bruised most in Indonesia, where the nation’s benchmark lost almost 4 percent. The 10-year Treasury yield eased back to 2.89 percent, while the dollar strengthened. At the same time, an emerging-market currency gauge fell to a fresh one-year low, led for a second day by South Africa’s rand.
Canada PM indicates he will not bend on key NAFTA demands at talks (Reuters) Canadian Prime Minister Justin Trudeau indicated on Tuesday that Canada would not compromise on key demands at high-level talks this week with the United States to update the North American Free Trade Agreement. Senior officials from both sides are due to meet in Washington on Wednesday in a bid to settle major differences amid pressure from Washington for a quick settlement. “There are a number of things we absolutely must see in a renegotiated NAFTA,” Trudeau told reporters in the Pacific province of British Columbia.
Canadian dollar to rally, say strategists betting on trade deal (Reuters) Canada’s dollar is likely to rally over the coming months, according to foreign exchange strategists in a Reuters poll, who forecast that trade uncertainty will fade and the Bank of Canada will continue to raise interest rates. The latest poll of more than 35 market strategists taken Sept 1-4 predicted the Canadian dollar would rally to C$1.30 against the U.S. dollar, or about 77 U.S. cents, in three months, from nearly a seven-week low of C$1.32 on Tuesday.
Canadians feeling weight of debt, despite better financial position (BNN) Many Canadians are feeling the debt crunch, despite two-thirds of the country being in a better financial position than previous years, according to a new study released Wednesday. The Canadian Payroll Association found that 66 per cent of Canadians surveyed said they are in a better financial position than they were one year ago, according to the study. However, 40 per cent of respondents said they feel overwhelmed by their current debt levels, the study found. “We would have hoped to see in the survey results that Canadians would do more to alleviate their debt and take control of their financial situation in strong economic times,” said Peter Tzanetakis, president of the Canadian Payroll Association, in a release.
Amazon joins Apple in climb to US$1 trillion market value (BNN) Amazon.com Inc. () shares rose as much as 1.9 per cent, pushing the company briefly beyond a market value of US$1 trillion, a milestone Apple Inc. () reached last month. It’s an historic accomplishment for Chief Executive Officer Jeff Bezos, who founded the company in his Seattle garage in 1994 as a small online book seller. Now Bezos is the world’s wealthiest person, running a diversified global enterprise with more than US$200 billion in annual sales and more than 575,000 employees.
Overnight markets
Overview: US 10yr note futures are up 0.104% at 120-02, S&P 500 futures are down -0.23% at 2891.5, Crude oil futures are down -1.13% at $69.08, Gold futures are up 0.03% at $1199.4, DXY is down 0% at 95.437, CAD/USD is down -0.13% at 0.7592.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.064% | 2 Year | 2.645% |
| 5 Year | 2.167% | 5 Year | 2.758% |
| 10 Year | 2.238% | 10 Year | 2.888% |
| 30 Year | 2.259% | 30 Year | 3.057% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Aug 31st -0.1% (-1.7% prior) |
| 8:30 AM | Trade Balance, Jul -50.1b est -50.2b (-46.3b prior) |
Canadian Economic Data
| 8:30 AM | Int’l Merchandise Trade, Jul -0.11b est -1.00b (-0.63b prior) |
| Labor Productivity QoQ, 2Q 0.7% est 0.5% (-0.3% prior) | |
| 10:00 AM | Bank of Canada Rate Decision, Sep 5th est 1.50% (1.50% 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