Market Update Tsys higher, near top of narrow o/n range on light volume (250k TY), before non farm payrolls at 8:30 (+185k exp). USD index, equities slightly weaker, little reaction to imposition of tariffs between the US & China. GOCs higher, in line with tsys, before June Employment data, expected to show a 30k rebound in full time employment after May’s 31k decline. Average hourly earnings, which showed the fastest rate of increase since April 2009 in May, are expected to drop to 3.7% from 3.9%.
News headlines
China’s Tariff Response Takes Effect After Trump Ignites Trade War (Bloomberg) President Donald Trump threatened to impose tariffs on every single Chinese import into America as the world’s two largest economies exchanged the first blows in a trade war that isn’t set to end anytime soon. After months of rhetoric, a 25 percent levy on $34 billion of Chinese goods entering the U.S. took effect just after midnight Washington time on Friday with farming plows and airplane parts among the products targeted. China hit back immediately via duties on U.S. shipments including soybeans and automobiles.
Payrolls Data Comes Up Against Trade War Artillery: Taking Stock (Bloomberg) With ink still drying on the U.S.-China tit-for-tat tariffs, S&P futures are sending the signal that the market is looking for the next shoe to drop, be it nonfarm payrolls due out shortly or a further ratcheting up of tensions. Trade rhetoric has been fatiguing markets for months, but what is different now is the follow-through from the administration. Strategists were mixed on how to play the development. Wells Fargo saw the damage as potentially “short-lived and contained,” whereas Credit Suisse was looking for the all-important details on implementation.
Stocks Slip as Tariffs Sour Mood Before Jobs Data: Markets Wrap (Bloomberg) European stocks edged lower and U.S. equity-index futures slipped after China said it’s retaliating to President Donald Trump’s trade tariffs that kicked in Friday. The dollar dipped as traders looked ahead to American jobs data, while Treasuries held steady. Carmakers and miners declined as the Stoxx Europe 600 Index inched toward its first drop in four days, while defensive stocks including utilities and food companies were among the gainers, underscoring the cautious mood. Deutsche Bank AG rose on speculation of takeover bids. Futures on the S&P 500, Dow Jones and Nasdaq declined ahead of the monthly U.S. payrolls figures due later on Friday. The euro posted a modest rise after a jump in German industrial production, while crude oil fell along with most industrial metals.
TSX futures down as oil slips due to Saudi boost, trade war (Reuters) Futures pointed to a lower opening for Canada’s main stock index on Friday as oil prices dipped due to higher output from top exporter Saudi Arabia and under pressure from a trade war between the United States and China. Oil slipped towards $77 a barrel after Saudi Arabia told OPEC it raised production by almost 500,000 barrels per day last month. September futures on the S&P/TSX index were down 0.37 percent at 7:15 a.m. ET.
Deutsche Bank shares spike on report of interest from JPM and ICBC (Reuters) Shares in Germany’s troubled Deutsche Bank (DBKGn.DE) jumped by up to 6 percent on Friday following a magazine report that JPMorgan (JPM.N) and Industrial and Commercial Bank of China (ICBC) (601398.SS) may be interested in taking a stake. Business weekly WirtschaftsWoche, citing regional government sources, also said Chancellor Angela Merkel had met Axel Weber, the former Bundesbank head who is now chairman of Swiss bank UBS (UBSG.S), to sound out his views on Deutsche Bank.
Carbon tax proceeds to go directly to Ontario residents: Trudeau (BNN) Ontario residents, and not the newly elected Progressive Conservative government, will receive the proceeds of a carbon price imposed on the province by the federal government, Prime Minister Justin Trudeau said Thursday. Trudeau made the comments moments after he met with Ontario Premier Doug Ford, who has already begun the process of scrapping the province’s cap-and-trade system – in defiance of Ottawa’s insistence that all provinces put a price on greenhouse gas emissions.
Boeing’s US$4.75B Embraer deal leaves long to-do list (BNN) After Boeing Co. and Embraer SA spent months hammering out the framework for a US$4.75 billion plane making partnership, the companies are ready to take the next step: yet more talks. Crucial details about the financial underpinnings of the proposed venture announced Thursday still need to be figured out, a name needs to be chosen and a Brazil-based management team appointed. Officials are striving to finalize terms by late October or early November, and then they’ll seek the blessings of regulators in 10 countries.
Overnight markets
Overview: US 10yr note futures are up 0.078% at 120-11, S&P 500 futures are down -0.18% at 2733.5, Crude oil futures are down -0.6% at $72.5, Gold futures are down -0.24% at $1255.8, DXY is down -0.11% at 94.291, CAD/USD is up 0.01% at 0.7614.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.913% | 2 Year | 2.545% |
| 5 Year | 2.054% | 5 Year | 2.726% |
| 10 Year | 2.137% | 10 Year | 2.827% |
| 30 Year | 2.181% | 30 Year | 2.944% |
US Economic Data
| 8:30 AM | Trade Balance, May est -43.7b (-46.2b prior) |
| Change in Nonfarm Payrolls, Jun est 195k (223k prior) | |
| Change in Private Payrolls, Jun est 190k (218k prior) | |
| Change in Manufact. Payrolls, Jun est 15k (18k prior) | |
| Unemployment Rate, Jun est 3.8% (3.8% prior) | |
| Average Hourly Earnings MoM, Jun est 0.3% (0.3% prior) | |
| Average Hourly Earnings YoY, Jun est 2.8% (2.7% prior) | |
| Labor Force Participation Rate, Jun est 62.7% (62.7% prior) |
Canadian Economic Data
| 8:30 AM | Int’l Merchandise Trade, May est -2.20b (-1.90b prior) |
| Net Change in Employment, Jun 20.0k (-7.5k prior) | |
| Unemployment Rate, est 5.8% (5.8% prior) | |
| Hourly Earnings Permanent Empl YoY, Jun est 3.7% (3.9% prior) | |
| Full Time Employment Change, Jun est 30.0 (-31.0 prior) | |
| Part Time Employment Change, Jun est -10.0 (23.6 prior) | |
| Participation Rate, Jun est 65.4 (65.3 prior) | |
| 10:00 AM | Ivey Purchasing Managers Index SA, Jun (62.5 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
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