Market Update
US tsys lower, 10Y yields retracing ~4bps of yesterday’s massive 13bp rally on China trade friction (China declared a currency manipulator for the first time since 1994), 10Y 1.75% from low 1.67% overnite, focus on US/China with PBOC saying the Yuan ‘wont keep falling’ , ex-official saying China could sell treasuries (MNI). US equity futures higher (S&P +24), gold unch after two day,3.0% gain surpassing the highs of July 2016. GOCs in catchup mode after yesterday’s close , 10Y below 1.30% a two and a half year low, OIS pricing in 60% chance of a 25bp rate cut, 2s10s back to 9bps inverted with the CAD relatively stable 1.3225 despite weakness in crude/ commodities.
News headlines
China says U.S. currency manipulator labeling could cause chaos in financial markets (Reuters) China’s central bank said on Tuesday that Washington’s decision to label Beijing as a currency manipulator would “severely damage international financial order and cause chaos in financial markets”.
Futures rebound after Wall Street’s worst day of 2019 (Reuters) U.S. stock index futures signaled a bounce on Tuesday, as China stepped in to steady the yuan and investors sought beaten-down stocks, a day after Wall Street’s main indexes racked up their steepest one-day percentage fall of the year.
U.S. Expands Sanctions Against Venezuela Into an Embargo (WSJ) New measures mark a significant escalation of pressure against the regime of President Nicolás Maduro and countries including Russia and China that continue to support him. The Trump administration imposed a total economic embargo against the government of Venezuela, a significant escalation of pressure against the regime of President Nicolás Maduro and countries including Russia and China that continue to support him, a senior administration official said.
The United States and China may be headed for a currency war (CNN) China may have just fired the opening shot of a currency war with the United States. For the first time in more than a decade, Beijing let the yuan weaken past the symbolically important level of 7 to the dollar on Monday. The Chinese central bank said the move mostly reflected market concern about « trade protectionism and new tariffs on China. » President Donald Trump escalated the trade war last week by announcing that the United States would tax just about every Chinese export starting in September.
NEB gives green light for Trans Mountain expansion construction to begin (BNN) The National Energy Board says Trans Mountain can begin construction at three major facility sites, providing approvals the company said it needed to meet its deadline for shovels to get in the ground. BNN Bloomberg’s Tara Weber has the details.
Toronto home sales rise 24.3% in July; prices rise amid tighter supply (BNNBloomberg) The Greater Toronto Area’s home price index was up 4.4 per cent last month as the supply of properties for sale tightened and the number of sales jumped 24.3 per cent from July last year, the Toronto Real Estate Board reports. The overall average selling price for properties in the Greater Toronto Area was up 3.2 per cent year-over-year to $806,755, TREB said in a monthly report issued Tuesday. The number of properties sold increased to 8,595 from 6,916, with sales of all four categories of housing up by double digits.
Fitch analysts don’t see grounds for panic over Canadian debt (BNNBloomberg) An Aug. 2 report on asset-backed securities from Fitch Ratings, which analyzes credit card payments, indicates consumers are coping with record debt levels and concluded the “stable performance” should continue. Though charge-offs, or receivables that have been written off as noncollectable, hit a two-year high in May, the year-to-date average is little changed from 2018. Meanwhile, delinquencies of more than 60 days actually declined in the second quarter, and the monthly payment rate increased
Former Fed chiefs unite in call on Trump to end Powell threats (BNNBloomberg) Four former Federal Reserve chiefs made a joint plea for the central bank to be able to operate without political pressures or the threat of removal of its leaders, responding to President Donald Trump’s persistent attacks on current Chairman Jerome Powell.
Global stocks rebound after China calms currency markets (CNN) Stocks in Asia clawed back some of their losses and US stock futures rebounded on Tuesday after China took steps to shore up the falling yuan. Major Asian markets still ended Tuesday in the red: Hong Kong’s Hang Seng Index (HSI) finished down 0.7%, while Japan’s Nikkei closed 0.7% lower. China’s Shanghai Composite Index (SHCOMP) lost 1.6%. South Korea’s Kospi (KOSPI) fell 1.5%. Taiwan’s Taiex settled lower by 0.3%. But they recovered significantly from earlier in the day, when all of those indexes fell by more than 2%.
Market Overview: US 10yr note futures are down -0.132% at 129-22, S&P 500 futures are up 0.98% at 2857.75, Crude oil futures are up 0.71% at $55.08, Gold futures are up 0.05% at $1477.2, DXY is up 0.11% at 97.634, CAD/USD is up 0.13% at 0.7562.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.388% | 2 Year | 1.599% |
| 5 Year | 1.265% | 5 Year | 1.554% |
| 10 Year | 1.292% | 10 Year | 1.75% |
| 30 Year | 1.544% | 30 Year | 2.297% |
US Economic Data
| 10:00 AM | JOLTS Job Openings June Survey: 7326 Prior: 7323 |
Canadian Economic Data
| 10:00 AM | Bloomberg Nanos Confidence, Aug 2 Prior: 58.2 |
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