Market Update Tsys trading higher, 10Y 2.895%, long end lagging tsy curve 1bps steeper on light volume in TY futures overnite (245k), prices moving higher after weaker August ADP (163k vs 200k exp) ahead of non-farm payrolls tomorrow (195k est). Equities firmer (S&P fut +1), crude slightly higher. GOCs slightly higher, lagging the rally in tsys post ADP – provi supply rumoured (Quebec 10Y, long Alberta)
News headlines
Canada’s Dairy Farmers Could Be Trudeau’s Nafta Bargaining Chip (Bloomberg) Henry Holtmann has seen this before – Canada carving off access to its dairy market as a bargaining chip, and using it in trade talks. Now it could happen again. More than 2,500 kilometers (1,500 miles) from Washington, the third-generation Canadian dairy farmer is closely watching North American Free Trade Agreement talks, where U.S. President Donald Trump has taken aim repeatedly at his sector. Canada could once again barter away a piece of its restricted – and lucrative – dairy market, over outcry from farmers like Holtmann.
Things Are Not Going to Plan in Trump’s U.S. Trade Deficit Wars (Bloomberg) The numbers are not looking good for a president who has made reducing the U.S. trade deficit one of his main economic goals. Worse still, signs are emerging that President Donald Trump’s trade wars are starting to hit economic growth, not just at home but around the world. New data out Wednesday showed the U.S. trade deficit in July widening at its fastest rate since 2015 as monthly deficits with China and the European Union both hit new records. In the year so far, the U.S.’s overall goods and services deficit is up by $22 billion, or 7 percent, versus the same period last year.
Trump Says He May Sign New South Korea Trade Deal This Month (Bloomberg) President Donald Trump said he has finished negotiating a new trade deal with South Korea and may sign it at the United Nations General Assembly that starts this month. “The deal is done,” Trump told reporters at the White House on Wednesday. “It’s been done with South Korea for a long time. It’s been done for about two months. We’ll do a ceremonial signing over the next very short period of time.”
Stocks Struggle for Foothold as EM Fears Linger: Markets Wrap (Bloomberg) U.S. stock futures and European equities swung between gains and losses as they grappled for direction amidst turmoil in emerging markets. The yen climbed and the dollar was steady. Futures on the Dow, S&P 500 and Nasdaq pointed to a steady open, while the Stoxx Europe 600 Index edged lower after two days of losses. Earlier, the MSCI Asia Pacific Index was down for a sixth straight session, as Japan underperformed in the wake of a powerful earthquake. The Turkish lira and South African rand helped lead a recovery in emerging market currencies, while the MSCI Emerging Markets Index of stocks headed for a seventh consecutive fall. Ten-year Treasuries were little changed and European bonds were mixed.
NAFTA talks make progress; U.S., Canadian officials to work into night (Reuters) The United States and Canada have made progress in talks to revise the North American Free Trade Agreement, and officials from the two sides will work together into the night to flesh out areas for further discussion, Canadian Foreign Minister Chrystia Freeland said on Wednesday. Freeland sounded upbeat as she emerged from a day of talks with top U.S. trade negotiator Robert Lighthizer, although she cautioned that no trade deal was done until the last issue was nailed down.
Bank of Canada leaves rates unchanged; markets mull October hike (Reuters) The Bank of Canada held interest rates steady on Wednesday as expected and said more hikes would be needed to keep inflation on target, boosting speculation it could tighten monetary policy next month. The overnight interest rate remains at 1.50 percent. The central bank, which maintains a 2 percent inflation target, has raised rates four times since July 2017 amid a strengthening economy.
Metro Vancouver home prices edge lower for 2 straight months (BNN) The Real Estate Board of Greater Vancouver says prices for detached homes, townhouses and condos have fallen for two consecutive months in Metro Vancouver. The board says the benchmark price for all types of properties is currently $1,083,400 — up 4.1 per cent compared to August 2017, but down 1.9 per cent since May 2018. Detached home prices fell 2.8 per cent since May to $1,561,000, which is also down 3.1 per cent compared to the previous August. Attached home prices fell 0.8 per cent to $846,100 since May, but rose 7.9 per cent compared to August 2017.
Couche-Tard Q1 profit surges 25% despite lag in Esso loyalty program (BNN) Alimentation Couche-Tard Inc. () posted strong earnings and revenue growth from acquisitions in the first quarter of its fiscal year, even though a gap in the switch to the PC Optimum loyalty program from Aeroplan hurt sales at its Esso branded convenience store locations. The Quebec-based retailer said its net income attributable to shareholders surged 25 per cent to US$455.5 million for the period ended July 22. That was up from US$364.7 million a year earlier.
Overnight markets
Overview: US 10yr note futures are down 0% at 119-31, S&P 500 futures are up 0.11% at 2891.5, Crude oil futures are up 0.15% at $68.82, Gold futures are up 0.88% at $1211.9, DXY is down -0.11% at 95.079, CAD/USD is down 0% at 0.7588.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.05% | 2 Year | 2.649% |
| 5 Year | 2.163% | 5 Year | 2.769% |
| 10 Year | 2.239% | 10 Year | 2.906% |
| 30 Year | 2.262% | 30 Year | 3.085% |
US Economic Data
| 7:30 AM | Challenger Job Cuts YoY, Aug 13.7% (-4.2% prior) |
| 8:15 AM | ADP Employment Change, Aug 163k est 200k (219k prior) |
| 8:30 AM | Nonfarm Productivity, 2Q est 3.0% (2.9% prior) |
| Unit Labor Costs, 2Q est -0.9% (-0.9% prior) | |
| Initial Jobless Claims, Sep 1st est 213k (213k prior) | |
| Continuing Claims, Aug 25th est 1720k (1708k prior) | |
| 9:45 AM | Bloomberg Consumer Comfort, Sep 2nd (58.3 prior) |
| Markit US Services PMI, Aug est 55.2 (55.2 prior) | |
| Markit US Composite PMI, Aug (55.0 prior) | |
| 10:00 AM | ISM Non-Manufacturing Index, Aug est 56.8 (55.7 prior) |
| Factory Orders, Jul est -0.6% (0.7% prior) | |
| Factory Orders Ex Trans, Jul (0.4% prior) | |
| Durable Goods Orders, Jul est -1.7% (-1.7% prior) | |
| Durables Ex Transportation, Jul (0.2% prior) | |
| Cap Goods Orders Nondef Ex Air, Jul (1.4% prior) | |
| Cap Goods Ship Nondef Ex Air, Jul (0.9% prior) |
Canadian Economic Data
| 8:30 AM | Building Permits MoM, Jul est 1.0% (-2.3% 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