Market Update Treasuries slightly lower, 10Y 2.977, volume in TY futures ~50% of avg (212k), US equity futures slightly lower little reaction to Trump imposing 25% tariffs on Chinese goods. UK gilts outperforming, curve flatter, decent demand for 10Y gilt auction and continued weakness in the GBP. Focus on US 10Y auction this aft, $26bln August 2028 with the WI 2.975% . GOCs moving higher on news Saudis starting to divest cdn assets, CAD tumbling 50pps above 1.31, ontarios trading down on the news as well.
News headlines
Energy Deals Decline in Canada as Oil Rally Heals Slump’s Scars (Bloomberg) Investors have been pushing Canadian energy companies to merge so they can cut costs and combine resources. That isn’t going so well this year. The value of deals involving Canadian oil, natural gas and pipeline companies slumped 29 percent to $45.5 billion in the first seven months of the year, according to data compiled by Bloomberg. Exclude $22.3 billion in Enbridge Inc. outlays to absorb subsidiaries, and this year’s decline2 widens to 64 percent.
Nafta Talks Enter Third Week With Focus on Cars, Sunset Clause (Bloomberg) As Nafta negotiators from the U.S. and Mexico meet for a third straight week in a push to complete a deal on cars, they’re also preparing for a showdown over a clause sought by the Trump administration that could end the agreement altogether. The nations are nearing an accord on content and salaries for auto manufacturing, and the issue remains their top focus, according to two people familiar with the talks. But as teams become more optimistic that a cars deal can come together, attention is starting to pivot to the so-called sunset clause pushed by U.S. Trade Representative Robert Lighthizer — another make-or-break issue.
Pound Falls to Lowest Level Since October Versus Euro (Bloomberg) The pound fell to the lowest level against the euro in more than nine months amid growing concern that the U.K. could end up leaving the European Union with no agreement for future economic ties. Sterling dropped for the third day versus Europe’s common currency and weakened against most of its Group-of-10 peers. U.K. International Trade Secretary Liam Fox said over the weekend that the risk of a no-deal Brexit had increased to as much as 60 percent.
Stocks Mixed Amid New Trade Duties; Dollar Steady: Markets Wrap (Bloomberg) European shares drifted in thin trading on Wednesday, with U.S. futures pointing to an almost flat opening as earnings disappointments and concern over global trade kept markets in check. The dollar erased an earlier decline. Contracts on the S&P 500, Dow and Nasdaq were steady, with Tesla Inc. shares set to be closely watched after Elon Musk suggested taking the company private. The Stoxx Europe 600 Index pared an earlier decline, with volume 27 percent below the 100-day average for the time of day. Earnings reports from Glencore and Novo Nordisk disappointed. Asia’s markets were mixed as shares in China notched the biggest declines.
Canada to ask allies to help cool Saudi dispute; U.S. offers no aid (Reuters) Canada plans to seek help from the United Arab Emirates and Britain to defuse an escalating dispute with Saudi Arabia, sources said on Tuesday, but close ally the United States made clear it would not get involved. The Saudi government on Sunday recalled its ambassador to Ottawa, barred Canada’s envoy from returning and placed a ban on new trade, denouncing Canada for urging the release of jailed rights activists. Riyadh accused Ottawa on Tuesday of interfering in its internal affairs.
Chinese exports accelerate even as Trump escalates trade war (Reuters) China’s exports surged more than expected in July despite U.S. duties and its closely watched surplus with the United States remained near record highs, as the world’s two major economic powers ramped up a bitter dispute that some fear could derail global growth. In the latest move by President Donald Trump to put pressure on Beijing to negotiate trade concessions, Washington is set to begin collecting 25 percent tariffs on another $16 billion in Chinese goods on Aug. 23.
Saudi dispute poses ‘real economic impacts that will bite’: MacKay (BNN) Former foreign affairs minister Peter MacKay is urging the federal government to ensure the Canadian oil industry is top of mind in whatever it decides to do in its escalating diplomatic dispute with Saudi Arabia. MacKay warned in an interview with BNN Bloomberg Tuesday that Canada’s deteriorating relations with Saudi Arabia could have a detrimental effect on the economy if it escalates further – especially considering the country’s reliance on Saudi oil. “What’s alarming is this has escalated so quickly, and the [Saudi Crown Prince Mohammed bin Salman] has proven himself to be very aggressive,” MacKay said.
Snap sees users drop for first time in Q2; sales beat estimates (BNN) Snap Inc. (SNAP.N) reported its first-ever quarterly drop in daily Snapchat users, signaling that a controversial redesign of the social-media app earlier this year is still hindering growth. Still, revenue topped projections as demand increased for the company’s mobile advertisements. Second-quarter daily average users fell 2 per cent from the previous period to 188 million, missing the average analyst estimate of 193 million. The period that ended in June was the first full quarter in which all users shifted to a new version of Snapchat that separates content from a user’s friends and content from public figures.
Overnight markets
Overview: US 10yr note futures are down -0.026% at 119-14, S&P 500 futures are down -0.04% at 2858.5, Crude oil futures are down -0.84% at $68.59, Gold futures are down 0% at $1218.3, DXY is up 0.15% at 95.327, CAD/USD is up 0.29% at 0.7639.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.136% | 2 Year | 2.67% |
| 5 Year | 2.278% | 5 Year | 2.841% |
| 10 Year | 2.371% | 10 Year | 2.977% |
| 30 Year | 2.385% | 30 Year | 3.122% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Aug 3rd -3.0% (-2.6% prior) |
Canadian Economic Data
| 8:30 AM | Building Permits MoM, Jun est -0.1% (4.7% 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