Market Update

US tsys opening higher after weaker PPI & initial claims, US 10Y 2.23% (-1.5bpts). Global stocks lower – Europe down 0.60% , S&P mini -9pts, crude higher for a second day, 49.90 (+0.70%). The US Tsy auctions $15bln in 30y bonds at 1:00PM, yesterday’s 10Y auction was weak (1.5bp tail) yet prices rallied on N. Korea jitters. Core Euro bonds mixed – German bund curve flatter with longer end  yields slightly lower, Italy & Spain giving underperforming bunds for a second day. GOCs higher in line with tsys, 10Y 1.90%, curve ~1bp flatter, provis seeing little trade with a weaker bias, rumors of City of Toronto 20Y deal.

News headlines 

U.K., Scotland Fail to Reach Agreement on Post-Brexit Powers (Bloomberg) Prime Minister Theresa May’s government failed to reach an agreement with Scotland’s administration over repatriation of powers after Britain leaves the EU, as Scottish lawmakers said they would continue to reject the Brexit bill in its current form.

U.S. Allies Warn North Korea Against Firing Missiles Toward Guam (Bloomberg) South Korea and Japan warned North Korea that it would face a strong response if it carried through with a threat to launch a missile toward the U.S. territory of Guam.

TSX futures fall as North Korea tensions brew (Reuters) Canada’s benchmark stock index was set to follow global markets lower on Thursday as investors sought refuge in safe-haven assets following exchange of more threats between the United States and North Korea.

Investors cool on Canadian banks, turn to insurers, amid housing fears (Reuters) Investors are losing enthusiasm for Canada’s banking stocks as a slowdown in the country’s housing market dents banks’ growth prospects, and they see insurance companies as a better bet to benefit from higher interest rates. Two of Canada’s biggest insurance companies on Wednesday reported second-quarter earnings that beat market expectations, benefiting in part from strong growth in Asia. Canadian insurance companies are expanding rapidly in Asia, selling products to the rapidly growing middle class. The strategy is helping the firms drive growth and diversify from domestic markets where competition is intense.

RBNZ Keeps Key Rate at Record Low on Weak Inflation Outlook (Bloomberg) New Zealand’s central bank held interest rates at a record low and said it doesn’t expect to raise them for two years amid weak inflation. The RBNZ’s surprisingly cautious tone in recent months has been justified by the latest data. Inflation has slowed more than economists forecast and economic growth has disappointed on the downside. The strong New Zealand dollar remains a headache for the bank, damping import prices and suppressing inflation.

Oil gains as inventory overhang erodes and Saudi cuts exports (Reuters) Oil prices rose on Thursday, lifted by a sustained decline in inventories and as Saudi Arabia prepared to cut crude supplies to its prized Asian customers.Crude is down nearly 7 percent so far this year, suppressed in large part by concern that OPEC and its partners may not be able to force global oil inventories to drop by cutting production. Saudi Arabia said on Tuesday it would cut supplies to most buyers in Asia – the world’s biggest oil-consuming region – by up to 10 percent in September.

China Needs to Act on $33 Trillion of Credit, China Banking Expert Chu Says (Bloomberg) China has made progress in slowing leverage in the economy, but still needs to do more with the total amount of financing expected to rise 13 percent this year, according to Autonomous Research analyst Charlene Chu. Total outstanding credit is expected to grow to 223 trillion yuan ($33 trillion) by December from 196.8 trillion yuan at the end of 2016, analysis by Chu shows. The estimated increase will be lower than last year’s 19 percent gain as the government’s campaign against leverage starts to bite, she said.

Overnight markets 

Overview: US 10yr note futures are up 0.037% at 126-13, S&P 500 futures are down -0.38% at 2463.5, Crude oil futures are up 1.11% at $50.11, Gold futures are up 0.74% at $1288.8, DXY is up 0.07% at 93.609, CAD/USD is down -0.09% at 0.7882.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.236% 2 Year 1.333%
5 Year 1.512% 5 Year 1.796%
10 Year 1.893% 10 Year 2.236%
30 Year 2.334% 30 Year 2.817%

US Economic Data

8:30 AM Initial Jobless Claims, Aug 5, 244k, est. 240k (prior 240k, revised 241k)
Continuing Claims, Jul 29, 1951k, est. 1960k (prior 1968k, revised 1967k)
PPI Final Demand, m/m, Jul, -0.1%, est. 0.1% (prior 0.1%)
PPI Ex Food and Energy , m/m, Jul, -0.1%, est. 0.2% (prior 0.1%)
PPI Final Demand, y/y, Jul, 1.9%, est. 2.2% (prior 1.9%)
PPI Ex Food and Energy, y/y, Jul, 1.8%, est. 2.1% (prior 2.0%)
9:45 AM Bloomberg Consumer Comfort Index, Aug 6, (prior 49.6)
2:00 PM Monthly Budget Statement, Jul, est. -$52.0b

Canadian Economic Data

8:30 AM New Housing Price Index, m/m, Jun, 0.2%, est. 0.5% (prior 0.7%)
New Housing Price Index, y/y, Jun, 3.9%, (prior 3.8%)


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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230