Market Update US tsys slightly lower, narrow range in TY futures on heavier volume (445k), 10Y 2.89%. Relative calm in EM with the Turkish Lira rebounding 5%, EU peripheral bond yields lower. Core EGBs also weighed by stronger than expected Eurozone Q2 GDP, IP. US equity futures higher, S&P +7, Nasdaq +29. Little reaction to stronger July Import Prices.GOCs lower in line with tsys, provis unch.
News headlines
Investors Haven’t Been This Bullish on U.S. Stocks Since 2015 (Bloomberg) The bull run that has taken U.S. equities to record highs this year may be about to reach its peak, according to the latest survey of fund managers by Bank of America Merrill Lynch. Allocations to U.S. stocks jumped 10 percentage points this month to a net 19 percent overweight, the highest since January 2015, the survey said. That makes America the most popular equity region for the first time in five years, according to the bank’s analysts.
China Growth Momentum Stalls as Debt Campaign and Trade War Bite (Bloomberg) China’s economy hit a mid-year rough patch as efforts to curb risky lending and excessive debt collided with a deepening trade war, adding to concerns about global growth. Fixed-asset investment in the world’s largest developing economy rose at the slowest pace in two decades in the first seven months of this year, while infrastructure spending slumped to a quarter of the pace of a year earlier. Factory output, retail sales and credit creation in July all trailed estimates.
Erdogan Escalates Row With U.S., Calls for Boycott of iPhones (Bloomberg) Turkish President Recep Tayyip Erdogan vowed to boycott American electronics, including Apple Inc.’s iPhone, as he retaliates against Donald Trump’s attempts to isolate his economy.After the U.S. imposed sanctions on two Turkish ministers and amid growing domestic pressure from businesses and banks to contain a currency crisis, Erdogan said he wouldn’t back down in the face of the economic attack against his country.
Stocks Rebound as Turkey Calms; Dollar Declines: Markets Wrap (Bloomberg) European stocks tracked gains across most Asian equities as global markets steadied in the wake of Monday’s Turkey-induced turmoil. The dollar slipped from its highest in 14 months and Treasuries fell. The Stoxx Europe 600 Index climbed alongside futures for the S&P 500, Dow Jones and Nasdaq, while European peripheral debt rebounded as a degree of calm returned to Turkish markets. The lira rose, and the country’s benchmark equity index climbed even as a diplomatic standoff between Turkey and the U.S. dragged on. The euro steadied after data showed the euro-area economy grew faster in the second quarter than initially reported.
Canada finance minister at steel mill Tuesday amid talk of new tariff steps (Reuters) Canadian Finance Minister Bill Morneau will make an announcement at steelmaker ArcelorMittal’s Dofasco plant in Hamilton on Tuesday, raising expectations that Canada could propose new tariffs or quotas to protect the industry. The Department of Finance said in a release that Morneau would also meet with local business leaders in Hamilton, the heart of Canada’s steel industry. The government said previously that it was considering a safeguard action to protect steel producers from imports flowing to Canada since the United States imposed tariffs in March.
Brazil’s farmers dump sugar for soy as trade war boosts Chinese demand (Reuters) Last year, Brazilian farmer Gustavo Lopes sized up his sugarcane plantation against his soybean fields. He looked at global trends, including rising U.S.-China trade tensions and a stubborn sugar-market glut. Then he tore up the last of his cane fields and ditched a decades-old supply contract with a local sugar mill. Lopes planted soybeans across his 1,600-hectare (4,000-acre) farm in Sao Paulo state – a bet that paid off earlier this month when Chinese buyers loaded up on South American soy after Beijing imposed tariffs on U.S. beans. The farmer got his highest price ever for soybeans.
Canada’s biggest builder faces ‘new level of risk’ in Saudi feud (BNN) Canada’s diplomatic clash with Saudi Arabia is threatening a key pillar of SNC-Lavalin Group Inc.’s growth plan. The Montreal-based builder gained additional exposure to the kingdom with its two biggest acquisitions, the 2014 purchase of Ireland’s Kentz Corp. and last year’s deal for WS Atkins of the U.K. SNC Chief Executive Officer Neil Bruce is counting on business in the Middle East to bolster his drive to increase profit more than 50 percent by 2020. SNC is getting caught in the crossfire after the kingdom froze diplomatic ties and new business deals with Canada last week, following a call by Canadian Foreign Minister Chrystia Freeland for Saudi human rights activists to be released from prison. The flare-up spooked investors in Canada’s biggest construction company, which gets about 11 percent of sales in Saudi Arabia.
Home Capital Q2 income falls short of estimates (BNN) Home Capital Group Inc. says it earned nearly $30 million in its most recent quarter, but fell just short of analyst estimates. The Toronto-based mortgage lender’s net income for the second quarter of its 2018 financial year was $29.6 million compared to a $111.1 million loss in the same quarter the previous year. It says its diluted earnings per share were 37 cents for the quarter ended June 30, compared to a loss of $1.73 per share in the second quarter of its 2017 financial year.
Overnight markets
Overview: US 10yr note futures are down -0.065% at 120-06, S&P 500 futures are up 0.25% at 2832.5, Crude oil futures are up 1.22% at $68.02, Gold futures are up 0.33% at $1202.8, DXY is down -0.11% at 96.289, CAD/USD is down -0.47% at 0.765.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.117% | 2 Year | 2.625% |
| 5 Year | 2.234% | 5 Year | 2.758% |
| 10 Year | 2.316% | 10 Year | 2.882% |
| 30 Year | 2.335% | 30 Year | 3.045% |
US Economic Data
| 6:00 AM | NFIB Small Business Optimism |
| 8:30 AM | Import Price Index MoM, Jul est 0.0% (-0.4% prior) |
| Import Price Index ex Petroleum MoM, Jul est 0.1% (-0.3% prior) | |
| Import Price Index YoY, Jul est 4.5% (4.3% prior) | |
| Export Price Index MoM, Jul est 0.2% (0.3% prior) | |
| Export Price Index YoY, Jul (5.3% prior) |
Canadian Economic Data
| 8:30 AM | Teranet/National Bank HP Index, Jul (223.82 prior) |
| Teranet/National Bank HPI MoM, Jul (0.9% prior) | |
| Teranet/National Bank HPI YoY, Jul (2.9% 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