Market Update US tsys rallying across the curve, yields 2-3bps lower on heavier volume in TY futures, 10Y 2.87 (-2.5bps). Little reaction to stronger July Retail Sales/Aug Empire Manuf data. “Risk off” session overnite despite Turkish lira being higher for a 3rd day after central bank made it more expensive to short the xcy. Turkey also doubled tariffs on select US imports. Stock futures lower, S&P -0.57%, Nasdaq -0.80%. China’s stock index fell 2.4% after Q2 earnings from Tencent missed exp, the stock is down ~10% this week. Core EGBs higher led b y UK gilts underpinned by weakness in stocks and July inflation coming in as expected. GOCs higher in line with tsys, 10Y 2.29%. New CMB 10Y ($2.0bln ~41bps) & 5Y FRN to price this morn. 10Y WI indicated 40.5/40 on screen.
News headlines
Tencent Hits Tech as Miners Sink European Stocks: Markets Wrap (Bloomberg) U.S. equity futures tracked declines across both Europe and Asia on Wednesday as disappointing earnings from Chinese tech giant Tencent Holdings added to a gloomy mood across global markets. Treasuries climbed, the dollar rose to the highest in 14 months and metals slumped. Contracts for the Dow, Nasdaq and S&P 500 were already edging lower before Tencent reported its first profit drop in at least a decade, spurring further declines. After a positive start to the European session, raw material producers pulled the Stoxx Europe 600 Index down as copper and zinc fell to the lowest in more than a year.
Turkey Just a Test Case as Quantitative Tightening Era Nears (Bloomberg) Turkey is just a drill. A push by major central banks to reverse crisis-era policies is primed to accelerate into 2019 amid plans for higher interest rates and smaller balance sheets. So-called quantitative tightening then risks sucking dollars and euros from nations whose governments and companies binged on cheap debt without improving the fundamentals of their economies.
Amazon Prime Day May Have Boosted U.S. Retail Sales (Bloomberg) A key gauge of U.S. retail sales probably got a boost in July from Amazon.com Inc.’s Prime Day promotion. That’s set to be a bright spot in an otherwise subdued report Wednesday that reflects drags from auto sales and fuel prices. With popular items including the Instant Pot cooker and the 23andMe Inc. genetic test, global sales during Amazon’s 36-hour Prime Day event in mid-July exceeded the company’s other recent promotions including Black Friday and 2017’s Prime Day. Such purchases may prop up the so-called retail “control group” — which excludes auto dealers, gasoline stations, building materials and food services — while the overall figures show a weaker increase than in the prior month.
Turkey doubles tariffs on some U.S. imports; lira rallies (Reuters) Turkey doubled tariffs on some U.S. imports including alcohol, cars and tobacco on Wednesday in retaliation for U.S. moves, but the lira rallied further after central bank’s liquidity moves had the effect of supporting the currency. Ankara acted amid increased tension between the two NATO allies over Turkey’s detention of a Christian American pastor and other diplomatic issues, which have helped send the lira tumbling to record lows against the dollar.
Chinese oil importers shun U.S. crude despite tariff reversal (Reuters) Chinese oil importers are shying away from buying U.S. crude as they fear Beijing’s decision to exclude the commodity from its tariff list in a trade dispute between the world’s biggest economies may only be temporary. Not a single tanker has loaded crude oil from the United States bound for China since the start of August, Thomson Reuters Eikon ship tracking data showed, compared with about 300,000 barrels per day (bpd) in June and July. The United States and China have been locked in a tit-for-tat trade spat over the last few months, but crude was dropped from China’s final list of tariffs on $16 billion in U.S. goods announced last week.
Metals tariffs ‘not a shot against Canada’: Major U.S. steel exec (BNN) The former CEO of America’s largest steel producer says U.S. President Donald Trump’s use of metals tariffs against both its allies and enemies is not “a shot against Canada.” “The people of Canada should not take this as a shot against Canada,” Dan DiMicco, chairman emeritus and former chief executive of Nucor told BNN Bloomberg in an interview on Tuesday. “This is a much bigger issue than any one country. And, what we’ve asked for is: ‘Okay. Sit down. Talk with us. Let’s put together a plan that works for Canada and works for us.’” “We need to work together and we can make this work so it’s mutually okay for all of us, but it’s not destructive for any of us.”
Pot stocks fall as Ontario delays rollout of stores to 2019 (BNN) Canadian pot stocks retreated Tuesday after the country’s largest province said it will delay the launch of bricks-and-mortar cannabis stores until six months after legalization. Canopy Growth Corp. closed trading down 8.25 per cent, Aphria Inc. lost 9.54 per cent and Aurora Cannabis Inc. slid 9.8 per cent on Tuesday. Ontario’s Progressive Conservative government said Monday it will start cannabis sales with an online-only retail model when marijuana is legalized on Oct. 17, followed by private retail sales on April 1. This is an abrupt policy change from the former Liberal government, which planned to sell cannabis in government run stores, starting with 40 in 2018.
Overnight markets
Overview: US 10yr note futures are up 0.143% at 120-09, S&P 500 futures are down -0.55% at 2825.25, Crude oil futures are down -1.04% at $66.34, Gold futures are down -0.52% at $1194.4, DXY is up 0.12% at 96.844, CAD/USD is up 0.3% at 0.7635.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.103% | 2 Year | 2.625% |
| 5 Year | 2.218% | 5 Year | 2.743% |
| 10 Year | 2.295% | 10 Year | 2.868% |
| 30 Year | 2.32% | 30 Year | 3.039% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Aug 10th -2.0% (-3.0% prior) |
| 8:30 AM | Empire Manufacturing, Aug est 20.0 (22.6 prior) |
| Nonfarm Productivity, 2Q est 2.4% (0.4% prior) | |
| Unit Labor Costs, 2Q est 0.0% (2.9% prior) | |
| Retail Sales Advance MoM, Jul est 0.1% (0.5% prior) | |
| Retail Sales Ex Auto MoM, Jul est 0.3% (0.4% prior) | |
| Retail Sales Ex Auto and Gas, Jul est 0.4% (0.3% prior) | |
| 9:15 AM | Industrial Production MoM, Jul est 0.3% (0.6% prior) |
| Capacity Utilization, Jul est 78.2% (78.0% prior) | |
| Manufacturing Production, Jul est 0.3% (0.8% prior) | |
| 10:00 AM | Business Inventories, Jun est 0.1% (0.4% prior) |
| NAHB Housing Market Index, Aug est 67 (68 prior) | |
| 16:00 PM | Total Net TIC Flows, Jun (69.9b prior) |
| Net Long-term TIC Flows, Jun (45.6b prior) |
Canadian Economic Data
| 9:00 AM | Existing Home Sales MoM, Jul (4.1% 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