Market Update Tsys lower, 10Y 2.88% (+1bp), above avg volume in TY futures (378k), yields creeping higher with the USD since the start of Powell’s testimony, with a new high for the DXY index (95.55 +0.47). Prices weakening further after drop in weekly claims (lowest since 1969!), stronger Phili Fed. The Chinese Yuan fell to a one year low on trade tensions, the PBOC unwilling to step in at this point to protect the currency. Weaker stocks (S&P fut- 9.5) not impacting tsys. Gilts continuing to push higher, 10Y yield new low since May 31st @ 1.21%, new low also in the 10Y gilt/tsy spd. GOCs higher, outpeforming tsys 1-2 bps, data calendar picks up tommorow with CPI/Retail Sales. CIXCN 5Y yest @ 145.4 looked right on the screws (~15bps/yr), now 146/144.
News headlines
Trump Faces Growing Storm Over Car Tariffs as Lobbying Ramps Up (Bloomberg) The procession of industry groups and foreign governments lining up to oppose President Donald Trump’s car tariffs is starting to look like a rush-hour traffic jam. The Commerce Department will hold public hearings Thursday on its probe into whether imports of passenger vehicles imperil U.S. national security. Judging from the list of speakers, the administration will find little if any support for the idea that foreign cars undermine America’s ability to defend itself.
America’s Largest Aluminum Maker Is Getting Hit by U.S. Tariffs (Bloomberg) U.S. aluminum tariffs that were meant to protect the industry from foreign competitors are instead taking a bite out of the earnings of the nation’s largest producer. Alcoa Corp. lowered its 2018 profit projection as tariffs on imported aluminum present what Chief Executive Officer Roy Harvey is calling a “significant” headwind. The manufacturer has been hit with $15 million so far on material it produced mostly in Canada and shipped to the U.S. The company also cited higher energy costs and lower aluminum prices for the cut.
China’s Yuan Tumbles as PBOC Weakens Fixing, Easing Bets Mount (Bloomberg) China’s yuan slumped to a one-year low as the central bank showed little sign of intervening to slow the currency’s descent and bets for monetary policy easing mounted. The yuan dropped as much as 0.85 percent to 6.8032 per dollar in offshore trading, the lowest level since July 2017. The People’s Bank of China weakened its fixing beyond 6.7 on Thursday for the first time since the currency began tumbling in June. Signs of further monetary easing are also adding strains, with China Business News reporting policy makers have made efforts to encourage bank loans and investment in lower-rated corporate debt.
Dollar Extends Advance on Upbeat Fed; Stocks Drop: Markets Wrap (Bloomberg) The dollar extended gains in the wake of Federal Reserve signals that the American economy is on solid footing. A downbeat mood gripped equities, where U.S. futures and European stocks slipped, tracking Asian peers as the corporate earnings season continued to ramp up. The greenback strengthened a third day following Fed Chairman Jerome Powell’s upbeat assessment of the domestic economy, and after the Beige Book economic report showed growth holding up. The move was in stark contrast to that of the Chinese yuan, which fell to a one-year low as the country’s central bank showed little sign of intervening to slow the currency’s descent.
Canada PM shuffles Cabinet, seeks to reduce reliance on U.S. (Reuters) Canadian Prime Minister Justin Trudeau shuffled his Cabinet on Wednesday ahead of a challenging 2019 election, stressing the need to diversify trade away from the United States while leaving key ministers in place. Polls show the ruling Liberals are facing an increasing threat from the official opposition Conservatives, and Trudeau made 11 changes to freshen up his front bench. In a move designed to shore up domestic support, trade minister Francois-Philippe Champagne was shifted to the infrastructure portfolio, where he will oversee plans to spend billions of dollars on major projects.
TSX futures fall on lower oil prices (Reuters) Stock futures pointed to a lower opening for Canada’s main stock index on Thursday as oil prices fell after government data showed an unexpected rise in U.S. crude stockpiles. The U.S. Energy Information Administration said on Wednesday U.S. crude production had reached 11 million barrels per day (bpd) for the first time. The country has added nearly 1 million bpd in production since November, thanks to rapid increases in shale drilling.
Uganda Airlines eyes Bombardier, Airbus jets to revamp carrier (BNN) Bombardier Inc. said Uganda Airlines signed a firm order for four new CRJ900 jets as the East African nation seeks to resuscitate its moribund carrier after two decades. The country also signed a memorandum of understanding for two A330neo, Airbus SE said in a statement on its website, without providing cost details. “Based on the list price for the CRJ900 aircraft, the firm order is valued at approximately $190 million,” Montreal-based Bombardier said in a statement on its website.
CP Rail Q2 profits hurt by labour uncertainty (BNN) Canadian Pacific Railway Ltd. () says service interruptions related to labour negotiations and strike notices caused its net income to decrease 10 per cent in the second quarter despite higher revenues. The rail service experienced two labour disruptions during its second-quarter that created some inconvenience, additional cost and slowed momentum, said CP Rail CEO Keith Creel during a conference call with analysts Wednesday. The labour issues also curtailed revenue, he said.
Overnight markets
Overview: US 10yr note futures are down -0.052% at 120-00, S&P 500 futures are down -0.31% at 2807.25, Crude oil futures are down -0.76% at $68.24, Gold futures are down -1.06% at $1214.9, DXY is up 0.41% at 95.472, CAD/USD is up 0.6% at 0.7549.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.956% | 2 Year | 2.616% |
| 5 Year | 2.054% | 5 Year | 2.778% |
| 10 Year | 2.14% | 10 Year | 2.88% |
| 30 Year | 2.192% | 30 Year | 2.994% |
US Economic Data
| 8:30 AM | Initial Jobless Claims, Jul 14th est 220k (214k prior) |
| Continuing Claims, Jul 7th est 1729k (1739k prior) | |
| Philadelphia Fed Business Outlook, Jul est 21.5 (19.9 prior) | |
| 9:45 AM | Bloomberg Economic Expectations, Jul (56.0 prior) |
| Bloomberg Consumer Comfort, Jul 15th (58.0 prior) | |
| 10:00 AM | Leading Index, Jun est 0.4% (0.2% prior) |
Canadian Economic Data
There is no Canadian economic data for today.
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
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