Market Update Tsys trading weaker, 10Y 2.84 (+2bps), heavy volume in TY futures(430k). Risk on with S&P futures on the verge of reaching above the highs of August, while in Europe peripheral spds narrow vs bunds. DXY index lower extending yesterday’s decline on Trump comments. Quiet day in terms of data, focus on FOMC minutes tomorrow & Fed Jackson Hole conference later this week. GOCs lower, outperforming tsys by 0.5bps, reversing part of yesterday’s ~2bp widening – BOC governor Wilkins speaking yest afternoon implied tighter monetary policy has been more impactful due to high debt levels. Provi spds wider again yest on little activity. Quebec released a pre lecection report outlining Quebec’s finances, which are ‘in good shape’ – the province ended the FY 2018 with a $2.3bln surplus vs $850mln projected in spring budget.
News headlines
U.S. Heads for Best Growth Since 2005 on Robust Domestic Demand (Bloomberg) The U.S. economy looks set to forge ahead as fresh reservoirs of domestic demand carry it past turbulence overseas, keeping the Federal Reserve on course for further interest-rate hikes. Households have more cash to spend than thought, thanks to newly discovered pools of savings and President Donald Trump’s big tax cuts. Firms are ramping up production and rebuilding inventories after running them down by the most since 2009. And government spending finally looks set to swell, after Congress opened the floodgates in March with a $1.3 trillion package.
China Reiterates It Won’t Use Yuan Rate as Tool in Trade War (Bloomberg) China won’t use competitive currency devaluation or the foreign exchange rate as a tool to cope with trade frictions, according to a senior central bank official. “The yuan’s exchange rate is decided by the market,” Li Bo, director of the People’s Bank of China’s monetary policy department, said at a press conference in Beijing. He said the currency has more flexibility this year and the central bank is confident of keeping the rate “basically stable at a reasonable equilibrium level.”
Microsoft Thwarts Russia Hackers Targeting GOP Critics of Trump (Bloomberg) Microsoft Corp. has detected and seized web domains created by cyber-attackers linked to the Russian military, in a potential attempt to manipulate and disrupt the U.S. midterm elections. The shadowy group, known as Strontium, created domains that mimicked organizations such as the International Republican Institute and Hudson Institute so intended victims would believe they were receiving emails or visiting real sites, Microsoft President Brad Smith said in a blog post. Microsoft said it’s sifting through evidence of the group’s intentions after getting a court order to take over those domains, effectively disrupting the hacking campaign.
Dollar Weakens on Trump Remarks; U.S. Futures Rise: Markets Wrap (Bloomberg) The dollar dropped with Treasuries on Tuesday after President Donald Trump criticized Federal Reserve interest-rate hikes. U.S. equity futures tracked gains in Europe and Asia, setting the scene for a potential S&P 500 record. Metals broadly advanced. Contracts for the Dow and Nasdaq also rose, but all eyes will be on the S&P 500 Index as it may head toward the January all-time closing high and equals the longest bull market on record. The greenback’s fourth day of declines drove the euro above the key $1.15 level amid thin summer liquidity after Trump was said to have lamented rising borrowing costs and complained that Jerome Powell hasn’t proved to be a cheap-money Fed chairman. Treasuries gave back some of Monday’s gains and European bonds were mixed before a meeting of the world’s central bankers later this week, with peripheral debt outperforming.
Britain can’t afford to close door to EU banks after Brexit (Reuters) Britain is expected to keep the door open for European Union banks and investors after Brexit to try to preserve London’s global financial clout, irrespective of whether it gets a good trade deal from the bloc, bankers and industry officials say. Nerves in the City of London financial district were rattled last month when the UK government proposed future financial services trade with the EU based on “reciprocal” arrangements.
Futures flat, investors await Sino-U.S. trade talks (Reuters) Futures for Canada’s main stock index were flat on Tuesday as investors awaited trade talks between the United States and China due to start later this week. Speculation that lower-level trade talks between the two countries might help ease trade tensions has shored up the broader equity markets over the past few sessions. September futures on the S&P/TSX index SXFc1 were up 0.02 percent at 7:15 a.m. ET. The Toronto Stock Exchange’s S&P/TSX .GSPTSE closed up on Monday.
Air Canada group reaches deal to buy Aimia’s Aeroplan for $450M (BNN) An Air Canada-led consortium has reached a deal in principle to buy the Aeroplan loyalty program from Aimia Inc. for $450 million in cash, the companies said Tuesday. Air Canada (), along with Toronto-Dominion Bank (), Canadian Imperial Bank of Commerce () and Visa Canada Corp. (), will also assume approximately $1.9 billion in Aeroplan points liability as part of the transaction. The deal was unanimously approved by Aimia’s () board of directors and Mittleman Brothers, the Montreal-based company’s largest shareholder.
‘No safe harbour’ for Canadian workers as survey reveals 22% in precarious jobs (BNN) More than one-fifth of Canadian workers are in precarious jobs despite higher education and experience levels, according to a new survey from the Canadian Centre for Policy Alternatives. The report, released Tuesday, found that 22 per cent of Canadians are currently in jobs lacking economic security such as steady income, pension, benefits and sick pay. Of that group, 26 per cent work full time, 40 per cent are employed in the private sector, while 30 per cent are in the public sector. The survey also found there was a higher rate of precarious workers aged 55 and older. “We tend to think of precarious work as something that happens in low-wage, low-skill jobs, but the findings from this national survey suggest that there is no safe harbour,” CCPA-Ontario Senior Researcher Ricardo Tranjan, said in a release.
Overnight markets
Overview: US 10yr note futures are down -0.091% at 120-17, S&P 500 futures are up 0.15% at 2862.75, Crude oil futures are up 1.16% at $67.2, Gold futures are up 0.29% at $1198.1, DXY is down -0.26% at 95.649, CAD/USD is down -0.16% at 0.7678.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.115% | 2 Year | 2.595% |
| 5 Year | 2.197% | 5 Year | 2.718% |
| 10 Year | 2.274% | 10 Year | 2.839% |
| 30 Year | 2.279% | 30 Year | 3.003% |
US Economic Data
There is no US economic data for today.
Canadian Economic Data
| 8:30 AM | Wholesale Trade Sales MoM, Jun est 0.7% (1.2% 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