Market Update Tsys trading slightly higher, 10Y 2.823 (-0.7bps), on above avg volume in TY futures (500k). So far only modest ‘risk off’ tone following Tuesday’s political news (Manafort conviction, Cohen plea), S&P futures -4.25 after the S&P set record high yesterday, while the USD index remains near recent lows(DXY -0.24) Crude higher for 5th day (67.11 +1.9%) after API crude inventories fell 5.17mln bbls last week. EIA data due at 10:00ET.  Core EGBs higher yet off well off o/n highs, 10Y bund weakening after German 10Y bund auction barely covered (1.0 vs 1.4 Aug 1st auction). GOCs higher in line with tsys before June Retail Sales & 5Y auction at noon. Rumours of Ontario/Quebec supply – Ontario spreads have been widening while 10s/30s curve steepens (14.5 last trade) 

News headlines

RBC Reins in Canadian Banking Costs as Profit Tops Estimates (Bloomberg) Royal Bank of Canada has kept costs at bay, even with elevated spending on digital initiatives to woo more customers. Revenue growth in Canadian banking outpaced expenses in the fiscal third quarter, pushing operating leverage at the lender’s biggest division closer to its financial target for the year. Operating leverage — the difference between revenue and expense growth rates — was 5 percent for the period ended July 31, up from 0.7 percent in the second quarter, the Toronto-based bank said Wednesday in announcing earnings that beat analysts’ estimates. The gain helped lift profit from Canadian banking 11 percent to C$1.49 billion ($1.14 billion).

America’s Booming Economy Comes With a Cost for Global Growth (Bloomberg) Making America great again isn’t proving so great for other parts of the world. With the rise in the dollar and interest rates already squeezing emerging economies just as President Donald Trump’s trade war threatens China, the U.S. is set to be the only Group of Seven nation to see economic growth accelerate this year as Trump’s tax cuts kick in.

Fed Minutes May Drop Clue About How Long Powell Will Hike Rates (Bloomberg) The last published record of internal deliberations at the Federal Reserve ended on a cliffhanger. An update this week may illuminate U.S. central bankers’ thinking on what is becoming an increasingly controversial topic: the outlook for interest rates next year. That conversation, along with any hints about how they are judging progress as they unwind part of the Fed’s $4.2 trillion balance sheet, will be the main focus for investors when minutes of the policy-setting Federal Open Market Committee’s July 31-Aug. 1 meeting are released Wednesday at 2 p.m. in Washington. Chairman Jerome Powell may provide more color when he speaks Friday at the Kansas City Fed’s annual gathering in Jackson Hole, Wyoming.

U.S. Futures Slip on Trump Legal Woes; Euro Rises: Markets Wrap (Bloomberg) U.S. equity futures edged lower while stocks in Europe and Asia were mixed as traders tried to gauge the fallout from the latest legal drama engulfing Donald Trump’s presidency. Treasuries held steady, while the euro advanced after data showed wages surged. The guilty plea by Trump’s former attorney to illegal campaign-finance charges over hush money helped send U.S. equity futures lower and initially sparked mild demand for haven assets, though many moves pared and there was little sign of a pronounced impact in markets beyond America. Futures on the Dow and S&P 500 slipped, while they nudged higher on the Nasdaq. Germany’s DAX Index pared gains after tiremaker Continental AG cut its guidance, and the single currency rallied after data on last quarter showed the biggest jump in wages since 2012.

Cohen testifies Trump told him to commit crime by paying off women (Reuters) U.S. President Donald Trump’s former personal lawyer Michael Cohen testified on Tuesday that Trump had directed him to commit a crime by arranging payments ahead of the 2016 presidential election to silence two women who said they had affairs with Trump. Cohen’s voice cracked several times as he pleaded guilty to eight criminal charges in federal court in Manhattan, including tax evasion, bank fraud and campaign finance violations. Facing up to five years in prison, the admissions were a dramatic change from Cohen’s earlier boasts that he was Trump’s “fixer” and would “take a bullet” for the president.

Futures flat ahead of retail sales data (Reuters) Futures for Canada’s main stock index were little changed on Wednesday as investors awaited June retail sales data. September futures on the S&P/TSX index SXFc1 were down 0.02 percent at 7:15 a.m. ET. Canada’s retail sales are expected to rise 0.1 percent in June, according to analysts polled by Reuters. Retail sales in May had clocked a 2 percent rise, their biggest increase in 7 month. The data is due at 8:30 a.m. ET. The Toronto Stock Exchange’s S&P/TSX closed down on Tuesday. Dow Jones Industrial Average e-mini futures 1YMc1 were down 0.04 percent at 7:15 a.m. ET, while S&P 500 e-mini futures ESc1 were down 0.09 percent and Nasdaq 100 e-mini futures NQc1 were up 0.04 percent.

U.S., Mexico near NAFTA framework, but obstacles remain (BNN) The U.S. and Mexico moved closer toward a consensus on how to forge a new North American Free Trade Agreement even though key hurdles remain, according to several people familiar with the matter on both sides of the talks. Progress has been made during five weeks of discussions between the U.S. and Mexico on issues including rules for cars, but there’s no broader agreement on reshaping NAFTA, two U.S. administration officials said Tuesday night. The Trump administration’s talks with Mexico are seen as an important precursor to a three-way final deal with Canada on a revised NAFTA. Earlier Tuesday, Politico reported that President Donald Trump was poised to announce a handshake deal with Mexico as soon Thursday, citing unidentified sources.

Overnight markets

Overview: US 10yr note futures are up 0.143% at 120-20, S&P 500 futures are down -0.15% at 2857.5, Crude oil futures are up 1.99% at $67.15, Gold futures are up 0.49% at $1205.9, DXY is down -0.25% at 95.022, CAD/USD is down -0.13% at 0.7679.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 2.097% 2 Year 2.595%
5 Year 2.176% 5 Year 2.704%
10 Year 2.247% 10 Year 2.821%
30 Year 2.256% 30 Year 2.987%

US Economic Data

7:00 AM MBA Mortgage Applications, Aug 17th 4.2% (-2.0% prior)
10:00 AM Existing Home Sales, Jul est 5.40m (5.38m prior)
  Existing Home Sales MoM, Jul est 0.4% (-0.6% prior)
14:00 PM FOMC Meeting Minutes, Aug 1st

Canadian Economic Data

8:30 AM Retail Sales MoM, Jun -0.2% est -0.2% (2.0% prior)
  Retail Sales Ex Auto MoM, Jun -0.1% est -0.1% (1.4% 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