Market Update Tsys trading slightly weaker, 10Y 2.96% , prices near bottom of o/n  4 tick range in TY futures on better than avg volume (~382k).  Equities firmer, (S&P +5, Nasdaq +21), core EGB yields higher as well on stronger PMIs (German 57.3 vs 55.5), while 10y JGBs are 2 bps lower after yesterday’s BOJ inspired rout. US $35bln 2Y auction at 1:00PM, followed by $36bln 5Y & $30bln 7Y Wed and Thurs, the WI 2Y 1.638% or ~10bps cheaper than June auc.  The long end of the tsy curve should benefit rom m/e extension (BB index +0.6yrs). GOCs trading lower, 0.5bps wider vs tsys , provis closed 0.5bps tighter on the selloff in GOCs – the BOC auctions $3bln in new June 2029 bonds tomorrow – the current 5.75/29 ~2.272% . The last 10Y auction on June 20th was for $2.2bln June 28s, so this is an $800mln/36% increase – which could weigh on the sector. 

News headlines

China Unveils New Measures to Aid Growth Amid Trade Uncertainty (Bloomberg) China unveiled a package of policies to boost domestic demand as trade tensions threaten to worsen the nation’s economic slowdown, sending stocks higher. From a tax cut aimed at fostering research spending to special bonds for infrastructure investment, the measures announced late Monday following a meeting of the State Council in Beijing are intended to form a more flexible response to “external uncertainties” than had been implied by budget tightening already in place for this year.

Alphabet Results Support Confidence in Face of EU Curbs (Bloomberg) Google executives projected confidence in Android and other businesses, giving investors no signal that a costly regulatory crackdown in Europe would curb sales and profit anytime soon. Parent company Alphabet Inc. posted second-quarter results that walloped Wall Street expectations, while Chief Executive Officer Sundar Pichai hinted at new untapped advertising opportunities and highlighted growth at video service YouTube and the cloud arm. The shares rose 4.5 percent in pre-market trading Tuesday, putting them on course for a record. 

Trump and Iran Leader Swap Taunts as Sanctions Loom (WSJ) After Iran leader refers to ‘the mother of all wars,’ president warns of consequences such as ‘few throughout history have ever suffered’. The Trump administration exchanged threats with Iran, turning to a longstanding security concern and a top foreign-policy focus of President Donald Trump’s key supporters. In a Twitter message addressed “To Iranian President Rouhani,” Mr. Trump wrote: “NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE.”

Bitcoin has now gained 35% from recent lows as prices rally back above $US8,000 (Business Insider) Bitcoin climbed back above the $US8,000 mark in Asian trade this afternoon for the first time since late May. The world’s biggest cryptocurrency has now rallied by around 35% since dipping below $US5,900 at the end of June.

Alphabet jumps after big earnings beat (CNBC) Google parent company Alphabet reported its Q2 earnings Monday afternoon, with a big beat sending its stock jumping after-hours. Wall Street will be paying close attention to the company’s traffic acquisition costs and capital expenditures. 

World markets rally on strong US corporate earnings (Financial Post) World markets rallied on Tuesday, gaining momentum from an upbeat day in Asia and from U.S. corporate earnings. But downbeat purchasing managers’ index readings hinted at underlying worries. This week brings earnings from Facebook and Twitter, both of which remain under fire for their abilities to handle fake accounts and false information on their respective platforms. Facebook reports Wednesday afternoon, and Twitter reports on Friday morning. Amazon.com Inc. is on the docket for Thursday afternoon, and can also be considered an advertising giant as it pulls in billions from selling ads on its site.

Goldman says an all-out trade war would lower earnings for US companies by 15% (CNBC) If « tensions spread » and a 10 percent tariff were imposed on all U.S. imports, Goldman says, it would lower its 2019 EPS estimate by 15 percent to $145 a share. Goldman economists now assign a 60 percent probability that the U.S. imposes tariffs on the recently targeted $200 billion of imports from China. Certain tactics, such as investing in companies with higher domestic sales, would likely outperform if the trade dispute worsens, Kostin added. 

Overnight markets

Overview: US 10yr note futures are up 0.013% at 119-16, S&P 500 futures are up 0.41% at 2823.5, Crude oil futures are up 0.71% at $68.37, Gold futures are up 0.13% at $1236, DXY is down -0.16% at 94.48, CAD/USD is down -0.21% at 0.7607.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 2.001% 2 Year 2.633%
5 Year 2.133% 5 Year 2.825%
10 Year 2.235% 10 Year 2.962%
30 Year 2.277% 30 Year 3.097%

US Economic Data

9:00 AM FHFA House Price Index MoM, Apr est 0.5% (0.1% prior)
9:45 AM Markit US Manufacturing, Jun est 56.1 (56.4 prior)
  Markit US Services PMI, Jun est 56.5 (56.8 prior)
  Markit US Composite PMI, Jun (56.6 prior)
10:00 AM Richmond Fed Manufact. Index, Jun est 15 (16 prior)

Canadian Economic Data

There is no Canadian Economic Data for today.

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