Market Update Tsys trades mixed on narrow range, long end outperforming, decent volume due to ongoing Sep/Dec roll action ahead Dec taking lead contract Fri, pace of roll should start tapering off today after huge jump Tuesday. Q2 GDP revised up to +4.2% SAAR vs +4.1% adv, as opposed to the downward adjustment to +4.0% expected, with the key upward revisions seen in nonresidential fixed investment, inventories, and net export gap. The prices measures were little revised. The overall GDP price index still +3.0%, while the closely watched core PCE price measure was unrev at +2.0%, keeping the y/y rate at +1.9%, still up from +1.7% in Q1. Tsy auctions today: $17B 1Y-11M FRN and $31B 7Y note. 

News headlines

Canadian Unity on Nafta Cracks in Latest Trudeau-Trump Showdown (Bloomberg) Until now, pretty much all of Canada had Justin Trudeau’s back in his Nafta fight with U.S. President Donald Trump — but cracks are emerging as some pivot to blame him if the pact falls apart. The U.S. is using a deal it announced with Mexico on Monday to pressure Canada into signing on. That’s exposing rifts within the Canadian Conservative Party, Trudeau’s main opposition, which had mostly refrained from criticizing the prime minister on this issue. Prominent former Conservative lawmakers stuck to supporting the government in talks, but Conservative Leader Andrew Scheer blamed Trudeau.

Overheating Economy Tests Poloz’s Patience With Canadian Rates (Bloomberg) The biggest threat to Canada’s economic expansion lies within its own borders, even as President Donald Trump pushes protectionism from abroad. The home-grown news is that the Canadian economy is closer to overheating than faltering on the back of the trade uncertainty, forcing the Bank of Canada to respond with higher interest rates.

Stocks Edge Higher With Treasuries; Euro Weakens: Markets Wrap (Bloomberg) European stocks edged higher and U.S. equity futures were steady on Wednesday after a lackluster Asian session, with investors largely treading water as they await the next developments on trade. The euro slipped and the pound gained. The Stoxx Europe 600 Index swung from a gain to a loss and back again, while national gauges in the U.K. and Spain stayed lower. Retailers were among the worst performers, after Morgan Stanley analysts cut their recommendation for the owner of the Zara clothes chain. S&P 500 futures gave up an earlier advance to trade little changed, though contracts for the Nasdaq stayed higher. Emerging-market assets were under pressure as the dollar gained a second day and Treasuries drifted higher.

National Bank of Canada posts 10 percent rise in quarterly earnings (Reuters) National Bank of Canada reported a ten percent rise in third-quarter earnings, beating market expectations, helped by growth in its retail and wealth management businesses. The bank said earnings per share, excluding one-off items, rose to C$1.53 in the quarter ended July 31, compared with C$1.39 the year before. Analysts had on average forecast earnings of C$1.50, according to Thomson Reuters I/B/E/S data.

Tesla wins court case against Ontario government over rebate cancellation (Reuters) A Canadian court has ruled in favor of Tesla Inc after the electric carmaker challenged the province of Ontario’s wind-down of an electric vehicle rebate. In a ruling on Monday, Judge Frederick Myers of Ontario struck down the transition program set up by the new Ontario government, which excluded Tesla customers from qualifying for rebates.

Bombardier revises deal to sell regional jets to Chinese leasing company (BNN) Bombardier says a Chinese leasing company has changed its aircraft order for 10 regional jets by swapping half of the CRJ 900s for five 90-seat Q400 turboprops. Fred Cromer, president of Bombardier’s commercial aircraft division, says the deal is part of a fleet expansion plan in Asia. The Montreal-based transportation giant entered into an agreement in June 2016 with a subsidiary of Chinese financial institution, Industrial Bank Co. Ltd.

Zara owner tumbles as ‘great’ becomes ‘good’ for Morgan Stanley (BNN) Sometimes good just isn’t good enough. Zara owner Industria de Diseno Textil SA (or Inditex SA) fell the most in six months Wednesday after Morgan Stanley analysts cut their recommendation to underweight from equalweight and reduced their price target for the stock to the lowest among analysts tracked by Bloomberg. Inditex dragged European retailers lower, making the sector the worst performer in the broader regional index. “Inditex is still a world-class retailer, but its investment proposition has been weakening for some years,” analysts Geoff Ruddell and Amy Curry wrote in a note to clients. “And we don’t think that is properly reflected [yet] either in consensus estimates or the multiple the market is applying to them.”

Overnight markets

Overview: US 10yr note futures are up 0.065% at 120-06, S&P 500 futures are up 0.05% at 2900.75, Crude oil futures are up 0.66% at $68.98, Gold futures are down -0.48% at $1208.6, DXY is up 0.19% at 94.898, CAD/USD is up 0.12% at 0.7724.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 2.148% 2 Year 2.665%
5 Year 2.253% 5 Year 2.764%
10 Year 2.318% 10 Year 2.873%
30 Year 2.319% 30 Year 3.021%

US Economic Data

7:00 AM MBA Mortgage Applications, Aug 24th 1.7% (4.2% prior)
8:30 AM GDP Annualized QoQ, 2Q 4.2% est 4.0% (4.1% prior)
  Personal Consumption, 2Q 3.8% est 3.9% (4.0% prior)
  GDP Price Index, 2Q 3.0% est 3.0% (3.0% prior)
  Core PCE QoQ, 2Q 2.0%  est 2.0% (2.0% prior)
10 :00 AM Pending Home Sales MoM, Jul est 0.3% (0.9% prior)
  Pending Home Sales NSA, Jul est -2.5% (-4.0% prior)

Canadian Economic Data

8:30 AM Current Account Balance, 2Q est -15.30b (-19.50b 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