Market Update
US tsys slightly lower on avg volume in TY futures (345k), 10Y 1.50% (+1.5bps). ‘Risk on’ trade as China announced China will not retaliate against the latest round of US tariffs, S&P futures +28, Chinese yuan stronger (+0.3%) . Highlights include US GDP , PCE and a $32bln 7Y auction at 1:00PM. GOCs lower, data calendar bare until tomorrow Q2 GDP. Major curve segments at new narrows, i.e. 2s10s -21bps which looks relatively rich vs 2s10s US curve at -3bps. Next week’s BOC meeting expected to see a shift to a dovish outlook on trade concerns, so putting on a Can/US trade in the short end makes sense after several weeks of no communication from the BOC, Can/US 2Y at -17bps is 20bps cheaper just since the start of the month.
News headlines
U.S. Stock Futures Advance on China Trade Optimism: Markets Wrap (Bloomberg) U.S. equity futures climbed with European stocks while Asian shares pared declines after China indicated it wouldn’t immediately retaliate against the latest American tariff increase. Treasuries edged down, while a dollar gauge held near a nine-month high.
Oil Rises as China Stokes Optimism on Potential Trade-War Easing (Bloomberg) Oil rose, erasing earlier losses, as investors weighed a sizable drop in U.S. crude inventories amid China’s latest indication that it won’t escalate the ongoing trade war with the U.S.
TSX futures rise on higher U.S. crude prices (Reuters) Futures for Canada’s main stock index edged up on Thursday, supported by higher U.S. crude prices amid positive comments from China on its trade war with the United States.
China indicates it won’t retaliate against newest U.S. tariffs (BNN) China indicated that it wouldn’t immediately retaliate against the latest U.S. tariff increase announced by President Donald Trump last week, emphasizing the need to discuss ways to deescalate the trade war between the world’s two largest economies.
China hopes U.S. will create conditions necessary for September trade talks (Reuters) China and the United States are discussing the next round of face-to-face trade talks scheduled in September, but hopes for progress hinge on whether Washington can create favorable conditions, China’s commerce ministry said on Thursday.
Explainer: Can political unrest in Hong Kong break its currency peg? (Reuters) Three months of anti-government protests have thrown Hong Kong into its deepest crisis in decades, pounding the financial hub’s economy and stock market and adding to its Sino-U.S. trade war woes.
Europe cheers Italy pact, bond bulls pause for breath (Reuters) Signs that Italy’s latest political drama was over and hopeful noises from Beijing in the trade war pushed Europe’s share markets higher on Thursday and paused the relentless steamrollering of global bond yields.
Merkel and Putin agree need to speed gas talks (Reuters) Chancellor Angela Merkel agreed in a phone call with Russian President Vladimir Putin on Thursday on the need to speed up talks on future gas transit agreements, the German government said.
German inflation slows, jobless edges up as economy splutters (Reuters) German inflation likely slowed in August from the prior month, state data indicated on Thursday, sliding further below the European Central Bank’s target ahead of its Sept. 12 policy meeting at which fresh stimulus is expected.
Market Overview: US 10yr note futures are down -0.155% at 131-05, S&P 500 futures are up 0.94% at 2917, Crude oil futures are up 0.74% at $56.19, Gold futures are down -0.11% at $1547.4, DXY is up 0.08% at 98.287, CAD/USD is down -0.19% at 0.7529.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.345% | 2 Year | 1.52% |
| 5 Year | 1.178% | 5 Year | 1.387% |
| 10 Year | 1.129% | 10 Year | 1.491% |
| 30 Year | 1.372% | 30 Year | 1.97% |
US Economic Data
| 08:30 AM | GDP Annualized QoQ, 2Q S Survey: 2.00% Prior: 2.10% |
| Personal Consumption, 2Q S Survey: 4.30% Prior: 4.30% | |
| GDP Price Index, 2Q S Survey: 2.40% Prior: 2.40% | |
| Core PCE QoQ, 2Q S Survey: 1.80% Prior: 1.80% | |
| Wholesale Inventories MoM, Jul P Survey: 0.20% Prior: 0.00% | |
| Initial Jobless Claims, Aug 24 Survey: 214k Prior: 209k | |
| Continuing Claims, Aug 17 Survey: 1686k Prior: 1674k | |
| 09:45 AM | Bloomberg Consumer Comfort, Aug 25 Survey: — Prior: 61.5 |
| 10:00 AM | Pending Home Sales MoM, Jul Survey: 0.00% Prior: 2.80% |
| Pending Home Sales NSA YoY, Jul Survey: 1.80% Prior: -0.60% |
Canadian Economic Data
| 08:30 AM | Current Account Balance, 2Q Survey: -$9.75b Prior: -$17.35b |
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, Émile Bordeleau
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