Market Update Tsys trading higher on heavy volume (TY>585k), 10Y 2.95% (-2bps). BOJ held off on removing stimulus, keeping rates steady with dovish guidance (revising down inflation forecast). The JGB 10Y, which will have a wider band to trade in, fell 4bps to 0.052%, reversing two thirds of the increase since July 20th. USDJPY higher on the news, DXY index lower, equities firmer (S&P fut +6.75), WTI lower (69.68 – 0.46). Gilts/Bunds mixed having given up most of the early post BOJ gains. The 10Y bund yield rose to new high 0.449% after July Eurozone inflation rose to the highest since Dec 2012 2.1% vs 2.0% exp. GOCs getting slammed after May GDP 0.5% vs 0.3% -largest increase since May ’17, 2.6% vs 2.5% y/y.
News headlines
Kuroda Pushes Through Changes to Stay the Course for Longer Haul (Bloomberg) Bank of Japan Governor Haruhiko Kuroda pushed through changes to his radical monetary stimulus program as the central bank prepares for a longer struggle to stoke inflation.
Euro-Area Economy Gets Higher Inflation But Weaker Growth (Bloomberg) A bumper day of euro-area economic releases showed the region’s vital signs remain good, if not great. The region’s economic expansion entered a sixth year but growth slowed to just 0.3 percent, the weakest in two years. Inflation accelerated further above the European Central Bank’s goal, though that was largely driven by stronger energy prices. Unemployment remained at the lowest since 2008.
Trade Fight and Tariff Threats Are Sapping Canadian Confidence (Bloomberg) Canadians are feeling beaten down after months of wrangling over U.S. trade, with pessimism about the economy reaching the highest since the last recession, telephone polling shows. Some 45.6 percent of respondents said the economy will be worse in six months, the highest month-end reading since 2009, according to the survey conducted by Nanos Research. The figure has surged from 27.8 percent in May and more than doubled this year.
U.S. Stock Futures Climb Before Apple; Bonds Rise: Markets Wrap (Bloomberg) U.S. equity futures rose on Tuesday as investors prepared for the latest clues to the health of the American tech sector when Apple reports its earnings later. Most sovereign bonds edged higher after the Bank of Japan pledged to keep its monetary policy ultra loose. Contracts on the S&P 500, Nasdaq and Dow all pointed to a firmer open in advance of the Apple Inc. results, which are due after the close. Technology investors will be hoping for a turnaround in fortunes: tech shares have suffered three days of losses in the wake of disappointing results from Facebook, Twitter and Netflix.
Canada’s Shopify posts bigger second-quarter loss (Reuters) Shopify Inc (SHOP.TO) (SHOP.N), which helps e-commerce companies build their online stores, reported a bigger quarterly loss on Tuesday as higher costs weighed on its earnings. The Ottawa-based company’s net loss widened to $24 million, or 23 cents per share, in the second quarter ended June 30, from $14 million, or 15 cents per share, a year earlier.
WestJet posts smaller-than-expected loss on traffic growth (Reuters) Canada’s WestJet Airlines Ltd reported a smaller-than-expected loss on Tuesday as it flew more fuller planes and improved a key revenue metric, offsetting a steep rise in aviation fuel prices. The country’s second-largest carrier said revenue passenger miles (RPMs) increased 6.2 percent in the second quarter ended June 30. The Calgary-based company said aircraft fuel expenses rose 34.4 percent to C$302.3 million, while overall expenses increased 13.8 percent.
Higher interest rates to hit younger, middle-income households: Federal analysis (BNN) Younger, middle-income households will be among those that feel the biggest financial sting from the Bank of Canada’s gradual move towards higher interest rates, says a newly released federal analysis. The Finance Department explored factors such as income, age and region in an effort to pinpoint the types of households that will be most affected by the central bank’s ongoing rate-hiking trajectory, which follows years of extremely low interest rates.
Canada to join Mexico, Japan, South Korea, EU to talk auto tariffs (BNN) Canada will join Mexico and other European and Asian auto-producing countries this week to plot strategy ahead of the potential imposition of tariffs on vehicles and auto parts exported to the United States. Japan and the European Union organized the meeting for Tuesday in Geneva, where vice and deputy ministers from Canada, the EU, Japan and South Korea will gather to talk about the punishing levies threatened by U.S. President Donald Trump.
Overnight markets
Overview: US 10yr note futures are up 0.092% at 119-16, S&P 500 futures are up 0.25% at 2810.25, Crude oil futures are down -0.43% at $69.83, Gold futures are down -0.18% at $1229.3, DXY is down -0.11% at 94.248, CAD/USD is down 0% at 0.7672.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.044% | 2 Year | 2.665% |
| 5 Year | 2.191% | 5 Year | 2.839% |
| 10 Year | 2.288% | 10 Year | 2.954% |
| 30 Year | 2.327% | 30 Year | 3.078% |
US Economic Data
| 8:30 AM | Personal Income, Jun 0.4% est 0.4% (0.4% prior) |
| Personal Spending, Jun 0.4% est 0.4% (0.2% prior) | |
| PCE Deflator YoY, Jun 2.2% est 2.3% (2.3% prior) | |
| PCE Core MoM, Jun 0.1% est 0.1% (0.2% prior) | |
| PCE Core YoY, Jun est 1.9% (2.0% prior) | |
| Employment Cost Index, 2Q 0.6% est 0.7% (0.8% prior) | |
| 9:00 AM | S&P CoreLogic CS 20-City MoM SA, May est 0.20% (0.20% prior) |
| S&P CoreLogic CS 20-City YoY NSA, May est 6.40% (6.56% prior) | |
| S&P CoreLogic CS 20-City NSA Index, May (210.17 prior) | |
| S&P CoreLogic CS US HPI NSA Index, May (200.86 prior) | |
| S&P CoreLogic CS US HPI YoY NSA, May (6.41% prior) | |
| 9:45 AM | Chicago Purchasing Manager, Jul est 62.0 (64.1 prior) |
| 10:00 AM | Conf. Board Consumer Confidence, Jul est 126.0 (126.4 prior) |
| Conf. Board Present Situation, Jul (161.1 prior) | |
| Conf. Board Expectations, Jul (103.2 prior) |
Canadian Economic Data
| 8:30 AM | Industrial Product Price MoM, Jun 0.5% est 0.3% (1.0% prior) |
| Raw Materials Price Index MoM, Jun 0.5% (3.8% prior) | |
| GDP MoM, May 0.5% est 0.3% (0.1% prior) | |
| GDP YoY, May 2.6% est 2.3% (2.5% 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