Market Update Tsys higher on risk off, yields 2-3bps lower across the curve with mkt focus on trade with reports Nafta talks between the US/Cda have stalled, meanwhile European stocks lower (Stoxx -1.0%) after Trump’s decision to follow through on $200bln in tariffs on China and his rejection of a proposal to eliminate tariffs on EU autos. GOCs higher, 1.5-2bps narrower on strong Cda outperformance after nafta news, CAD lower (1.3040 +56pps), GOC curve 1bp flatter, 10Y 2.235(-3.6bps). Provis starting 1.5-2bps wider,Ont 10s30s box 0.5bps wider @ 14.5. Ford 15-20bps wider after Moody’s downgrade, JPM negative view on free cash flow F 2.766/22 165/155 from 145/135.
News headlines
Trudeau’s Pipeline Gamble Stalls After Court Overturns Approval (Bloomberg) Prime Minister Justin Trudeau’s bid to press ahead with construction of the Trans Mountain pipeline suffered a major setback after a Canadian court nullified approval of the project. The Federal Court of Appeal ruled Thursday that the regulatory review of the pipeline expansion was “impermissibly flawed” because it excluded project-related tanker traffic. In addition, the court found the government failed to fulfill its legal duty to consult indigenous people.
Coke Makes $5.1 Billion Bet on Coffee Market With Costa Purchase (Bloomberg) Coca-Cola Co. is making an audacious move into coffee and retail outlets with the 3.9 billion-pound ($5.1 billion) purchase of U.K. coffee chain Costa, its biggest acquisition in eight years that pushes the soda pioneer into a fiercely competitive java market. The soft-drinks company swooped in after Whitbread Plc announced a plan in April to spin off the business. The transaction gives Coca-Cola instant heft in a business from which it was all but absent, with 3,800 stores in 32 countries and a foothold in China. Highlighting Coke’s desire to close the deal, Whitbread CEO Alison Brittain said the two sides signed just minutes before the announcement, after Coke first approached the other party in June.
Trump Makes Clear EU Won’t Escape His Ire Over Trade for Long (Bloomberg) The EU’s Jean-Claude Juncker left Washington in late July with a Rose Garden truce — a handshake trade agreement he had good reason to believe would spare the continent from President Donald Trump’s wrath. It didn’t last.
Stocks Drop on Trump Trade Talk; Dollar Advances: Markets Wrap (Bloomberg) U.S. stock index futures pointed to a drop at the open and European equities fell following a downbeat session in Asia on Friday after President Donald Trump stepped up his tough talk on trade. Emerging-market shares took another hit, while the dollar climbed with Treasuries. Contracts on the S&P, Dow and Nasdaq all pointed to weak start, while carmakers were the biggest losers in the Stoxx Europe 600 Index after Trump cast doubt on the scope of a trade deal between the U.S. and Europe. Emerging-market equities fell a second day, and the Indian rupee dropped to a record as contagion spread from Argentina and Turkey. The yen climbed and European sovereign bonds edged higher while the euro fell as the region’s inflation unexpectedly slowed.
U.S., Canada slug it out as deadline looms to clinch NAFTA (Reuters) Canada and the United States will make a final push to iron out differences on a pact to modernize the North American Free Trade Agreement (NAFTA) on Friday, with Mexico on standby to return to talks aimed at ending a year of hard-fought negotiations. U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland were unable to clinch a deal despite meeting late into the evening on Thursday. They will reconvene on Friday morning.
Futures dip on renewed worries over trade dispute (Reuters) Futures for Canada’s main stock index fell on Friday, ahead of a deadline for the NAFTA trade deal, as fresh threats from U.S. President Donald Trump on a trade war with Beijing dulled investor sentiment. Trump is prepared to quickly ramp up a trade war with China and has told aides he is ready to impose tariffs on $200 billion worth of Chinese imports as soon as a public comment period on the plan ends next week, Bloomberg News reported on Thursday.
Morneau vows Trans Mountain ‘will be built’ despite court ruling (BNN) Finance Minister Bill Morneau said that the Canadian government is committed to ensuring the Trans Mountain pipeline project is completed despite Thursday’s ruling by the Federal Court of Appeal that nullified the project. “We want to make sure this project gets done,” Morneau said in an interview with BNN Bloomberg Thursday. “We want to make sure it happens and as a government, we’re well placed to assure that that happens. We’ll be moving forward with resolve.
TD beats third-quarter expectations as profit in U.S. surges 31% (BNN) Toronto-Dominion Bank has closed out Big Six earnings season with a profit beat amid double-digit growth in the lender’s stateside division. TD’s total fiscal third-quarter net income rose 12 per cent year-over-year to $3.1 billion. On an adjusted basis, the company earned $1.66 per share; analysts, on average, were expecting $1.63 in earnings per share.
Overnight markets
Overview: US 10yr note futures are up 0.117% at 120-10, S&P 500 futures are down -0.16% at 2897.25, Crude oil futures are down -0.07% at $70.2, Gold futures are up 0.41% at $1210, DXY is up 0.08% at 94.8, CAD/USD is up 0.44% at 0.7669.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.089% | 2 Year | 2.637% |
| 5 Year | 2.189% | 5 Year | 2.738% |
| 10 Year | 2.251% | 10 Year | 2.842% |
| 30 Year | 2.275% | 30 Year | 2.989% |
US Economic Data
| 9:45 AM | Chicago Purchasing Manager, Aug est 63.0 (65.5 prior) |
| 10:00 AM | U. of Mich. Sentiment, Aug est 95.5 (95.3 prior) |
| U. of Mich. Current Conditions Aug (107.9 prior) | |
| U. of Mich. Expectations, Aug (87.3 prior) | |
| U. of Mich. 1 Yr Inflation, Aug (2.9% prior) | |
| U. of Mich. 5-10 Yr Inflation, Aug (2.5% prior) |
Canadian Economic Data
| 8:30 AM | Industrial Product Price MoM, Jul est -0.4% (0.5% prior) |
| Raw Materials Price Index MoM, Jul est 0.0% (0.5% 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