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Market Update Stronger than expected ADP leads to Tsy trading lower, moderate volume, curves steepening, reversing Tuesdays bull flattening; dealers see lighter buying from overseas accounts as weakness; Tsy ylds higher 10Y 99-01.5 (2.986%) vs. 99-08 (2.962%) late Tuesday; 30YY 3.113, lighter data today with ADP and FOMC announcement leading todays outlook. US Tsy to announce next week’s 3s, 10s and 30s auction details at 8h30. Markets starting to feel more confident that there will be a 4th Fed rate hike this year as odds rise for a December hike after the one in September. European markets have started to think of the possibility that ECB may raise hikes earlier than expected as inflation ticks higher. 

News headlines

China Slams U.S. ‘Blackmailing’ as Trump Weighs Higher Tariffs (Bloomberg) China warned the U.S. against “blackmailing and pressuring” it over trade as the Trump administration mulls trying to force officials back to the negotiating table through threats of even higher tariffs. President Donald Trump’s officials are considering more than doubling planned tariffs on $200 billion in Chinese imports, people familiar with the deliberations said. The U.S. had threatened an additional $200 billion with levies of 10 percent, a level the administration may raise to 25 percent in a Federal Register notice in coming days, one of the people said.

Factories From Asia to Europe Put on the Brakes Amid Trade Spats (Bloomberg) Manufacturers in some of the world’s biggest economies are putting the brakes on production as they watch trade disputes with the U.S. unfold. Reports on Wednesday showed factory activity from the Asia Pacific region to Europe slowed last month. With companies issuing warnings about the impact of tit-for-tat battles over import tariffs on their profits, the data suggest that protectionist threats are starting to weigh on global growth.

Stocks Slip, Bonds Drop as Trade Fears Hit Metals: Markets Wrap (Bloomberg) Stocks struggled on Wednesday as the world’s two biggest economic powers once again ratcheted up rhetoric over trade, sinking commodities in the process. The dollar strengthened and Japanese bonds led sovereign debt lower. Futures for the Dow fell and contracts for the S&P 500 edged lower, tracking losses in the Stoxx Europe 600 Index after China vowed to retaliate if the U.S. follows through on threats to increase its import tariffs. Nasdaq futures bucked the trend, pointing to a higher open in the wake of Apple Inc.’s strong results.

Encana adjusted operating profit rises on higher production (Reuters) Canadian oil and gas producer Encana Corp (ECA.TO) on Wednesday posted a 10 percent rise in adjusted operating profit, helped by an increase in production and higher selling prices for crude. Total oil and gas production rose 7 percent to 337,900 barrels of oil equivalent per day (boe/d). Its four core assets – Montney and Duvernay oilfields in western Canada and Eagle Ford and Permian in the United States – contributed 96 percent of total volumes in the second quarter, the company said.

Canada’s Enercare to be bought by Brookfield Infrastructure for C$4.3 billion (Reuters) Canadian homeservices company Enercare Inc (ECI.TO) said on Wednesday it would be bought by Brookfield Infrastructure Partners (BIP.N) for C$4.3 billion ($3.30 billion) as the asset management firm looks to expand its business across Canada. Brookfield Infrastructure’s offer of C$29 per Enercare share represents a 53 percent premium to Enercare Tuesday’s close. On Tuesday, Brookfield Infrastructure’s parent company, Brookfield Asset Management Inc (BAMa.TO), said it would buy Forest City Realty Trust Inc (FCEa.N) in a deal valued at $11.4 billion.

Molson Coors teams up with Hydropothecary on pot drinks (BNN) Molson Coors has found its pot partner. The brewer announced early Wednesday it’s teaming up with The Hydropothecary Corporation on a joint venture to develop cannabis-infused, non-alcoholic beverages. BNN Bloomberg recently reported Molson had engaged in talks with as many as four marijuana producers over a six-month period to explore opportunities in Canada’s soon-to-be legal recreational cannabis market.

Canada not getting frozen out of NAFTA: Former industry minister (BNN) A former Canadian industry minister thinks too much is being made about the country being ‘frozen out’ of NAFTA talks as the U.S. and Mexico have planned head-to-head discussions. “I think the news out of yesterday that’s being covered today about Canada being frozen out is not frankly quite the truth,” James Moore, who served as federal industry minister from 2013-2015 told BNN Bloomberg in an interview on Tuesday. “These are complex and intense negotiations with a lot at stake.” “Any time there’s a tripartite agreement, there’s always going to be voices domestically, I can assure you, in Mexico, in the United States and in Canada who are going to say that we’re being bullied by the other two partners… There’s certainly maneuvering and debate amongst all three partners.” 

Overnight markets

Overview: US 10yr note futures are down -0.17% at 119-07, S&P 500 futures are up 0.01% at 2817.25, Crude oil futures are down -1.32% at $67.85, Gold futures are down -0.19% at $1231.2, DXY is down 0% at 94.552, CAD/USD is up 0.14% at 0.7677.

US Economic Data

Canadian Economic Data

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

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 20^th.  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.

US Economic Data

Canadian Economic Data

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

Market Update US tsys lower, curve steeper with the US 10Y 2.982(+2.8bps), close to lows of Friday post GDP, weakening in Europe with bunds/gilts.  Below avg volume in TY futures ahead of busy week in terms of central bank mon pol & data with non-farm payrolls Friday. WTI 2.0% higher, above $70 for the first time in a week. UK gilt yields 2-6bps higher, 10Y gilt 1.34% highest since June 14th. BOE only central bank expected to hike rates this week (90%).  Key BOJ meeting tomorrow with JGB yields having leapt higher over the past two weeks on speculation the BOJ could adjust its bond buying and/or yield curve targets. GOCs trading well offered, 0.5bps wider vs tsys, 10Y above 2.30% for the first time since late May. Corporate spreads grinding tighter last week on lack of issuance, provis 2bps tighter. 

News headlines

BOJ Steps In to Buy Bonds Again as Traders Don’t Heed Signal (Bloomberg) The Bank of Japan offered to buy an unlimited amount of bonds for a third time in a week after the benchmark 10-year yield rose to an almost 18-month high ahead of the central bank’s policy decision on Tuesday. The offer, made at 0.1 percent for the five-to-10 year maturities, drew some 1.6 trillion yen ($14.4 billion) of bids which were all accepted, according to the central bank. The 10-year yield pared the day’s advance after the move was announced.

Storm of News to Hit Global Economy This Week Before August Calm (Bloomberg) People charged with running or monitoring the world economy are set for a busy week before those in the Northern Hemisphere get to enjoy their summer vacations. Central bankers in the U.S., Japan, the U.K., Brazil and India all meet to set their respective monetary policies at a time when Eric Oynoyan, senior European interest-rate strategist at BNP Paribas SA, is telling clients that “central banks are back in the bond market driving seat.”

Stocks Slip Amid Earnings Deluge; Bonds Retreat: Markets Wrap (Bloomberg) Stocks began the week on the back foot as investors weighed earnings results against lofty expectations and prepared for key policy meetings from some of the world’s biggest central banks. Treasuries and European sovereign bonds fell. Miners and food and beverage makers were among the biggest losers in the Stoxx Europe 600 Index, as metals dropped and brewer Heineken reported disappointing results. Futures on the S&P 500 and Nasdaq pointed to a softer open following declines across most Asian markets, while those on the Dow were little changed. The euro and Swedish krona climbed, putting pressure on the dollar.

Canada to host meeting on WTO reform, U.S. and China left out for now (Reuters) Canada plans to convene a meeting of trade ministers to discuss how to reform the troubled World Trade Organization but the United States and China will be left out for now, an official said on Friday. The WTO is facing an increasingly serious crisis amid complaints by U.S. President Donald Trump that the body is biased against the United States. Joseph Pickerill, a spokesman for Canadian Trade Minister Jim Carr, said the meeting would take place in October in Ottawa and played down the suggestion Beijing and Washington were being snubbed.

Pompeo to announce U.S. economic initiatives in ‘Indo-Pacific’ (Reuters) Building on President Donald Trump’s “Indo-Pacific” strategy, U.S. Secretary of State Mike Pompeo will announce a series of investment initiatives in Asia on Monday focusing on digital economy, energy and infrastructure. The announcement, to be made at a U.S. Chamber of Commerce forum in Washington, comes at a time when trade frictions with China have given U.S. trade diplomacy a sharper edge. “The Indo-Pacific is an absolute priority of U.S. policymakers in the executive branch and in Congress,” Brian Hook, Pompeo’s senior policy advisor, told journalists in a conference call.

RBC fund urges Aimia to accept bid to avoid ‘existential crisis’ (BNN) One of Aimia Inc.’s biggest investors has some simple advice for the frequent-flyer program: Say yes to an unsolicited takeover from a group led by Air Canada to escape an “existential crisis.” “It behooves the board to negotiate the very best deal they can for shareholders and other parties, but at the end of the day to not consummate something here would be suicidal,” said Hanif Mamdani, who runs a hedge fund at a unit of Royal Bank of Canada. Mamdani, the Vancouver-based head of alternative investments at Phillips, Hager & North, described the $250 million cash offer for the Aeroplan loyalty program as a “turn-key solution” to most of Aimia’s biggest problems.

Italy Threatens to Bring Down EU-Canada Free Trade Deal (WSJ) Italy’s new government wants to reject a painstakingly negotiated trade deal between the European Union and Canada, and that is welcome news to Ettore Prandini, a small farmer in Italy’s fertile north. Mr. Prandini, who sells milk to producers of the famed Grana Padano cheese, says his revenue is set to fall by a fifth this year compared with last. He blames the Comprehensive Economic and Trade Agreement, or CETA, which late last year eliminated tariffs between the EU and Canada on many products. The dairy farmer objects to his Canadian counterparts now being able to compete more aggressively in Europe by offering cheeses similar to Italy’s. “The food industry is a key asset for this country,” Mr. Prandini said. “It must be protected.” 

Overnight markets

Overview: US 10yr note futures are down -0.105% at 119-10, S&P 500 futures are down -0.04% at 2816.5, Crude oil futures are up 2.14% at $70.16, Gold futures are down -0.15% at $1230.8, DXY is down -0.17% at 94.509, CAD/USD is down -0.07% at 0.7662.

US Economic Data

Canadian Economic Data

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