Commentaires

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

Market Update US tsys unch on avg volume , 10Y 2.977%, before advance Q2 GDP (4.2% exp). Market expecting a big number after Trump/Kudlow. USD index slightly higher, equities fut mixed (S&P -0.25, Nasdaq +7). A second BOJ bond buying operation this week to cap the rise in yields after the 10Y had reached an 18mth high early Friday morning above 0.10%. Core EGBs little changed as well, 10Y bund has retraced post ECB/Draghi gains, edging closer to 0.42% high from Monday. In Canada, GOCs lower before US data, underperforming tsys in 2s&5s. Provi spreads 1bp tighter over last couple of days, recent widening abating somewhat going into month end with credit curves flatter. Manitoba deal rumoured for today.  CN Rail  (A2/A) priced $800mln 2 tranche 10Y & 30Y deal which was well received despite rather tight spd , breaking 2-3 bps tighter. 

News headlines

Nafta Optimism Doesn’t Necessarily Lessen Auto Threat to Canada (Bloomberg) Even with hopeful signs on Nafta and a trade detente between the U.S. and the European Union, Canada still isn’t out of the woods on auto tariffs. U.S. Trade Representative Robert Lighthizer said Thursday he hopes a deal in principle on the North American Free Trade Agreement is within reach, a day after Canadian and Mexican ministers indicated a pact could be signed in the next few months. President Donald Trump and European Commission President Jean-Claude Juncker also agreed Wednesday to suspend new levies while trade negotiations continue.

Trump Predicts Data Will Show U.S. Economy in ‘Terrific’ Shape (Bloomberg) President Donald Trump predicted data on Friday will show the U.S. economy is in “terrific” shape amid forecasts that growth topped 4 percent in the second quarter, the fastest since 2014. Speaking at a steel mill in Granite City, Illinois, on Thursday, Trump doubted the expansion would reach the 5.3 percent some economists have penciled in, but said that “if it has a four in front of it, we’re happy.” He called recent economic figures “unthinkable.”

Canada Cuts U.S., China Out of Talks on Reforming Global Trade (Bloomberg) Canada’s new Minister of International Trade Jim Carr has invited a dozen trade ministers to meet in October to discuss how to fix the World Trade Organization. But two countries have been left off the list: the U.S. and China.

Dollar Steady, Stocks Gain With U.S. GDP in Focus: Markets Wrap (Bloomberg) The dollar and Treasuries were little changed as traders awaited the release of data which President Donald Trump predicted will show the U.S. economy is in “terrific” shape. U.S. equity futures pared gains as European stocks climbed, with corporate earnings again taking a front seat. Futures on the S&P 500 and Nasdaq pointed to a marginally higher open even as Twitter Inc. tumbled in pre-market trading after saying monthly users had missed estimates. The Stoxx Europe 600 Index headed for its best week in almost two months as banks and telecommunications firms gained, with BT Group Plc and Banco Bilbao Vizcaya Argentaria SA reporting earnings that exceeded analysts’ estimates. In Asia, Japanese equities climbed for a fourth day, while benchmarks in China and Hong Kong ticked lower. The euro slipped after disappointing economic data from France, the region’s second-biggest economy.

Air Canada reports quarterly loss on rising fuel costs (Reuters) Air Canada (AC.TO) on Friday posted a quarterly loss compared to a year-ago profit, as the carrier faced margin pressure from rising fuel costs. The Montreal-based company reported a loss of C$77 million, or 28 Canadian cents per share, in the second quarter ended June 30, compared with a profit of C$311 million, or C$1.13 per share, a year earlier. The loss in the latest quarter included a charge of $186 million on the sale of assets and losses on foreign exchange of $25 million.

Twitter to prioritize fixing platform over user growth, shares plunge (Reuters) Twitter Inc (TWTR.N) on Friday reported fewer monthly active users than analysts expected and warned that the closely-watched figure could keep falling as it deletes phony accounts, sending shares sharply lower in early trading. The company said the work it was doing to clean up Twitter by purging automated and spam accounts had some impact on its user metrics in the second quarter, and that it would prioritize work to improve suspicious accounts and reduce hate speech and other abusive content over projects that could attract more users.

Amazon Q2 earnings stoke fires of cloud, advertising growth (BNN) Amazon.com Inc. () reported better-than-expected earnings in the second quarter and forecast more of the same in the current period, igniting investor optimism about cloud computing, advertising and other businesses that are more profitable than its main online retail operation. The world’s largest e-commerce company said third-quarter operating income will surge to as much as US$2.4 billion, compared with the average analyst estimate of US$1.28 billion, according to data compiled by Bloomberg. Second-quarter profit came in at a record US$2.53 billion, or US$5.07 per share, more than double analysts’ forecasts. The shares rose 4.1 per cent in extended trading.

Facebook’s US$120B Thursday loss worst single-day wipeout in U.S. history (BNN) It’s official. Facebook Inc. just had the biggest stock-market wipeout in American history. Shares tumbled 19 per cent on Thursday to close at US$176.26 after sales and user growth disappointed investors. The drop translates to a US$119.4 billion decline in market capitalization, the largest-ever loss of value in one day for a U.S. traded company. The social-media goliath’s financial performance had previously seemed immune to fierce critiques of its content policies, its failure to safeguard private data, and its changing rules for advertisers. But on Wednesday Facebook reported sales and user growth numbers for the second quarter that fell short of analysts’ projections, leaving investors reeling.

Overnight markets

Overview: US 10yr note futures are down 0% at 119-11, S&P 500 futures are down -0.02% at 2842, Crude oil futures are down -0.26% at $69.43, Gold futures are down -0.57% at $1228.2, DXY is up 0.1% at 94.882, CAD/USD is down -0.04% at 0.765.

US Economic Data

Canadian Economic Data

There is no Canadian economic data for today.

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 higher led by the long end , with the tsy curve 1.4bps flatter 2s10s, the 10Y 2.96 (-1.5bps). Prices sliding on Draghi comments, despite weaker June Durable Goods Orders. ECB left rates unch as expected, rates to be on hold ‘through the summer of 2019’ with very little initial reaction in bunds/euro, both close to yesterday’s lows. Stock futures lower, Facebook earnings/guidance disappointed, the stock is down20% pre-mkt.  GOCs lower ,1bp  wider vs tsys, 10Y 2.29% 9 (0.5bps). Provis unch despite higher all in yields, QC 48s issue yest @ 75, 75/74 on screen. 

News headlines

ECB Keeps to Policy Path to End Bond Purchases (Bloomberg) The European Central Bank stuck to its plan to end bond purchases as the European Union and U.S. stepped back from a trade war and the currency bloc’s economic expansion remained solid. The Frankfurt-based institution reiterated it will continue buying 30 billion euros ($35 billion) of assets a month until the end of September, reduce the pace to 15 billion euros from October, and stop additional purchases at the end of the year.

Uranium Tariffs Threaten Nuclear Plants Trump Is Trying to Save (Bloomberg) The Trump administration’s decision to consider tariffs on uranium imports may raise the cost of fuel for nuclear reactors and undermine a separate initiative to shore up struggling electricity generators. The Commerce Department said Wednesday it will probe whether uranium imports “threaten to impair” national security. U.S. miners Energy Fuels Inc. and Ur-Energy Inc., which requested the probe in January, want 25 percent of the domestic market reserved for U.S. producers. Domestic companies supply less than 5 percent of U.S. consumption and would need about three years to ramp up production to meet that target.

Air Canada Unveils Back-to-the-Future Bid for Loyalty Plan (Bloomberg) Air Canada is trying to take its frequent-flyer program back to the future. The airline is teaming up with Visa Inc. and two Canadian banks on a C$250 million ($190 million) cash offer for Aimia Inc.’s Aeroplan rewards program. If accepted — and Aimia surged the most on record on the news — the deal would return the loyalty plan to Air Canada, which spun it off in 2005.

U.S. Stock Futures Slip on Facebook; Euro Weakens: Markets Wrap (Bloomberg) U.S. equity index futures fell on Thursday as investors braced for the impact of Facebook Inc.’s disappointing earnings, which looked set to overshadow a trade breakthrough between America and Europe. The euro stayed lower after the ECB held interest rates steady. The Nasdaq was set for a steep drop after Facebook Inc. tumbled more than 20 percent in pre-market trading as revenue and user growth missed estimates. S&P 500 futures also nudged lower, though contracts for the Dow edged up. In Europe, the Stoxx 600 Index climbed, led by industrials, after President Donald Trump agreed with European Commission chief Jean-Claude Juncker to suspend new tariffs while continuing to negotiate over trade.

NXP to repurchase $5 billion shares after Qualcomm deal falls through (Reuters) NXP Semiconductors NV (NXPI.O), whose buyout deal with U.S. chipmaker Qualcomm Inc (QCOM.O) fell through due to lack of approval from China, said on Thursday it would buy back $5 billion worth of shares. The company said Qualcomm has informed the company it would pay $2 billion breakup fee by 9 a.m., New York City time, on Thursday. NXP also reported second-quarter revenue of $2.29 billion, a 4 percent increase from last year, missing the average analyst estimate of $2.36 billion, according to Thomson Reuters I/B/E/S.

Carmakers surge after Trump agrees to put auto tariffs on hold (BNN) European carmakers climbed after President Donald Trump backed off his threat to levy tariffs on cars imported to the U.S. during a meeting with European Commission President Jean-Claude Juncker, averting for the time being an escalating trade war. Shares of BMW AG, Volkswagen AG, Fiat Chrysler Automobiles NV and Daimler AG jumped on Thursday following a pledge from the two leaders to “hold off on other tariffs” while they negotiate a deal to expand European imports of U.S. liquefied natural gas and soybeans and lower industrial levies. Germany’s VDA auto industry association called the meeting “a big step forward” and “good news for industry and consumers on both sides of the Atlantic.”

Apparent EU-U.S. trade truce ‘positive news’ for Canada: Freeland (BNN) The apparent trade truce agreement between European Commission President Jean-Claude Juncker and U.S. President Donald Trump is good news for Canada, Foreign Affairs Minister Chrystia Freeland told reporters in a conference call from Mexico City. The U.S. and the EU agreed to expand imports of U.S. liquefied natural gas and soybeans as well as lower tariffs on non-auto industrial goods on both sides. The U.S. and EU have also agreed to “hold off on other tariffs” while negotiations continue, said Juncker. “I really commend everyone involved for pulling back from an action – if that is indeed what is happening – from pulling back from an action that not only is not justified and illegal under WTO and NAFTA rules but actually has the potential to be really devastating for the global economy,” Freeland said on the conference call shortly after the U.S.-EU announcement. “We need to look at [the agreement] more closely, but it sounds certainly like some positive news.”

Precision Drilling loss rises 30.7% on higher compensation expense (BNN) Precision Drilling Corp. had a $47.2-million net loss in the second quarter, 30.7 per cent bigger than the same time last year, as stock-linked compensation expenses increased. The loss amounted to 16 cents per share compared with a net loss of $36 million or 12 cents per share in the second quarter of 2017. Analysts had estimated a loss of 14 cents per share, according to Thomson Reuters Eikon. The increase was largely fuelled by a $12-million increase in administrative expenses due to higher incentive compensation tied to the price of Precision Drilling’s stock price.

Overnight markets

Overview: US 10yr note futures are down -0.209% at 119-13, S&P 500 futures are down -0.11% at 2838.25, Crude oil futures are down -0.07% at $69.25, Gold futures are down -0.32% at $1237, DXY is up 0.06% at 94.286, CAD/USD is up 0.05% at 0.7661.

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