Comments

Market Update Tsys lower, 10Y 2.88% (+1bp), above avg volume in TY futures (378k), yields creeping higher with the USD since the start of Powell’s testimony, with a new high for the DXY index (95.55 +0.47). Prices weakening further after drop in weekly claims (lowest since 1969!), stronger Phili Fed. The Chinese Yuan fell to a one year low on trade tensions, the PBOC unwilling to step in at this point to protect the currency.  Weaker stocks (S&P fut- 9.5) not impacting tsys. Gilts continuing to push higher, 10Y yield new low since May 31st @ 1.21%, new low also in the 10Y gilt/tsy spd.  GOCs higher, outpeforming tsys 1-2 bps, data calendar picks up tommorow with CPI/Retail Sales. CIXCN 5Y yest @ 145.4 looked right on the screws (~15bps/yr), now 146/144.

News headlines

Trump Faces Growing Storm Over Car Tariffs as Lobbying Ramps Up (Bloomberg) The procession of industry groups and foreign governments lining up to oppose President Donald Trump’s car tariffs is starting to look like a rush-hour traffic jam. The Commerce Department will hold public hearings Thursday on its probe into whether imports of passenger vehicles imperil U.S. national security. Judging from the list of speakers, the administration will find little if any support for the idea that foreign cars undermine America’s ability to defend itself.

America’s Largest Aluminum Maker Is Getting Hit by U.S. Tariffs (Bloomberg) U.S. aluminum tariffs that were meant to protect the industry from foreign competitors are instead taking a bite out of the earnings of the nation’s largest producer. Alcoa Corp. lowered its 2018 profit projection as tariffs on imported aluminum present what Chief Executive Officer Roy Harvey is calling a “significant” headwind. The manufacturer has been hit with $15 million so far on material it produced mostly in Canada and shipped to the U.S. The company also cited higher energy costs and lower aluminum prices for the cut.

China’s Yuan Tumbles as PBOC Weakens Fixing, Easing Bets Mount (Bloomberg) China’s yuan slumped to a one-year low as the central bank showed little sign of intervening to slow the currency’s descent and bets for monetary policy easing mounted. The yuan dropped as much as 0.85 percent to 6.8032 per dollar in offshore trading, the lowest level since July 2017. The People’s Bank of China weakened its fixing beyond 6.7 on Thursday for the first time since the currency began tumbling in June. Signs of further monetary easing are also adding strains, with China Business News reporting policy makers have made efforts to encourage bank loans and investment in lower-rated corporate debt.

Dollar Extends Advance on Upbeat Fed; Stocks Drop: Markets Wrap (Bloomberg) The dollar extended gains in the wake of Federal Reserve signals that the American economy is on solid footing. A downbeat mood gripped equities, where U.S. futures and European stocks slipped, tracking Asian peers as the corporate earnings season continued to ramp up. The greenback strengthened a third day following Fed Chairman Jerome Powell’s upbeat assessment of the domestic economy, and after the Beige Book economic report showed growth holding up. The move was in stark contrast to that of the Chinese yuan, which fell to a one-year low as the country’s central bank showed little sign of intervening to slow the currency’s descent.

Canada PM shuffles Cabinet, seeks to reduce reliance on U.S. (Reuters) Canadian Prime Minister Justin Trudeau shuffled his Cabinet on Wednesday ahead of a challenging 2019 election, stressing the need to diversify trade away from the United States while leaving key ministers in place. Polls show the ruling Liberals are facing an increasing threat from the official opposition Conservatives, and Trudeau made 11 changes to freshen up his front bench. In a move designed to shore up domestic support, trade minister Francois-Philippe Champagne was shifted to the infrastructure portfolio, where he will oversee plans to spend billions of dollars on major projects.

TSX futures fall on lower oil prices (Reuters) Stock futures pointed to a lower opening for Canada’s main stock index on Thursday as oil prices fell after government data showed an unexpected rise in U.S. crude stockpiles. The U.S. Energy Information Administration said on Wednesday U.S. crude production had reached 11 million barrels per day (bpd) for the first time. The country has added nearly 1 million bpd in production since November, thanks to rapid increases in shale drilling.

Uganda Airlines eyes Bombardier, Airbus jets to revamp carrier (BNN) Bombardier Inc. said Uganda Airlines signed a firm order for four new CRJ900 jets as the East African nation seeks to resuscitate its moribund carrier after two decades. The country also signed a memorandum of understanding for two A330neo, Airbus SE said in a statement on its website, without providing cost details. “Based on the list price for the CRJ900 aircraft, the firm order is valued at approximately $190 million,” Montreal-based Bombardier said in a statement on its website.

CP Rail Q2 profits hurt by labour uncertainty (BNN) Canadian Pacific Railway Ltd. () says service interruptions related to labour negotiations and strike notices caused its net income to decrease 10 per cent in the second quarter despite higher revenues. The rail service experienced two labour disruptions during its second-quarter that created some inconvenience, additional cost and slowed momentum, said CP Rail CEO Keith Creel during a conference call with analysts Wednesday. The labour issues also curtailed revenue, he said.

Overnight markets

Overview: US 10yr note futures are down -0.052% at 120-00, S&P 500 futures are down -0.31% at 2807.25, Crude oil futures are down -0.76% at $68.24, Gold futures are down -1.06% at $1214.9, DXY is up 0.41% at 95.472, CAD/USD is up 0.6% at 0.7549.

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

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Market Update Tsys trading slightly higher on very light volume ( 216k TY fut), 10Y 2.85% (-1bp),  rallying in Europe with gilts after UK June inflation came in below exp (2.4% vs 2.6%).  Fed Powell delivers second part of Mon policy testimony before the US House this morning, Fed Beige Book at 2:00ET.  US equity futures lower, crude  at a three week low (67.55), the USD extending gains to close to highs of June 28th on the back of Powell’s bullish assessment of the US economy.  In Canada, GOCs are higher, continuing outperformance vs tsys with the GOC curve at new narrows across major segments , 2s10s 18.6bps the narrowest since Sep 2007. Yesterday Moody’s upgraded  Canadian bank deposit notes and NVCC, and raised the outlook to Stable from negative, reversing its downgrade of the banks last summer as the new ‘bail-in’ regime affords greater loss protection for senior debt.

News headlines

U.K. Inflation Miss Adds a Little Doubt to BOE August Rate Hike (Bloomberg) An anticipated pickup in U.K. inflation failed to materialize last month, a development that sent the pound lower as investors pared bets for a Bank of England interest-rate increase next month. Summer sales meant clothes prices dropped sharply in June, and there was also drag from computer games. Annual inflation stayed at 2.4 percent, surprising economists who had expected the rate to accelerate to 2.6 percent. Core inflation also surprised to the downside, slowing to a 15-month low of 1.9 percent.

Trump Yields to Pressure in Delayed Retreat From Putin Remarks (Bloomberg) Donald Trump was still dug in, unwilling to back down a day after siding with Vladimir Putin over U.S. intelligence agencies in accepting the Russian leader’s denial of interfering in the 2016 U.S. presidential election. That changed after a meeting between the president and Vice President Mike Pence and Secretary of State Michael Pompeo, according to a person familiar with the deliberations.

Airbus’s Bombardier Gambit Gets Boost With $5.4 Billion Jet Deal (Bloomberg) Airbus SE’s bet on a slow-selling Canadian jetliner is paying off. The European planemaker reached its second 60-plane deal in a week for the A220 aircraft, this time through a pact with a planned U.S. carrier backed by airline entrepreneur David Neeleman. The agreement is valued at $5.4 billion before customary discounts, the same as last week’s order by JetBlue Airways Corp.

Dollar Extends Advance After Powell; Stocks Climb: Markets Wrap (Bloomberg) The dollar advanced for a second day after Federal Reserve Chairman Jerome Powell gave an upbeat assessment of the U.S. economy, helping spur declines in raw materials prices and emerging-market currencies. Stocks in Europe rose and S&P 500 futures edged higher. The greenback outperformed its major peers, helping push down an index of developing-nation currencies by the most in two weeks. China’s yuan approached its weakest close in almost a year. The pound tumbled after U.K. inflation came in below expectations, while CPI for the eurozone matched forecasts. A Bloomberg commodities gauge was further weighed down by oil futures, which tumbled through a technical support level on rising inventories. Treasuries drifted higher while European sovereign bonds were mixed.

TSX futures point to slightly higher open (Reuters) Stock futures pointed to a higher opening for Canada’s main stock index on Wednesday, gaining strength from U.S. Federal Reserve Chairman Jerome Powell’s upbeat view on the strength of the world’s largest economy. Powell, in his congressional testimony on Tuesday, said he believed the United States was on course for years of steady growth and played down the risks to the economy from an escalating trade dispute.

Canadian finance minister set to keep job during shuffle (Reuters) Canadian Finance Minister Bill Morneau is set to stay in his post when Prime Minister Justin Trudeau shuffles his cabinet, which could be as early as this week, political sources said on Tuesday. Foreign Minister Chrystia Freeland will also not be moving, said the sources, who declined to be identified given the sensitivity of the situation. The next election is scheduled for October 2019 and Trudeau wants to freshen up his cabinet amid an increasingly strong challenge from the official opposition Conservatives, said the sources. Trudeau’s office declined to comment.

U.S. plans uranium import probe that may lead to tariffs (BNN) The Trump administration plans to open an investigation into whether uranium imports are harming national security, a move that could lead to tariffs on foreign shipments of the metal, said three people familiar with the matter. U.S. uranium producers Energy Fuels Inc. and Ur-Energy Inc. filed a petition in January asking the Commerce Department to investigate the matter under Section 232 of the 1962 Trade Expansion Act, the same provision the president used to slap tariffs on steel and aluminum imports. U.S. industry wants the government to shield it from competition from state-owned companies in countries including Russia, Canada and Kazakhstan.

Avison Young to buy European real estate company after Caisse investment (BNN) Avison Young Canada Inc. will use a new, $250 million investment by a big Canadian pension fund to recruit talent and make global acquisitions, including the purchase of a European real estate services company, Chief Executive Officer Mark Rose said. The Toronto-based firm announced Monday that Caisse de Depot et Placement du Quebec, Canada’s second-largest pension fund manager, had made a preferred-equity investment in Avison Young. Caisse will be entitled to designate three members of the company’s nine-member board of directors.

Overnight markets

Overview: US 10yr note futures are up 0.052% at 120-06, S&P 500 futures are down -0.06% at 2809.5, Crude oil futures are down -0.71% at $67.6, Gold futures are down -0.42% at $1222.1, DXY is up 0.41% at 95.372, CAD/USD is up 0.48% at 0.7545.

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

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Market Update US tsys slightly higher, near top of overnite range on avg volume in TY futures (~240k), 10Y 2.85% (-0.7bps). Focus on Fed Powell semi-annual testimony at 10:00ET. Equities weaker (S&P fut -3, Nasdaq -7)  after Netflix, Goldman Sachs earnings. GS stock slightly lower despite Q2 eps $5.98 way ahead of exp $4.66, revenues +19% at $9.40bln vs $8.74bln est.  Core EGBs higher, outperforming tsys – gilt yields ~2bps lower , avg weekly earnings 2.7% below 2.8% exp, better than exp rise in 3mnth employment of 137k. GOCs higher, ~0.5bps tighter vs tsys. 

News headlines

BOE’s Carney Nudged Step Closer to Rate Hike by Jobs Numbers (Bloomberg) U.K. employment rose to a record high in the three months through May and wage pressures showed few signs of abating, keeping the Bank of England on course for an interest-rate increase next month. The number of people in work rose by 137,000, more than forecast, taking the employment rate to 75.7 percent, the highest since records began in 1971. While headline measures of wage growth eased modestly, an underlying gauge climbed to the highest since January.

Trump’s Defense of Putin Proves Too Much for Some Republicans (Bloomberg) President Donald Trump’s equivocation on U.S. intelligence agencies during a news conference with Russian leader Vladimir Putin triggered the most intense backlash from Republicans of anything he’s done since winning election in 2016. Republicans who looked past the release of his recorded remarks about grabbing women and his refusal to denounce neo-Nazi protesters, or complained but took no substantive action when he imposed tariffs on allies found their line in the sand after he sided with Putin against the U.S. intelligence community’s consensus that Russia interfered in the 2016 election.

Toronto Leads Canada’s Biggest Gain in Home Sales This Year (Bloomberg) Canadian home sales rose in June at the fastest pace this year, led by a 17 percent surge in Toronto, a sign the market may be regaining strength. Transactions climbed 4.1 percent from May after touching a five-year low, the Canadian Real Estate Association reported Monday from Ottawa. Benchmark prices fell 0.1 percent on the month and advanced 0.9 percent from a year earlier.

Stocks Drop as Traders Await Powell; Oil Steadies: Markets Wrap (Bloomberg) U.S. equity futures fell alongside European stocks as investors digested a flood of earnings as well as prepared for the latest clues from the Federal Reserve on monetary policy in the world’s biggest economy. Most commodities climbed, as oil steadied. Futures on the Nasdaq slumped as Netflix Inc. tumbled in pre-market trading after delivering disappointing subscriber growth. Results from Goldman Sachs narrowly beat investor expectations, while trading revenue disappointed. On the Stoxx Europe 600 Index, gains in mining and chemicals shares were outweighed by declines in telecommunications and household goods.

TSX futures set to open lower, manufacturing sales data awaited (Reuters) Stock futures pointed to a lower opening for Canada’s main stock index on Tuesday as investors awaited a report on the country’s manufacturing sales for May. September futures on the S&P/TSX index were down 0.17 percent at 7:15 a.m. ET. Canada’s manufacturing sales data for May is due at 08:30 a.m. ET. On Monday, Toronto Stock Exchange S&P/TSX composite index closes down 66.39 points, or 0.40 percent, at 16,494.73.

Boeing lifts industry demand forecast as air show deals roll on (Reuters) Boeing (BA.N) raised its rolling 20-year industry forecast for passenger and cargo aircraft on Tuesday, as a steady flow of deals on day two of the Farnborough Airshow underscored the industry’s resilience to rising global trade tensions. The world’s biggest planemaker predicted 42,700 industry deliveries over the next two decades, up three percent from its estimate of 41,030 a year ago. That would be worth $6.3 trillion at list prices versus last year’s $6.1 trillion forecast.

Netflix plunges as subscriber growth disappoints in Q2 (BNN) Netflix Inc. () stunned Wall Street by attracting fewer subscribers than expected last quarter, renewing concerns that the video-streaming service has become an investment bubble. The shares plunged as much as 15 per cent after Netflix added 5.2 million users in the period, about a million fewer than it predicted. Its outlook for the current quarter also reflected a deceleration: The world’s largest paid online TV network expects to add 5 million customers, a slower pace than a year earlier.

Overnight markets

Overview: US 10yr note futures are up 0.039% at 120-07, S&P 500 futures are down -0.13% at 2793, Crude oil futures are up 0.16% at $68.17, Gold futures are up 0.1% at $1241, DXY is up 0.1% at 94.607, CAD/USD is up 0.14% at 0.7601.

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

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