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Market Update

• US tsys opening mixed, curve flatter, longs out outperforming, curve flatter US 10Y 1.58%. FOMC minutes from July meeting at 2:00PM. Range bound, 3 tick session in TY futures, on avg volume (300k). European stocks lower, German DAX down 1.0%. German govt bonds higher, curve flatter a marked contrast to UK gilts which are lower/steeper after UK unemployment remained steady in the wake of June’s Brexit vote while initial claims fell 8.6k last month vs 9k increase exp. GOCs lower led by 10s with 2s10s +1.5bps. Canada 5Y auction today – $3.7bln Sep 21 reopen with the roll 2.5/2.4 – ~1.5bps flatter than at the last auction on July 6th even as 5s have underperformed ~10bps on the curve vs 2s/10s over the past month.  (Provis opening unch after narrowing 1bp yest on no supply. CMB 10Y (Sep 26 reopen) – guidance 57.5 thou spds are 1bp better on screen (56.5/56) after good buying yest.

 News headlines                                                                                             

• European Stocks Slip With Oil as Fed Speculation Revives Dollar (Bloomberg)  European stocks joined a retreat in emerging markets and oil fell for the first time in a week as investors awaited minutes from the Federal Reserve to better assess whether markets had become too complacent on the prospects for interest rate hikes. The Stoxx Europe 600 Index fell for a fourth day, while MSCI’s gauge of developing-nation shares also declined, having halted an eight-day winning streak on Tuesday.
• UK labor market shows little sign of immediate Brexit hit (Reuters) The number of people claiming unemployment benefit in Britain unexpectedly fell in July despite the shock decision by voters to leave the European Union, suggesting little immediate impact from Brexit on the labor market. Benefit claimants fell by 8,600 in the month, compared with an increase of 900 in June, and there was only a small fall in the number of jobs employers were trying to fill, the Office for National Statistics said on Wednesday.
• Hold the lift! – Japan Inc’s answer to the rising yen (Reuters) While previous bouts of strength in the yen have pushed Japanese manufacturers to shift production overseas, exporters are coping with the recent currency stresses by penny-pinching – turning off lights and cramming elevators in the hope that nothing more drastic will be needed before the tide turns. The yen, a safe haven in troubled times, has been climbing in the unsettled period before and after Britain’s June 23 vote to leave the European Union (Brexit) upset global markets, moving nearly 10 yen against the dollar since early June to just under 100 JPY=.
• Gaining confidence, Fed officials eye interest rate hike this year (Reuters) The Federal Reserve is raising expectations for an interest rate rise this year, even as early as next month, after two policymakers on Tuesday said the economic stars now appear to be aligning despite weak U.S. economic growth in the first half of 2016. New York Fed President William Dudley said “it’s possible” to raise rates at the Sept. 20-21 policy meeting given evidence of wage gains and a tighter labor market that could boost inflation, while Dennis Lockhart of the Atlanta Fed said a hike next month is in play.
• Hong Kong shares slip after approval of Shenzhen-Hong Kong connector (Reuters) Hong Kong shares slipped on Wednesday, as some investors took profits and shrugged off China’s approval of a long-anticipated link to allow stock trading between Hong Kong and Shenzhen. The Hang Seng index fell 0.5 percent, to 22,799.78, while the China Enterprises Index lost 0.7 percent, to 9,641.76 points.
• Couche-Tard poised to get even bigger with acquisition of CST (TheGlobeandMail) Alimentation Couche-Tard Inc. is poised to boost its standing as a major convenience-store consolidator and top global player if it goes ahead with another major North American acquisition. Couche-Tard, which has grown to become one of Canada’s largest companies with a market capitalization above $35-billion, is believed to be the lead contender in an auction to acquire San Antonio, Tex.-based CST Brands Inc., the second-largest publicly listed fuel and convenience-store retailer in North America. CST has more than 2,000 locations in the United States and Canada.
• Cisco Plans to Cut Up to 14,000 Jobs Within Weeks, CRN Says (Bloomberg) Cisco Systems Inc., the largest maker of networking equipment, will cut as many as 14,000 employees worldwide, or 20 percent of its workforce, CRN reported, citing people close to the company.

Overnight markets

• Overview: US 10yr note futures are down -0.0947% at 131-28, S&P 500 futures are up 0.03% at 2177.5, Crude oil futures are down -0.34% at $46.42, Gold futures are down -0.57% at $1349.1, DXY is up 0.11% at 94.896.

US Economic Data

• 14:00 PM: FOMC Meeting Minutes Release, June 27

Canadian Economic Data

• There is no major 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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market update

Treasuries see some more mild buying. US stock index futures remain weak, echoing overnight global trend. Treasuries gain on short-covering spurred by low CPI  but then tsys sink as NY Fed Pres. Dudley said on Fox Biz Network that a Sept. rate hike is possible; 10-yr note 1.549%.

News headlines                                                                                        

• World stocks edge away from one-year peak, dollar on defensive (Reuters) World stocks markets edged away from one-year peaks on Tuesday as a stellar rally stalled, while the dollar hit a one-month low against the yen as recent weak U.S. economic data was seen limiting the scope for a near-term rate hike. Asian shares rose to a one-year peak, lifted by a rise in U.S. stocks to record highs a day earlier and expectations that monetary policy around the world will remain lower for longer than anticipated to support growth
• Oil Trades Near $46 a Barrel as Nigeria Sees OPEC Cuts Unlikely (Bloomberg) Oil traded near $46 a barrel after the biggest three-day gain since April as Nigeria’s oil minister signaled the prospect of production cuts from OPEC was unlikely. Futures added 0.6 percent in New York, reversing an earlier loss of 0.9 percent as the dollar weakened, making commodities more attractive. Prices climbed 9.7 percent the previous three sessions following comments by Saudi Arabia’s energy minister that it’s prepared to discuss stabilizing the market. Nigerian Minister of State for Petroleum Emmanuel Kachikwu said he has “sparse” optimism that OPEC will trim output.
• Sterling boosted by above-forecast UK inflation data (Reuters) Sterling slightly strengthened on Tuesday, rising from three-year lows against the euro and pulling further away from a five-week trough against the dollar, after slightly higher than expected inflation data. Consumer price rises gathered speed, up 0.6 percent in July compared with a year earlier, their biggest rise since the end of 2014. Economists in a Reuters poll had expected a 0.5 percent rise.
• German ZEW economic sentiment misses expectations (Market Watch) German economic sentiment picked up in August, but the mood among financial analysts remained relatively subdued, a sign that Europe’s largest economy will stay on its modest growth path. Germany’s ZEW think-tank said Tuesday that its measure of economic expectations rose to 0.5 points in August from minus 6.8 points in July, but remained well below its long-term average of 24.2 points. Economists polled by The Wall Street Journal had forecast an increase to 2.0 points.
• Alberta’s oilsands cap could mean billions worth of lost production, limited impact on emissions: report (FinancialPost) As Alberta’s NDP government rushes ahead with implementation of its climate change plan, a new study provides another measure of its exorbitant cost – a proposed cap on oilsands emissions would leave oil worth hundreds of billions in the ground, while doing little to reduce global greenhouse gases. According to the Fraser Institute study by Ken Green and Taylor Jackson, How Alberta’s Carbon Emission Cap Will Reduce Oil Sands Growth, the provincial government’s proposed cap of 100 megatonnes of emissions annually for the oilsands sector would reduce its production potential by more than three billion barrels between 2025 and 2040, costing the Canadian economy more than $250 billion in lost production and resulting in a “meager” 0.035 per cent reduction in global greenhouse gas emissions by 2040.
• The World’s Worst Currency Is in a Record Slide (Bloomberg) Mongolia’s tugrik, the world’s worst-performing currency in August, is in its longest losing streak on record as the nation’s government seeks ways to stabilize an economy it says is in the grip of a crisis. The currency weakened a 22nd day to 2,243.50 per dollar as of 5:05 p.m. in the capital Ulaanbaatar, the lowest level in Bloomberg data going back to 1993. The tugrik’s 7.8 percent drop this month is the biggest among 154 currencies tracked by Bloomberg, taking its decline in 2016 to more than 11 percent.
• BHP Says Price Freefall Is Over Following Record Net Loss (Bloomberg) BHP Billiton Ltd., the world’s biggest mining company, flagged it’s emerging from the worst commodities price collapse in a generation with renewed impetus after reporting a record full-year loss. “There is some sense that prices have stopped falling as opposed to being in freefall,” Chief Executive Officer Andrew Mackenzie told reporters Tuesday on an earnings call. “We start this new financial year with real momentum.”

Overnight markets

• Overview: US 10yr note futures are up 0.0236% at 132-9, S&P 500 futures are down -0.25% at 2180.5, Crude oil futures are down -0.13% at $45.68, Gold futures are up 0.55% at $1354.9, DXY is down -0.83% at 94.832.

US Economic Data

• 8:30 AM:  Housing Starts, July, 1211k, est. 1180k (prior 1189k, revised 1186k)
  •                                    Housing Starts,  m/m, July, 2.1%, est. -0.80% (prior 4.80%, revised 5.1%)
  •                                     Building Permits, July, 1152k, est. 1160k, (prior 1153k)
  •                                     Building Permits, m/m, July, -0.1%, est. 0.60% (prior 1.50%)
  •                                     CPI, m/m, July, 0.00%, est. 0.00% (prior 0.20%)
  •                                     CPI Ex Food and Energy, m/m, July, 0.10%, est. 0.20% (prior 0.20%)
  •                                     CPI, y/y, July, 0.80%, est. 0.90% (prior 1.00%)
  •                                    CPI Ex Food and Energy, y/y, July, 2.20 %, est. 2.30% (prior 2.30%)
• 9:15 AM:  Industrial Production, m/m, July, est. 0.30% (prior 0.60%)
  •                     Capacity Utilization, July, est. 75.60% (prior 75.40%)

  Canadian Economic Data

• 8:30 AM: Manufacturing Sales, m/m, June, est. 0.50% (prior -1.00%)

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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

News headlines                                                                                                  

• China shares hit seven-month high; world yields keep falling (Reuters) World shares set up camp at one-year peaks on Monday as a rally in Chinese stocks helped offset news that Japan’s economic growth had ground to a halt in the last quarter, while oil prices extended their latest rally. Wall Street looked set to add fractionally to last week’s string of all-time highs ESc1 [.N] while London .FTSE, Frankfurt .GDAXI and Paris .FCHI were up 0.2-0.4 percent as healthcare and energy stocks kept them buoyant in Europe.
• Japan’s Economic Growth Slows as Business Spending Slumps (Bloomberg) Japan’s economy grew less than forecast in the three months through June 30 as business spending contracted for a second-straight quarter and exporters struggled with the resurgent yen.
• Dollar pinned down by easing Fed rate hike expectations (Reuters) The dollar was softer on Monday, pegged back by sluggish U.S. data that tempered expectations of a Federal Reserve interest rate hike this year. The U.S. currency was 0.3 percent lower at 100.95 yen JPY= after losing 0.6 percent on Friday, when retail sales and producer prices came in weaker than expected. The euro was up 0.15 percent at $1.1172 EUR=, having risen 0.2 percent on Friday. The dollar index was weaker at 95.62 .DXY after dropping to 95.254 on Friday, its lowest since Aug. 3.
• Oil Trades Near Three-Week High on OPEC Freeze Speculation (Bloomberg) Oil traded near the highest closing level in three weeks in New York amid speculation that crude producers will revive talks to stabilize prices. Futures were little changed after earlier gaining as much as 1.5 percent. Prices climbed 6.4 percent last week as Saudi Arabia signaled it’s prepared to discuss stabilizing markets at informal OPEC discussions next month. Russia is open to talks for a joint output freeze “if necessary,” Energy Minister Alexander Novak told Saudi Arabian newspaper Asharq Al-Awsat.
• Russia says oil market talks with Saudi developing – newspaper (Reuters) Russia, the world’s top oil producer, is consulting with Saudi Arabia and other producers to achieve oil market stability, Energy Minister Alexander Novak said, adding that the door is still open for more discussions on freezing output levels if needed. In an interview published on Monday Novak also told Saudi-owned newspaper Asharq al-Awsat that a complete return of market stability is only likely in 2017.
• Nasdaq Tries to Appeal to Investors Lured by New Rival IEX (WSJ) In the latest sign that American stock exchanges are inching away from a decadelong arms race toward ever greater speed, Nasdaq Inc. plans a new option for investors who complain they can’t keep up with rapid-fire trading. The move shows how exchange operators are angling to respond to IEX Group Inc., the startup that won regulatory approval in June to launch a market that slows the pace of trading. Nasdaq and other rivals such as Intercontinental Exchange Inc. opposed the bid from IEX—made famous by the book “Flash Boys,” which maintained that exchanges sold advantages to high-frequency traders—saying its “speed bump” is an artificial barrier that violates rules requiring all orders be immediately accessible to traders.
• Brexit May Be Delayed Until Late 2019, Sunday Times Says (Bloomberg) Britain’s exit from the European Union could be delayed until late 2019 as new departments set up for the transition may not be ready to start negotiations as early as predicted, the Sunday Times reported. The Brexit and international trade ministries are still recruiting staff, making it unlikely Britain will invoke Article 50 –- after which the country has two years to leave the bloc — until late next year, the Sunday Times said, citing people it didn’t name. The potential delay comes amid tensions between International trade secretary Liam Fox and Foreign Minister Boris Johnson over control of certain aspects of policy, according to the Sunday Telegraph.

Overnight markets

• Overview: US 10yr note futures are down -0.0707% at 132-14, S&P 500 futures are up 0.24% at 2185.5, Crude oil futures are up 0.54% at $44.73, Gold futures are up 0.02% at $1343.5, DXY is down -0.1% at 95.629.

US Economic Data

• 8:30 AM : Empire Manufacturing, August, est. 2.00, -4.21, (prior 0.55)
• 10:00 AM: NAHB Housing Market Index, August, est. 60 (prior 59.9)
• 16:00 AM: Total Net TIC Flows, June, prior -11.0b
  • Net Long-term TIC Flows, June, est. 42.0b (prior 41.1b)

Canadian Economic Data

• 9:00 AM:  Existing Home Sales, m/m, July  prior -0.9%
• 10:00 AM:  Bloomberg Nanos Confidence Index, August 12^th, prior 59.9

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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230