Commentaires matinaux

The BOC expected to leave rates unchanged at 1.75% and issue a cautious outlook given uncertainties over trade. Since the July MPR , the Canadian economy has remained relatively robust , with Q2 GDP coming in at 3.7% vs 2.3% forecast in MPR. Meanwhile inflation has hovered close to target and core prices have moved higher. Still a key forward looking indicator,  the Markit PMI, fell to 49.1 in August, pointing to weakness in manufacturing. The outsized contribution from exports (+5.5% in Q2) is unlikely to be sustained , indeed international trade reverted back to deficit in July according to this morning’s STCA figures. Short end pricing might seem aggressive, with the 2Y/3Y roll at -3.3bps , yet we prefer to wait post BOC to fade the inversion at the short end.

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, Émile Bordeleau

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, yields 1-3bps higher led by the long end, 10Y 1.485% (+3bps), ‘risk on’ with US stock futures higher, S&P +26,  crude  +1.5%,  gold -10, DXY -0.40%. The Hang Seng index rose 3.9%, largest one day gain since nov 2018 as tensions recede after HK leader Lam backed down on extradition.  UK gilts reeling with 10Y jumping +10bps – UK Parliament’s vote to block no-deal Brexit will likely trigger a delay or general election.  GOCs lower, 1bp tighter vs tsys before BOC decision.  The BOC is not expected to cut rates after last week’s strong Q2 GDP (3.7% vs 2.5%) , while inflation has hovered close to target 2.0% and core prices have moved steadily higher. Yet forward looking indicators such as the August Markit PMI have weakened in line with recent signs of a global manufacturing recession and  exports had a disproportionate influence on Q2 (5.5%), which is unlikely to be sustained.

News headlines

Stocks Jump as Risks Recede From Hong Kong to U.K.: Markets Wrap (Bloomberg) U.S. equity-index futures rallied alongside European and Asian stocks as traders cheered a reduction in political tension from Italy and Britain to Hong Kong. Treasuries and gold retreated, while the dollar slipped.

TSX futures rise on higher oil prices (Reuters) Futures for Canada’s main stock index edged higher on Wednesday, as oil prices recovered, helped by a wider market pickup on upbeat data from China’s services sector.

Oil Rises as Tight U.S. Supplies Counter Trade War Pessimism (Bloomberg) Oil rose as a forecast decline in U.S. crude inventories countered pessimism driven by a surprise contraction in American manufacturing and a warning to China from President Donald Trump.

Hong Kong leader withdraws extradition bill, but some say too little too late (Reuters) Hong Kong leader Carrie Lam on Wednesday withdrew an extradition bill that triggered months of often violent protests so the Chinese-ruled city can move forward from a “highly vulnerable and dangerous” place and find solutions.

For Bank of Canada, the trade war is getting harder to ignore (BNN) The Bank of Canada is expected to open the door further to interest rate cuts at a decision Wednesday, amid worries U.S.-China tensions will curb a relatively robust expansion at home.

U.S. investment in Malaysia up sharply as trade row with China drags on (Reuters) Malaysia approved U.S. investment worth $5.62 billion in the first half of the year compared with $113 million the previous year, the government said on Wednesday, a possible sign of a diversion of U.S. business as a trade row with China drags on.

Malaysia had plan to use Chinese money to bail out 1MDB, court hears (Reuters) Malaysia’s former leader Najib Razak approved a plan to bail out troubled state fund 1MDB by offering stakes in several big infrastructure projects to Chinese firms in 2016, a former aide told a court on Wednesday.

Alberta overspending on health, education services: Panel (BNN) A panel looking into Alberta’s finances says the province habitually overspends on its services and needs to get tough on schools, have university students pay more and force doctors to charge less.

Market Overview: US 10yr note futures are down -0.106% at 131-32, S&P 500 futures are up 0.88% at 2931.5, Crude oil futures are up 1.56% at $54.78, Gold futures are down -0.65% at $1545.8, DXY is down -0.38% at 98.62, CAD/USD is down -0.12% at 0.7507.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.322%	2 Year	1.464%
5 Year	1.147%	5 Year	1.351%
10 Year	1.137%	10 Year	1.488%
30 Year	1.408%	30 Year	1.984%

US Economic Data

07:00 AM	MBA Mortgage Applications, Aug 30  Survey: — Actual: -3.10% Prior: -6.20%
08:30 AM	Trade Balance, Jul  Survey: -$53.4b  Prior: -$55.2b
02:00 PM	U.S. Federal Reserve Releases Beige Book

Canadian Economic Data

08:30 AM	Labor Productivity QoQ, 2Q  Survey: 0.10%  Prior: 0.30%
	Int’l Merchandise Trade, Jul  Survey: -0.35b  Prior: 0.14b
10:00 AM	Bank of Canada Rate Decision, Sep 4  Survey: 1.75%  Prior: 1.75%

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, Émile Bordeleau

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 this morning, yields 1-1.5bps lower with the 10Y 1.48%, heavy volume in TY futures (~715k).  Core EGBs leading tsys , UK 10Y gilts 4bps lower at 0.37% new record low  with the GBP sliding to the lowest since 2016 –  Boris Johnson faces a vote in Parliament today which could force a snap election, as the PM sticks to plans for the UK to leave the EU on Oct 31 with or without a deal. S&P futures -0.7%, crude two decline now 5% at 53.70. August ISM Manuf the focus for US session, the index having fallen to a three year low in July, the fourth straight decline. In Canada, GOCs 4bps lower across the curve – 3bps tighter vs tsys, 10Y 1.11%, BOC rate decision tomorrow with no cut expected (10%) thou October is prices at 60%.

News headlines

Stocks Slide; Pound Whipsawed on Brexit Turmoil: Markets Wrap (Bloomberg) U.S. stocks were poised to drop at the open as Wall Street resumes trading after the long weekend, while equities in Europe and Asia also declined as investors weighed receding chances for fresh China talks this month. Treasuries edged up, while the pound slipped against the dollar as Brexit brinkmanship raised the possibility of an early election in the U.K.

TSX futures down on lower oil prices (Reuters) Futures for Canada’s main stock index were down on Tuesday, as oil prices fell due to the ongoing U.S.-China trade dispute as well as rising OPEC and Russian oil output.

Oil drops 2% as trade war rumbles on and output swells (Reuters) Oil prices fell by 2% on Tuesday, weighed down by rising OPEC and Russian oil output as well as the protracted U.S.-China trade dispute that has dragged on the global economy.

China, U.S. Struggle to Set Meeting as Tariffs Erode Trust (Bloomberg) Chinese and U.S. officials are struggling to agree on the schedule for a planned meeting this month to continue trade talks after Washington rejected Beijing’s request to delay tariffs that took effect over the weekend, according to people familiar with the discussions.

Singapore hotels see best month in years amid Hong Kong turmoil (Reuters) Singapore’s hotel occupancy rates have climbed to their highest in over a decade as travelers and business events switched from Hong Kong, where pro-democracy protests have slammed tourist numbers and wider business sentiment.

PRECIOUS-Gold steady on trade war, Brexit jitters; dollar limits upside (Reuters) Gold prices held steady on Tuesday as uncertainties surrounding U.S.-China trade relations and Britain’s departure from the European Union offset pressure from a stronger dollar.

Trump heaps more tariffs on China, still no deal in sight (BNN) The Trump administration slapped tariffs on roughly US$110 billion in Chinese imports on Sunday, marking the latest escalation in a trade war that’s inflicting damage across the world economy. China retaliated.

As Poloz takes the spotlight, Bay Street eyes rate cut clues (BNN) Bank of Canada Governor Stephen Poloz will have to be extra careful with the words he chooses when he reveals the central bank’s rate decision on Sept. 4.

Market Overview: US 10yr note futures are up 0.119% at 131-28, S&P 500 futures are down -0.74% at 2903.25, Crude oil futures are down -2.12% at $53.93, Gold futures are up 0.74% at $1540.7, DXY is up 0.37% at 99.282, CAD/USD is up 0.35% at 0.7479.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.319%	2 Year	1.496%
5 Year	1.146%	5 Year	1.375%
10 Year	1.12%	10 Year	1.483%
30 Year	1.387%	30 Year	1.945%

US Economic Data

09:45 AM	Markit US Manufacturing PMI, Aug F  Survey: 50.0  Prior: 49.9
10:00 AM	ISM Manufacturing, Aug  Survey: 51.3  Prior: 51.2
	ISM Prices Paid, Aug  Survey: 46.8  Prior: 45.1
	Construction Spending MoM, Jul  Survey: 0.30%  Prior: -1.30%

Canadian Economic Data

08:30 AM	MLI Leading Indicator MoM, Jul  Survey: 0.30%  Prior: 0.30%
09:30 AM	Markit Canada Manufacturing PMI, Aug  Survey: —  Prior: 50.2
10:00 AM	Bloomberg Nanos Confidence, Aug 30  Survey: —  Prior: 57.0

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, Émile Bordeleau

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