Comments
05/09/2019
Market Update
US tsys lower, yields 3-4bps higher, 10Y 1.505 (+4bps), positive sentiment on news trade talks will resume between the US & China in October. Huge beat on ADP – 195k vs 148k exp. Rally in GBP & pullback in gilts, 10Y gilt +8bps 0.57% highest since August 1st. Boris Johnson’s proposal to hold a snap election on October 15th was rejected by MPs, while his brother Bo resigned from cabinet. US stock futures higher (S&P +24), crude unch 56.30 despite API data showing a surprise 401k bbl build in crude inventories for last week, DOE inventories at 10:30. GOCs lower continuing underperformance vs the US, 10Y +6bps 1.20%. BOC yesterday less dovish than expected, saying monetary policy was ‘appropriate’.
News headlines
Stock futures higher on news of U.S.-China trade talks (Reuters) U.S. stock index futures rose on Thursday as the United States and China agreed to hold high-level talks next month, raising hopes of a de-escalation in a trade war that has bruised global economic growth.
TSX futures rise on news of U.S.-China trade talks (Reuters) Canada’s main stock index futures edged up on Thursday, tracking global markets, after China and the United States agreed to hold high-level trade talks in early October in Washington.
China, U.S. to hold trade talks in October as mistrust remains (BNN) China and the U.S. announced that face-to-face negotiations aimed at ending their tariff war will be held in Washington in the coming weeks, amid skepticism on both sides that any substantive progress can be made.
U.S. Fed to further simplify ‘stress capital buffer’ plan: Quarles (Reuters) Randal Quarles, head of supervision at the Federal Reserve, said on Thursday the U.S. central bank is preparing to further simplify a pending bank capital rule known as the “stress capital buffer,” following industry concerns.
Recession risks rise for Germany as industrial orders plunge (Reuters) German industrial orders fell more than expected in July on weak demand from abroad, data showed on Thursday, suggesting that struggling manufacturers could tip Europe’s biggest economy into a recession in the third quarter.
Apple places $7 billion in return to bond market (Reuters) Apple Inc (AAPL.O) said on Thursday it had sold $7 billion of bonds at yields ranging up to 103 basis points over the equivalent U.S. Treasury on maturities of up to 30 years, its first such debt issues since November 2017.
Canada appoints former McKinsey consultant envoy to China, business groups pleased (Reuters) Canada has appointed veteran business consultant Dominic Barton as ambassador to China, Prime Minister Justin Trudeau said on Wednesday, as the government grapples with a major diplomatic and trade dispute between the nations.
U.S., Japan rush to finish trade deal by Trump’s tight deadline (BNN) The U.S. and Japan are still thrashing out details of a trade deal that President Donald Trump wants to sign this month, including the crucial issue of whether he’ll refrain from imposing higher tariffs on imported cars, according to people familiar with the matter.
Market Overview: US 10yr note futures are down -0.331% at 131-27, S&P 500 futures are up 0.87% at 2964, Crude oil futures are up 0.18% at $56.36, Gold futures are down -0.49% at $1552.8, DXY is down -0.31% at 98.149, CAD/USD is down -0.16% at 0.7574.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.376% | 2 Year | 1.468% |
| 5 Year | 1.201% | 5 Year | 1.361% |
| 10 Year | 1.194% | 10 Year | 1.51% |
| 30 Year | 1.467% | 30 Year | 2.01% |
US Economic Data
| 07:30 AM | Challenger Job Cuts YoY, Aug Survey: — Actual: 39.00% Prior: 43.20% |
| 08:15 AM | ADP Employment Change, Aug Survey: 148k Actual: 195k Prior: 156k Revised: 142k |
| 08:30 AM | Nonfarm Productivity, 2Q F Survey: 2.20% Prior: 2.30% |
| Unit Labor Costs, 2Q F Survey: 2.40% Prior: 2.40% | |
| Initial Jobless Claims, Aug 31 Survey: 215k Prior: 215k | |
| Continuing Claims, Aug 24 Survey: 1688k Prior: 1698k | |
| 09:45 AM | Bloomberg Consumer Comfort, Sep 1 Survey: — Prior: 62.5 |
| Markit US Services PMI, Aug F Survey: 50.9 Prior: 50.9 | |
| Markit US Composite PMI, Aug F Survey: — Prior: 50.9 | |
| 10:00 AM | Factory Orders, Jul Survey: 1.00% Prior: 0.60% |
| Factory Orders Ex Trans, Jul Survey: — Prior: 0.10% | |
| Durable Goods Orders, Jul F Survey: 2.10% Prior: 2.10% | |
| Durables Ex Transportation, Jul F Survey: -0.40% Prior: -0.40% | |
| Cap Goods Orders Nondef Ex Air, Jul F Survey: — Prior: 0.40% | |
| Cap Goods Ship Nondef Ex Air, Jul F Survey: — Prior: -0.70% | |
| ISM Non-Manufacturing Index, Aug Survey: 54.0 Prior: 53.7 |
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, 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
CTI Cad rates comment & BOC Preview
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
04/09/2019
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