Market Update

Tsys weaker, yields 2-3bps higher, 10Y 2.37% (+2.8bps) –  , yield curve slightly flatter, little reaction to stronger Nov retail sales (0.8% vs 0.3%). In Europe UK gilts outperforming, gilt/bund spread at a three-month low 87 bps – the March gilt future spiked to intra day high 125.18 well after BOE decision to leave rates unch despite a very strong read on Nov UK retail sales 1.1% vs 0.4%. Bunds under pressure as flash PMI data from France and Germany came in better than exp.  GOCs better offered after 8:30 US data, Can/US 1bp tighter after yesterday’s 4bp post FOMC widening. 

News headlines 

Fed Raises Rates, Eyes Three 2018 Hikes as Yellen Era Nears End (Bloomberg) Federal Reserve officials followed through on an expected interest-rate increase and raised their forecast for economic growth in 2018, even as they stuck with a projection for three hikes in the coming year.

Carney in Holding Pattern on Interest Rates After November Hike (Bloomberg) The Bank of England will fall into a central banking holding pattern on Thursday after November saw the first interest-rate hike in a decade.

Two GOP Senators Slam Tax Cuts for Rich, But How Will They Vote? (Bloomberg) President Donald Trump insisted Wednesday that his tax cut is all about helping the middle class even as Republican leaders formed a last-minute plan to cut the top rate paid by million-dollar earners.

Euro-Area Activity Surges as Manufacturing Posts Record Growth (Bloomberg) Economic momentum in the euro area unexpectedly accelerated to the fastest pace in almost seven years as manufacturing posted record growth at the end of 2017.  A composite Purchasing Managers’ Index rose to 58 in December from 57.5 in November, IHS Markit said. Economists surveyed by Bloomberg predicted a decline to 57.2. An index for Germany, the region’s biggest economy, jumped to the highest since 2011.

European Stocks Down, Euro Steady After ECB Holds: Markets Wrap (Bloomberg) Stocks stayed lower, while the euro and core European bonds held steady after the European Central Bank left its key rate unchanged and maintained its pledge to move slowly in winding down euro-area stimulus.

U.K. Retailers Get Black Friday Boost as Sales Jump 1.1% (Bloomberg)  Black Friday gave U.K. retailers a stronger-than-expected boost last month as discounts spurred Britons to snap up electrical appliances and other household products.

Walt Disney buys Murdoch’s Fox for $52.4bn (BBC) Walt Disney says it is to buy 21st Century Fox’s entertainment assets for a total $52.4bn (£39bn). The deal includes Fox’s 39% stake in satellite broadcaster Sky, and the 20th Century Fox film studio, Disney announced. Fox’s remaining assets, including Fox News and Sports, will form a new company.

Canadian home prices fall again in November: Teranet (Reuters) Canadian home prices fell again in November, the third straight monthly decline and the largest November drop outside of a recession, as Toronto prices fell for the fourth month and Vancouver prices were flat, data showed on Wednesday

Bombardier forecasts 2018 revenue below analysts’ estimates (Reuters) Canadian plane and train maker Bombardier Inc, in the middle of a five-year plan to turn around its ailing business, on Thursday forecast 2018 revenue that came in well short of analysts’ estimates.

Overnight markets

Overview: US 10yr note futures are down -0.113% at 124-15, S&P 500 futures are up 0.07% at 2671, Crude oil futures are down -0.44% at $56.35, Gold futures are up 0.89% at $1259.7, DXY is down -0.08% at 93.355, CAD/USD is up 0.1% at 0.7795. 

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.52% 2 Year 1.803%
5 Year 1.672% 5 Year 2.133%
10 Year 1.859% 10 Year 2.364%
30 Year 2.171% 30 Year 2.738%

US Economic Data

8:30 AM Initial Jobless Claims, Dec 9th est 236k (236k prior)
Continuing Claims, Dec 2nd est 1900k (1908k prior)
Retail Sales Advance MoM, Nov est 0.3% (0.2% prior)
Retail Sales Ex Auto MoM, Nov est 0.6% (0.1% prior)
Retail Sales Ex Auto and Gas, Nov est 0.4% (0.3% prior)
Import Price Index MoM, est 0.7% (0.2% prior)
Import Price Index Ex Petroleum, Nov est 0.1% (0.1% prior)
Import Price Index YoY, Nov est 3.2% (2.5% prior)
Export Price Index MoM, Nov est 0.3% (0.0% prior)
9:45 AM Markit US Manufacturing PMI, Dec est 53.9 (53.9 prior)
Markit US Services PMI, Dec est 54.7 (54.5 prior)
Markit US Composite PMI, Dec (54.5 prior)
Bloomberg Consumer Comfort, Dec 10th (52.3 prior)
10:00 AM Business Inventories, Oct est -0.1% (0.0% prior)

Canadian Economic Data

8:30 AM New Housing Price Index MoM, Oct est 0.2% (0.2% prior)
New Housing Price Index YoY, Oct (3.8% prior)
9:00 AM Existing Home Sales MoM, Nov (0.9% prior)
Bloomberg Dec. Canada Economic Survey



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