Market Update Tsys trading lower & steeper, yields 0.5-2bps higher with 10Y 3.16% (+1.7bps). Risk-on tone with Euro stocks higher (Stoxx +0.60%), US equity futures pointing to a higher open, S&P fut +13. Gilts underperforming after the BOE left rates unch as expected, yet warned the economy could ‘run hot’ requiring faster rates increases. GOCs lower, in line with tsys, 10Y above 2.50%, 2.52% being the 62% retracement of the October rally. Yesterday’s August GDP came in better than exp, mostly due to oil&gas and utilities, BOC Poloz reiterating that rates have further to rise, but ‘it wont be a rapid process’. Long bond auction yest went well – reopening of the 2%/2051 with the roll unch from auction lvls (-0.2/-0.3). The Dec 2064 issue looks cheap, we will be forwarding our latest curve comment later this morning.
News headlines
BOE Waits for Brexit Clarity as Forecasts Hint at Faster Hikes (Bloomberg) The Bank of England hinted there may be a need for faster rate increases in the coming years in a report dominated by uncertainty over Brexit. The Monetary Policy Committee, led by Governor Mark Carney, said the economy may start running hot earlier than previously anticipated as wage growth improves and domestic costs build. It sees the inflation rate staying above its 2 percent goal for the next two years. Interest rates were left unchanged on Thursday. The slightly hawkish bias compared with August is tempered by the fact that the forecasts are based on an assumption for a smooth Brexit that may not come to pass. It said the exit deal with the EU remains the biggest factor when it comes to the economy and monetary policy.
Asia’s Factories Are Flashing Amber as Trade War Starts to Bite (Bloomberg) Manufacturing gauges for some of Asia’s most export-driven economies slipped into negative territory in October, highlighting the spillover effect from the U.S.-China trade war. The contractions follow evidence of a broad-based slowdown in China that has prompted the government to promise new measures to stoke growth. In the latest sign that trade war pain is spreading, purchasing managers’ indexes for Taiwan, Thailand and Malaysia all fell into contractionary territory during October.
Trump Attacks ‘Birthright Citizenship’ in Bid to Keep Senate (Bloomberg) President Donald Trump doubled down on his vow to deny U.S. citizenship to children born of unauthorized immigrants as he kicked off an eleventh-hour effort to save Republican control of the Senate. “Under this policy,” Trump asserted at a rally in Estero, Florida, on Wednesday night, “anyone who breaks into our country and has a child, the very next moment that child would be made a citizen for life. Great. This policy has even created an entire industry of birth tourism. Big business, where pregnant mothers travel to America to make their children instant American citizens.”
U.S. Futures, European Stocks Advance; Dollar Dips: Markets Wrap (Bloomberg) Stocks added to gains Thursday as upbeat earnings helped investors turn the page on the worst month for global equities in more than six years. The dollar fell and the pound jumped. Futures on the S&P 500 climbed, with more than half of companies having reported earnings, and most Asian shares were in the green. The Stoxx Europe 600 Index also advanced with telecoms and travel companies leading the way. While strong results from the likes of ING Groep NV helped buoy sentiment, not all the news was positive, with Royal Dutch Shell Plc declining after profit fell short of expectations.
Canada economy grows for seventh month, no quick rate hike seen (Reuters) Canada’s economy grew for a seventh month in a row in August, its longest stretch of expansion for more than a year, but analysts said the Bank of Canada was under little pressure to raise interest rates again next month. Statistics Canada said on Wednesday that GDP in August edged up by 0.1 percent. Analysts in a Reuters poll had predicted no change from July.
Canada’s Encana to buy Newfield Exploration in $5.5 billion deal (Reuters) Canadian oil and gas producer Encana Corp said on Thursday it would buy Newfield Exploration Co for $5.5 billion, making it one of the biggest shale oil producers in North America. As part of the all-stock deal, Encana will get greater access to three of North America’s biggest oil patches, including the Permian Basin. Encana will also assume $2.2 billion of Newfield’s debt. EnCana said liquids production will contribute over half of the combined company’s production and help expand margins.
Canada Post workers in Hamilton, La Mauricie, Que., join rotating strikes (BNN) More than 1,800 Canada Post workers have walked off the job in Hamilton and La Mauricie, Que., as the union’s overtime ban becomes effective across the country. The Canadian Union of Postal Workers says the walkout in La Mauricie began Wednesday at 11:30 p.m. and in Hamilton just after midnight on Thursday. Those workers joined union locals in 12 other communities taking part in the rotating strikes. The Ontario communities of Arnprior-Renfrew and Ottawa are still on strike, as well as the British Columbia cities of Campbell River, Courtenay, Nanaimo and Port Alberni. In Quebec, six Canada Post locals are also off the job, including St-Jerome, Valleyfield and Sorel.
Vancouver sees world’s biggest drop in luxury home prices (BNN) Guess which city managed to top a luxury real-estate ranking despite a slew of cooling measures to tame its property market? Yes, the tiny island nation of Singapore, nudging out Hong Kong. Luxury home prices rose 13 per cent in the quarter ended Sept. 30 from a year earlier, according to Knight Frank LLP’s Prime Global Cities Index. Gains were driven in part by the limited availability of high-end properties. Hong Kong fell to 14th place with third quarter year-on-year price gains of just 5.5 per cent.
Overnight markets
Overview: US 10yr note futures are down 0% at 118-14, S&P 500 futures are up 0.37% at 2721, Crude oil futures are down -0.47% at $65, Gold futures are up 1.21% at $1229.7, DXY is down -0.7% at 96.449, CAD/USD is down -0.46% at 0.7635.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.341% | 2 Year | 2.863% |
| 5 Year | 2.444% | 5 Year | 2.985% |
| 10 Year | 2.513% | 10 Year | 3.159% |
| 30 Year | 2.551% | 30 Year | 3.411% |
US Economic Data
| 7:30 AM | Challenger Job Cuts YoY, Oct 153% (70.9% prior) |
| 8:30 AM | Nonfarm Productivity, 3Q est 2.1% (2.9% prior) |
| Unit Labor Costs, 3Q est 1.0% (-1.0% prior) | |
| Initial Jobless Claims, October 27th est 212k (215k prior) | |
| Continuing Claims, Oct 20th est 1640k (1636k prior) | |
| 9:45 AM | Bloomberg Consumer Confort, Oct 28th (60.1 prior) |
| Markit US Manufacturing PMI, Oct est 55.8 (55.9 prior) | |
| 10:00 AM | Construction Spending MoM, Sep est 0.0% (0.1% prior) |
| ISM Manufacturing, Oct est 59.0 (59.8 prior) | |
| ISM Price Paids, Oct est 69.0 (66.9 prior) | |
| 11/01 | Wards Total Vehicle Sales, Oct est 17.05m (17.40m prior) |
Canadian Economic Data
| 8:30 AM | MLI Leading Indicator MoM, Sep (0.1% prior) |
| 9:30 AM | Markit Canada Manufacturing, Oct (54.8 prior) |
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
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230