Market Update Tsys lower on potential for China/US trade deal and before key Oct Payrolls, (200k exp), yields 1.5-2bps higher with the 10Y 3.15%. Tsys off the lows as equities pare gains, S&P futures now +16 from +28 at 8:00ET. Exxon beat Q3 est ($1.46 vs $1.23), with production also beating est after 10 qtrs of misses. Core Euro bond yields also tracking higher with stocks. GOCs lower, in line with tsys, 10Y 2.50%. Cdn employment expected at 15k for Oct from 63k in Sep, with the unemp rate unch @ 5.9%.
News headlines
Trump Asks Cabinet to Draft Possible Trade Deal With China (Bloomberg) President Donald Trump wants to reach an agreement on trade with Chinese President Xi Jinping at the Group of 20 nations summit in Argentina later this month and has asked key U.S. officials to begin drafting potential terms, according to four people familiar with the matter. The push for a possible deal with China was prompted by the president’s telephone call with Xi on Thursday, the people said, requesting anonymity to discuss internal deliberations. Afterward, Trump described the conversation as “long and very good” and said in a tweet that their discussions on trade were “moving along nicely.”
Economist Sees Trump’s China Trade Draft as ‘Midterm Posturing’ (Bloomberg) Markets rallied after U.S. President Donald Trump was said to have asked key officials to begin drafting potential terms for a trade deal with China, but at least one political observer is questioning the sincerity of Trump’s intentions. George Magnus, an associate at the University of Oxford China Centre in U.K. and former chief economist at UBS, in a series of tweets said markets shouldn’t expect much result from Chinese President Xi Jinping and Trump’s planned meeting at the Group of 20 nations summit in Argentina at the end of this month.
Mahathir Pushes Malaysia Budget Gap to Highest Since 2013 (Bloomberg) Malaysia’s government will push its budget deficit to the highest in five years and will hike taxes and draw more income from the state oil company to help plug the shortfall. In the first budget since Prime Minister Mahathir Mohamad took office in May, the government is widening its deficit target for this year to 3.7 percent of gross domestic product from a 2.8 percent target under the previous government. The median estimate in a Bloomberg survey of nine economists was 3.2 percent.
Global Stocks Rebound Gathers Pace on Trade Hopes: Markets Wrap (Bloomberg) Stocks extended gains globally, Treasuries dropped and the dollar fell on Friday as a buoyant mood swept markets on the back of fresh hopes for trade between the world’s two biggest economies. U.S. equity-index futures advanced even as shares of Apple Inc. dropped in pre-market trading after underwhelming sales forecasts. The Stoxx Europe 600 Index headed for its best week in two years, with carmakers and basic resources leading the charge. Stocks from Hong Kong to Tokyo surged, taking gains on the MSCI Asia Pacific Index to 5 percent for the week. Emerging-market equities jumped the most since March 2016, while currencies from South Korea to Australia joined the rally. The euro gained even as a drop in Italian manufacturing dragged the region’s PMI to a two-year low. Italy’s bonds climbed.
TransCanada eyes joint ventures, sales to fund Keystone XL (Reuters) Canadian pipeline operator TransCanada Corp said on Thursday it is eyeing joint ventures and asset sales, among other options, to finance the construction of its $8 billion Keystone XL crude oil pipeline. The Calgary-based company also said it has had substantial interest from potential partners for its Coastal Gaslink pipeline, which will carry natural gas to the LNG Canada export terminal in British Columbia.
Canada manufacturing growth slows to 21-month low in October (Reuters) Canada’s manufacturing sector expanded in October at the slowest pace in nearly two years as production and new business growth lost further momentum, while input costs and factory gate prices climbed at a faster clip, data showed on Thursday. The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI), a measure of manufacturing business conditions, fell to a seasonally adjusted 53.9 last month, its lowest since January 2017, from 54.8 in September.
Enbridge reports third-quarter loss on charges (Reuters) Enbridge Inc, Canada’s largest pipeline operator, reported a third-quarter loss on Friday as it recorded several charges. The company said net loss attributable to common shareholders was C$90 million, or 5 Canadian cents per share, in the quarter ended Sept. 30 compared with a profit of C$765 million, or 47 Canadian cents per share, a year ago. Earlier in the day, the company said it is suspending its dividend reinvestment and share purchase plan immediately until further notice.
Throne speech vote could topple New Brunswick’s Liberal government today (BNN) It would appear New Brunswick’s Liberal minority government is on the verge of defeat today after both the Tory and Peoples’s Alliance parties said they’ll vote against the government’s throne speech. That would leave Premier Brian Gallant’s Liberals without enough support to survive the confidence vote. The Liberals won just 21 seats in the September election — one fewer than the Tories — while the Greens and People’s Alliance each won three seats.
Debt-service costs headed for record in Canada (BNN) Debt service costs for Canadian households will climb to a record over the next two years, creating a drag on spending that may limit further rate increases by the central bank, according to Toronto-Dominion Bank.
Overnight markets
Overview: US 10yr note futures are down -0.105% at 118-15, S&P 500 futures are up 0.68% at 2756.75, Crude oil futures are down -0.25% at $63.53, Gold futures are down -0.26% at $1235.4, DXY is down -0.23% at 96.053, CAD/USD is down -0.12% at 0.7651.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.341% | 2 Year | 2.867% |
| 5 Year | 2.43% | 5 Year | 2.985% |
| 10 Year | 2.506% | 10 Year | 3.153% |
| 30 Year | 2.544% | 30 Year | 3.386% |
US Economic Data
| 8:30 AM | Trade Balance, Sep est -53.6b (-53.2b prior) |
| Change in Nonfarm Payrolls, Oct est 200k (134k prior) | |
| Change in Private Payrolls, Oct est 195k (121k prior) | |
| Change in Manufact. Payrolls, Oct est 16k (18k prior) | |
| Unemployment Rate, Oct est 3.7% (3.7% prior) | |
| Average Hourly Earnings MoM, Oct est 0.2% (0.3% prior) | |
| Average Hourly Earnings YoY, Oct est 3.1% (2.8% prior) | |
| 10:00 AM | Factory Orders, Sep est 0.5% (2.3% prior) |
| Durable Goods Orders, Sep (0.8% prior) | |
| Durable Ex Transportation, Sep (0.1% prior) | |
| Cap Goods Orders nondef Ex Air, Sep (-0.1% prior) | |
| Cap Goods Ship Nondef Ex Air, Sep (0.0% prior) |
Canadian Economic Data
| 8:30 AM | Int’l Merchandise Trade, Sep est 0.20b (0.53b prior) |
| Net Change in Employment, Oct est 15.0k (63.3k prior) | |
| Unemployment Rate, Oct est 5.9% (5.9% prior) | |
| Hourly Earnings Permanent Emp YoY, Oct est 2.3% (2.2% prior) | |
| Full Time Employment Change, Oct est 20.0 (-16.9 prior) | |
| Part Time Employment Change, Oct est -4.1 (80.2 prior) | |
| Participation Rate, Oct est 65.4 (65.4 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