Market Update
Tsys higher, rising after non farm payrolls came up short of estimates (178k vs 180k) with Oct revised lower, US 10Y 2.40%(-4bps). Tsys higher in Asia on position squaring before employment data as well as Italy referendum this weekend. European rising to session highs after payrolls, outperforming tsys, UK 10Y gilts ~7bps lower, 10Y bunds 4bps lower @ 0.327%. Italian yields 5-6 bps lower before Italy vote Sunday on constitutional reform, a ‘no’ result is expected and PM Renzi has said he would resign should that be the outcome. GOCs opening higher, spds 2bps vs tsys, underpeforming on better than exp Nov Cda employment no.s (10k vs -15k exp) with the unemployment rate down 0.2% to 6.8% the lowest since June . Provis unch yest despite the highest yields since Dec., starting the day unch with supply still likely as today Ont pays out ~4bln Dec 2 cpn pmt.
News headlines
Stocks Fall With Commodities as Caution Prevails Before Payrolls (Bloomberg) Financial markets are ending the week the way they started, overshadowed by caution, as stocks fall with commodities and a selloff in Treasuries abates. The Stoxx Europe 600 Index extended its first weekly decline in a month and S&P 500 Index futures signaled further losses in U.S. equities as investors shift focus to a report on American payrolls. Oil led raw materials lower as it retreated from a six-week high, the British pound gained against all of its 16 major peers and German bunds ended a three-day slump.
Oil softens after OPEC decision prompts big weekly rally (Reuters) Oil prices fell 1.5 percent to steady at around $53 a barrel on Friday after the biggest weekly rally since 2009 following OPEC’s decision this week to cut crude output in order to rein in a global glut. The market focus now shifts to the implementation and impact of OPEC’s first production agreement since 2008, which will be joined by non-OPEC producers, after data showed output in Russia rose in November to a post-Soviet high.
Fed Should Lead Global Rate Rise, Former BOC Governor Says (Bloomberg) A former Group of Seven central banker says the time has come for the Federal Reserve to lead a coordinated global rate increase. David Dodge, who ran the Bank of Canada between 2001 and 2008, will give a speech in Toronto Friday arguing the best medicine for the world’s economy would be higher interest rates, combined with new government stimulus through spending or tax cuts.
Why 2016 May Be the Year of ‘Peak Housing’ for Canada (Bloomberg) There’s one particularly troubling tidbit to be found amid Canada’s surprisingly strong third-quarter growth: residential investment hit the skids. The annualized 5.5 percent decline in this category was its worst quarterly showing since 2010, notes Macquarie Capital Markets Analyst David Doyle, who views the details of the report as « growing evidence that 2016 will be the year of ‘peak housing’ for Canada. »
China’s Central Bank Is Facing a Major New Headache (Bloomberg) People’s Bank of China Governor Zhou Xiaochuan already has one policy headache with the currency falling to near an eight-year low. He could have an even bigger one next month. That’s when a $50,000 cap on how much foreign currency individuals are allowed to convert each year resets, potentially aggravating capital outflow pressures that are already on the rise. If just 1 percent of China’s almost 1.4 billion people max out those limits, that’s an outflow of about $700 billion — more than the estimated $620 billion that Bloomberg Intelligence estimates indicate has already flowed out in the first 10 months of this year.
National Bank of Canada posts better-than-expected profit (Reuters) National Bank of Canada (NA.TO: Quote), the country’s sixth biggest lender, posted a better-than-expected adjusted profit for the fourth quarter, benefiting from growth in its retail and wealth management businesses. Net income at the bank’s personal and commercial division increased by 7.1 percent to C$196 million ($147 million) in the three months ended Oct.31.
Overnight markets
Overview: US 10yr note futures are up 0.2142% at 124-8, S&P 500 futures are down -0.08% at 2190.25, Crude oil futures are down -0.61% at $50.75, Gold futures are up 0.1% at $1170.6, DXY is down 0% at 101.04, CAD/USD is down -0.23% at 0.7525.
US Economic Data
| 8:30 AM | Change in Nonfarm Payrolls, Nov, 178k, est. 180k (prior 161k, revised 142k) |
| Net Change in Employment, Nov, 10.7k, est. -15.0k (prior 43.9k) | |
| Change in Manufacturing Payrolls, Nov, -4k, est. -2k, (prior -9k, revised -5k) | |
| Unemployment Rate, Nov, 4.6%, est. 4.9% (prior 4.9%) | |
| Labor Force Participation, Nov, 62.7% (prior 62.8%) | |
| Average Hourly Earnings, m/m, Nov, -0.1%, est. 0.2% (prior 0.4%) | |
| Average Hourly Earnings, y/y, Nov, 2.5%, est. 2.8% (prior 2.8%) | |
| 9:45 AM | ISM New York, Nov, (prior 49.2) |
Canadian Economic Data
| 8:30 AM | Labor Productivity, q/q, 3Q, 1.2%, est. 1.0% (prior -0.3%, revised -0.2%) |
| Unemployment Rate, Nov, 6.8%, est. 7.0% (prior 7.0%) | |
| Participation Rate, Nov, 65.6 (prior 65.8) |
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, David Leclair-Legault
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230