Market Update
US tsys trading weaker, ‘risk-on’ after Trump decision to delay tariffs on China , China move to reduce US auto tariffs, yields 4-5bps higher across the curve, 10Y 3.04% (+5bps). US equity futures surging after deal – S&P +41 (+1.4%), Nasdaq + 155 (+2.23%). Crude higher on production cuts from OPEC and Alberta, crude 52.90 (+4%) USDCAD down the most in two months -0.7% 1.3176. US event calendar includes Oct Const spending & US Man ISM at 10:00ET, as well as various Fed speakers. In Canada, GOCs are lower , outperforming tsys by 1.5-2bps, 10Y 2.28%.
News headlines
Canada Joins Oil Cut Drive as Alberta Seeks to Ease Glut Crisis (Bloomberg) Canada’s largest oil producing province ordered an unprecedented output cut, an effort to ease a crisis in the nation’s energy industry and adding to global actions to combat a recent price crash. The plan announced Sunday will reduce production of raw crude and bitumen from Alberta by 325,000 barrels a day, or 8.7 percent, from January until excess oil in storage is drawn down. The reduction would then drop to 95,000 barrels a day until the end of next year at the latest.
Trump and Xi’s Truce Risks Extending, Not Ending the Trade War (Bloomberg) President Donald Trump framed his weekend trade truce with China’s Xi Jinping as an “incredible deal,” yet the leaders’ Buenos Aires steak dinner risks extending rather than ending the trade war. The postponing of a planned U.S. tariff hike on Chinese goods for three months was greeted by analysts and business groups as a welcome détente, avoiding for now a worsening of relations between the world’s largest economies. Early trading in currency markets on Monday also suggested upbeat investors.
Le Maire Says Eurozone Budget Gaining Traction: Brussels Update (Bloomberg) Euro-area finance ministers gather in Brussels on Monday for their final meeting on buttressing the currency bloc before passing the baton to their leaders, who are expected to strike a deal later this month.
Stocks Rally, Bonds Dip on Trade Truce; Oil Gains: Markets Wrap (Bloomberg) Stocks jumped on Monday after the U.S. and China declared a truce in their trade war, while Treasuries and the dollar fell. Oil surged on optimism producers will cut output. Futures on the Dow, Nasdaq and S&P all pointed to a firmer open, as European and Asian shares advanced following agreement by the leaders of the two countries to hold off on new tariffs and intensify trade talks. Automakers were among the biggest winners in the Stoxx Europe 600 Index after President Donald Trump said in a late-night tweet that China agreed to “reduce and remove” tariffs on imported American-made cars. Ten-year Treasury yields rose back above 3 percent while the euro pared a gain after data showed manufacturing activity slowed.
Canada economic growth slows in third-quarter, December rate hike seen off cards (Reuters) Canada’s economic growth slowed in the third quarter on declines in motor vehicle purchases and housing investment, underpinning market expectations that the Bank of Canada will not hike interest rates next week. Statistics Canada said on Friday that annualized growth between July and September was 2.0 percent, down from 2.9 percent in the second quarter. The pace of growth matched expectations of analysts in a Reuters poll.
Qatar to leave OPEC and focus on gas as it takes swipe at Riyadh (Reuters) Qatar said on Monday it was quitting OPEC from January to focus on its gas ambitions, taking a swipe at the group’s de facto leader Saudi Arabia and marring efforts to show unity before this week’s meeting of exporters to tackle an oil price slide.
Time to relax mortgage regulations, Canada home builders urge (BNN) Canada’s home builders are urging the federal government to loosen mortgage-lending restrictions that have helped cool housing markets this year. Executives at Mattamy Homes Ltd., North America’s largest closely held home builder, said the rules have brought about the desired soft landing and aren’t needed as much now that interest rates are rising. The Canadian Home Builders’ Association said the rules are hitting millennials and struggling markets like Calgary particularly hard. The rules, put in place in January, require even those with a 20 per cent down payment, who don’t need mortgage insurance, to prove that they can make payments at 2 percentage points above the contracted rate. The so-called B-20 stress tests already existed for insured mortgages. By April, the average home price in Toronto had tumbled 12 per cent from the same month the prior year, though has since stabilized.
Overnight markets
Overview: US 10yr note futures are down -0.183% at 119-08, S&P 500 futures are up 1.49% at 2799.25, Crude oil futures are up 3.75% at $52.84, Gold futures are up 0.73% at $1234.9, DXY is down -0.2% at 97.082, CAD/USD is down -0.9% at 0.7591.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.187% | 2 Year | 2.839% |
| 5 Year | 2.231% | 5 Year | 2.873% |
| 10 Year | 2.3% | 10 Year | 3.039% |
| 30 Year | 2.416% | 30 Year | 3.329% |
US Economic Data
| 9:45 AM | Markit US Manufacturing PMI, Nov est 55.4 (55.4 prior) |
| 10:00 AM | Construction Spending MoM, Oct est 0.4% (0.0% prior) |
| ISM Manufacturing, Nov est 57.5 (57.7 prior) | |
| ISM Employment, Nov (56.8 prior) | |
| ISM Prices Paid, Nov est 70.0 (71.6 prior) | |
| ISM News Orders, Nov (57.4 prior) | |
| 12/03 | Wards Total Vehicle Sales, Nov est 17.20m (17.50m prior) |
Canadian Economic Data
| 8:30 AM | MLI Leading Indicator MoM, Oct (0.1% prior) |
| 9:30 AM | Markit Canada Manufacturing, Nov (53.9 prior) |
| 10:00 AM | Bloomberg Nanos Confidence, Nov 30th (55.1 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