Market Update US tsys opening slightly higher, 10Y 3.21% on decent volume in TY futures (~445k), narrow 4 tick range, with mkt focus on US/China trade and midterms tomorrow. Core Euro bonds lower & wider vs tsys, 10Y bund/tsys spd 2bps wider while UK gilts underperform on indications the UK cabinet will meet to discuss a possible no-deal Brexit scenario. GOCs higher, in line with tsys, 10Y 2.525% (-1bp). CGBs fell to three week lows Friday in the wake of a mixed employment report – 33.9k rise in full time jobs, decline in unemp rate to 5.8% from 5.9% yet continued slowing in rate of wage increases, 1.9% the lowest since Aug 2017.
News headlines
Trump-Xi Trade Deal Likely to Begin Rather Than End at G-20 (Bloomberg) President Donald Trump often seems to be caught between his ideological desire to rewrite America’s trade relationship with China and a businessman’s instinct to cut a deal. And with midterm elections looming and financial markets coming off a rough October, the deal-maker appears to have the upper hand. “We’ll make a deal with China, and I think it will be a very fair deal for everybody,” Trump told reporters on Friday after asking aides the day before to begin drafting ideas for an agreement to take to his planned meeting with Chinese President Xi Jinping at the Group of 20 summit in Argentina Nov. 30 to Dec. 1. The two sides are “getting much closer to doing something,” he said.
U.S. Payrolls Rise More Than Forecast as Wage Gains Hit 3.1% (Bloomberg) American workers enjoyed the biggest leap in pay since 2009 as job gains topped forecasts and the unemployment rate held at a 48-year low, a boost for President Donald Trump ahead of next week’s midterm elections and reason for the Federal Reserve to keep raising interest rates. Nonfarm payrolls rose 250,000 after a downwardly revised 118,000 gain, a Labor Department report showed Friday. The median estimate in a Bloomberg survey called for an increase of 200,000 jobs. Average hourly earnings for private workers advanced 3.1 percent from a year earlier and the unemployment rate was unchanged from September at 3.7 percent, both matching projections.
Hong Kong Housing May Be Headed for a Correction (Bloomberg) Signs of a housing market downturn in Hong Kong are spreading after the city’s first interest-rate increases in 12 years and an escalation in trade tensions between China and the U.S. “We’re now in a correction like the one we had during 2015 to 2016,” said Cusson Leung, JPMorgan Chase & Co.’s head of property and conglomerates research in Asia, citing buyers’ fears for the outlook of both the Hong Kong and Chinese economies.
Stocks Edge Up Before U.S. Midterms; Pound Rises: Markets Wrap (Bloomberg) U.S. equity futures reversed a drop and European stocks rose as investors looked ahead to the American elections this week, with a trade deal between the world’s biggest economies seemingly off the table for now. Treasuries edged higher, while the pound strengthened amid signs the U.K. and European Union are closer to breaking the Brexit deadlock. Futures on the Dow, S&P 500 and Nasdaq all eventually turned higher, while telecom and healthcare companies were among the biggest advancers as the Stoxx Europe 600 Index climbed in relatively thin trading. Shares in Asia slid following Friday’s rally and after White House economic adviser Larry Kudlow downplayed the potential for a quick deal between the U.S. and China. The pound gained for the third day in four on news of further progress in Brexit negotiations, and the dollar climbed against most of its other major peers.
Canada adds jobs on a surge in full-time hiring, rates seen rising (Reuters) The Canadian economy added jobs in October with a surge in full-time hiring, and the unemployment rate dipped to a 40-year low, underpinning expectations that the Bank of Canada would keep raising interest rates. Statistics Canada said on Friday that 11,200 jobs were created and the unemployment rate fell to 5.8 percent for the first time since July. Analysts in a Reuters poll had forecast a gain of 10,000 positions and for the jobless rate to remain at 5.9 percent.
Barrick in talks with Newmont to combine Nevada gold operations (Reuters) Barrick Gold Corp, which is being formed by Barrick’s (ABX.TO) $6.1 billion takeover of Randgold Resources (RRS.L), is in talks with Newmont Mining (NEM.N) to combine their Nevada gold mining operations, sources told Reuters. Last month’s tie-up between Barrick and Africa-focused Randgold Resources revived speculation about a joint venture between Newmont and Barrick in Nevada, something the two mining firms had explored in 2014 without reaching a deal.
Lowe’s to close 27 stores in Canada by February (BNN) Lowe’s Cos. announced it will close 51 underperforming store locations by Feb. 1, 2019 in Canada and the U.S., as part of the hardware store chain’s ongoing reassessment of its business strategy. The North Carolina-based retailer said it will close 27 stores, two plants and two corporate locations in Canada. Twenty stores will be shuttered in the U.S. “While decisions that impact our associates are never easy, the store closures are a necessary step in our strategic reassessment as we focus on building a stronger business,” said Marvin R. Ellison, Lowe’s president and CEO, in a release.
Oil trades near six-month low as fears of a shortage subside (BNN) Oil traded near a six-month low as the prospects of a tight global market at the end of year further receded after the U.S. softened the restart of sanctions against Iran. Crude in New York slipped 0.4 per cent, falling for a sixth day. Sanctions against Iran snapped back on Monday, though eight countries were allowed to continue buying some crude from the country, according to U.S. Secretary of State Michael Pompeo. Hedge funds reduced bullish bets for an eighth week as extra supplies from OPEC and the U.S. assuaged concerns of a potential shortfall. “The U.S. has done a U-turn as compared with its previous announcements” on Iran, said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “It thus comes as no surprise that speculators are squaring their net long positions in crude oil, which is likewise weighing on prices.”
Overnight markets
Overview: US 10yr note futures are up 0.093% at 118-05, S&P 500 futures are down -0.06% at 2722.5, Crude oil futures are down -0.02% at $63.13, Gold futures are down -0.25% at $1230.2, DXY is up 0.07% at 96.614, CAD/USD is down -0.09% at 0.7636.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.349% | 2 Year | 2.901% |
| 5 Year | 2.439% | 5 Year | 3.021% |
| 10 Year | 2.523% | 10 Year | 3.199% |
| 30 Year | 2.559% | 30 Year | 3.444% |
US Economic Data
| 9:45 AM | Markit US Services PMI, Oct est 54.6 (54.7 prior) |
| Markit Us Composite PMI, Oct (54.8 prior) | |
| 10:00 AM | ISM Non-Manufacturing Index, Oct est 59.1 (61.6 prior) |
| 11/05-11/09 | Mortgage Delinquencies, 3Q (4.36% prior) |
| MBA Mortgage Foreclosures, 3Q (1.05% prior) |
Canadian Economic Data
| 10:00 AM | Bloomberg Nanos Confidence, Nov 2nd (58.0 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