Market Update
Cdn govt bond yields slightly higher, with the US mkt closed for the day, GOCs taking their cue from weakness in core EGBs. Equity futures higher , S&P +16, while European stocks off the lows, the Euro Stoxx -0.70%. UK gilts sharply lower, yields 4-5bps higher, as no-deal Brexit premium fading after developments in UK Parliament yest give it more control over the Brexit process. BOC rate decision at 10:00, no change in rates exp. The statement is expected to acknowledge Q3 weakness sluggish household spending and investment , odds of a Jan rate hike have come down to ~62% from 80%. Yesterday rally saw the 10Y yield fall to the lowest level since July @ 2.18%, with Can/US ~2bps tigher, 90bps thru in the long end the tightest since 2011.
News headlines
Falling Car Sales Are Latest Sign of Rate Hikes Hitting Canada (Bloomberg) Plunging automobile sales add to evidence that higher borrowing costs are beginning to eat into Canadian economic growth, possibly faster than the central bank expected. Light vehicle sales dropped 9.4 percent in November from a year earlier, the most since 2009, according to a report Monday by DesRosiers Automotive Consultants Inc. Outside the financial crisis, the decline was the biggest since 2004. Meanwhile, Bank of Canada data show growth in residential mortgages decelerated to 1.38 percent in September on an annualized three-month basis, the weakest pace since 1982.
China Swings Into Action on Trade as ‘Tariff Man’ Trump Ups Pressure (Bloomberg) China swung into action to start delivering on the trade commitments that led to its weekend truce with the U.S., even as uncertainty over what was agreed lingers. Beijing will start to quickly implement specific items where there’s consensus with the U.S. and will push forward on trade negotiations within the 90-day “timetable and road map,” the Ministry of Commerce said in a statement on Wednesday morning in China.
Yield-Curve Inversion Is Just Another Cloud on the Fed’s Horizon (Bloomberg) America’s economy is kicking by almost every metric the Federal Reserve cares about, with strong growth, at-target inflation and super-low unemployment. Yet the world seems risky right now, and the threat of a yield-curve inversion is among the dangers central bankers are monitoring. “In terms of reading the tea leaves around financial markets, obviously it’s something we pay a lot of attention to,” New York Fed President John Williams said at a press conference Tuesday.
Trade Pledge Slows Stock Sell-Off; Pound Advances: Markets Wrap (Bloomberg) European and Asian stocks dropped on Wednesday following a rout on Wall Street, though declines were contained and U.S. equity futures rose after China pledged to start delivering on trade agreements reached with America. The pound stayed higher as the U.K. government published legal advice relating to its proposed Brexit deal. Global markets have been left reeling after Tuesday’s steep sell-off in New York, but nerves appear to be steadying after China’s Commerce Ministry said Beijing will start to quickly implement specific items where there’s consensus with the U.S. and will push forward on trade negotiations within the 90-day “timetable and road map.” While the Stoxx Europe 600 Index slumped as much as 1.2 percent, that was far less than the 3.2 percent plunge recorded by the S&P 500 a day earlier. Futures for America’s benchmark gauge advanced, though the U.S. market will be closed on Wednesday to mark the death of President George H. W. Bush.
Two key Canada-to-U.S. oil pipelines hit by disruptions (Reuters) Two major pipelines carrying oil from Canada to the United States were hit by weather-related disruptions on Tuesday, the latest hit to Canada’s oil industry just days after the Alberta government announced forced cuts in crude production. A number of lines on the Enbridge Inc (ENB.TO) Mainline system, which carries crude and other liquids, were hit by power outages in the Western Canadian province of Saskatchewan due to severe weather, the company said Tuesday.
China confident it can clinch U.S. trade pact, Trump demands ‘real deal’ (Reuters) China expressed confidence on Wednesday that it can reach a trade deal with the United States, despite fresh warnings from President Donald Trump that he would revert to more tariffs if the two sides cannot resolve their differences. The remarks by the Chinese Commerce Ministry follow a period of relative quiet from Beijing after Trump and Chinese leader Xi Jinping reached a temporary truce in their trade war at a meeting over dinner in Argentina on Saturday.
Toronto home prices stable in November amid sharp drop in listings (BNN) The inventory of homes available for purchase in the Greater Toronto Area fell sharply last month in a sign that competition among buyers could be heating up in the country’s largest housing market, according to the regional real estate board. New listings of properties available for purchase in the GTA sank 26.1 per cent year-over-year in November, according to data released by the Toronto Real Estate Board on Wednesday. Meanwhile, total active listings fell 9.8 per cent to 16,420 units.
AGT Food agrees to go-private deal that values company at $436M (BNN) AGT Food and Ingredients Inc. () has agreed to be taken private by investors including CEO Murad Al-Katib in a deal that values the company at $436 million. The Regina-based company says it has elected to proceed with the $18-per-share transaction proposed last July upon the recommendation of a special committee of independent directors and a fairness opinion from TD Securities.
Overnight markets
Overview: US 10yr note futures are up 0.353% at 120-01, S&P 500 futures are up 0.53% at 2716, Crude oil futures are down 0% at $53.25, Gold futures are down -0.25% at $1243.5, DXY is down -0.1% at 96.872, CAD/USD is up 0.07% at 0.7533.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.127% | 2 Year | 2.795% |
| 5 Year | 2.146% | 5 Year | 2.787% |
| 10 Year | 2.182% | 10 Year | 2.914% |
| 30 Year | 2.269% | 30 Year | 3.173% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Nov 30th 2.0% (5.5% prior) |
| 14:00 AM | U.S. Federal Reserve Releases Beige Book |
Canadian Economic Data
| 10:00 AM | Bank of Canada Rate Decision, Dec 5th est 1.75% (1.75% 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