Market Update

US tsys higher, yields 2-3bps lower across the curve, on heavy volume in TY futures (645k), equity futures sharply lower : S&P -38 (-1.4%), Nasdaq -116 (-1.7%).  Risk off tone on renewed tensions between the US & China after Huwai’s CFO arrested in Vancouver. No reaction to weaker Nov ADP (179k vs 195k exp). Crude -3.5% below 51 – OPEC has yet to decide on size of production cut, proposed 1mln bbls/d not seen as adequate enough to stem oversupply in the mkt.  GOCs higher, outperforming tsys in the belly out to 10yrs 1.5-2bps, the 10Y below 2.10%, longs lagging since dovish BOC yest.

News headlines

Stocks Slump, Treasuries Gain as Sell-Off Resumes: Markets Wrap (Bloomberg) U.S. equity futures tumbled alongside stocks in Europe and Asia as concern resurfaced that trade tensions between the world’s two largest economies are far from resolved. Oil slid as OPEC ministers met in Vienna. Contracts on the Dow Jones Industrial Average sank more than 450 points, while S&P 500 futures signaled the underlying index will resume its slide after one of the biggest routs of the year. Trade tensions reignited after the arrest of the chief financial officer of tech giant Huawei Technologies Co. — dousing hope China and the U.S. would make immediate progress on a deal. The yuan dropped the most since October. The start of the futures session was marred by a sudden and unexpected plunge that sent a shock wave across equity markets.

China Says It’s Implementing Deals Done With U.S. on Trade (Bloomberg) China and the U.S. have reached agreement in the sectors of agriculture, autos, and energy, and China will immediately start implementing that consensus, a government spokesman said. « China will start from agricultural products, autos and energy to immediately implement specific items that China and the U.S. have agreed upon, » Ministry of Commerce Spokesman Gao Feng told reporters in Beijing. « In the next 90 days we will work in accordance with the clear timetable and road map to negotiate in areas where both sides have an interest and there are mutual benefits, such as intellectual property rights protection, technology cooperation, market access, and the trade balance. »

German Orders Rise for Third Month, Underpinning Recovery Hopes (Bloomberg) German factory orders unexpectedly rose for a third month, underpinning growth momentum after Europe’s largest economy contracted in the third quarter. Orders gained 0.3 percent in October from the previous month, compared with the median estimate in a Bloomberg survey for a 0.4 percent drop. It’s the longest streak of monthly increases in a year. Orders dropped 2.7 percent on the year.

‘Shocking’ Huawei Arrest Threatens to Upend Trump-Xi Trade Truce (Bloomberg) On the same day Donald Trump and Xi Jinping struck a trade war truce in Argentina, some 7,000 miles away Canadian authorities made an arrest that now threatens to make the U.S.-China conflict much worse. The U.S. is seeking the extradition of Wanzhou Meng, chief financial officer of Huawei Technologies Co., after convincing Canada to arrest her on Dec. 1. Canada confirmed she was in custody shortly after the Globe and Mail reported she had been arrested in connection with violating sanctions against Iran.

Bank of Canada more cautious on pace of hikes, Canadian dollar hits 18-month low (Reuters) The Bank of Canada kept interest rates on hold on Wednesday as expected and suggested the pace of future hikes could be more gradual, pushing the Canadian dollar down to an 18-month low and slashing market expectations of another increase next month. The central bank, which has lifted rates five times since July 2017 as the economy strengthens and reaches capacity, repeated that more monetary tightening would be needed to help meet its 2.0 percent inflation target.

Trump urges against oil production cut ahead of OPEC meeting (BNN) President Donald Trump urged OPEC nations not to cut oil production ahead of a meeting of the cartel to consider a reduction in output. The Organization of the Petroleum Exporting Countries and its allies continued to haggle over the size of potential crude-production cuts in Vienna on Wednesday. Their summit begins Thursday. Most producers made clear they agree on the need for a cut in oil production.

Roots plunges as retailer pulls back on expansion plans after weak Q3 (BNN) Barely a year after a rocky initial public offering, Roots Corp. () is slamming the brakes on its expansion, sending shares of the purveyor of quintessential Canadiana tumbling. The company, known for its leather goods and casual wear imprinted with beavers and maple leafs, cut sales forecasts after reporting third-quarter financial results that fell “well-below” its own expectations. It also vowed to pare store openings in the U.S. next year and slow down its entry in new markets.

Overnight markets

Overview: US 10yr note futures are up 0.182% at 120-08, S&P 500 futures are down -1.38% at 2664.5, Crude oil futures are down -3.06% at $51.27, Gold futures are up 0.05% at $1243.2, DXY is down -0.11% at 96.967, CAD/USD is up 0.43% at 0.7455.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 2.037% 2 Year 2.768%
5 Year 2.047% 5 Year 2.765%
10 Year 2.094% 10 Year 2.897%
30 Year 2.246% 30 Year 3.153%

US Economic Data

7:30 AM Challenger Job Cuts YoY, Nov 51.5% (153.6% prior)
8:15 AM ADP Employment Change, Nov est 195k (227k prior)
8:30 AM Trade Balance, Oct est -55.0b (-54.0b prior)
  Nonfarm Productivity, 3Q est 2.3% (2.2% prior)
  Unit Labor Costs, 3Q est 1.0% (1.2% prior)
  Initial Jobless Claims, Dec 1st est 225k (234k prior)
  Continuing Claims, Nov 24th est 1690k (1710k prior)
9:45 AM Bloomberg Consumer Comfort, Dec 2nd (60.6 prior)
  Markit US Services PMI, Nov est 54.4 (54.4 prior)
  Markit US Composite PMI, Nov (54.4 prior)
10:00 AM ISM Non-Manufacturing Index, Nov est 59.0 (60.3 prior)
  Factory Orders, Oct est -2.0% (0.7% prior)
  Factory Orders Ex Trans, Oct (0.4% prior)
  Durable Goods Orders, Oct est -2.4% (-4.4% prior)
  Durable Ex Transportation, Oct est 0.1% (0.1% prior)
  Cap Goods Orders Nondef Ex Air, Oct (0.0% prior)
  Cap Goods Ship Nondef Ex Air, Oct (0.3% prior)
12:00 AM Household Change in Net Worth, 3Q (2191b prior)

Canadian Economic Data

8:30 AM Int’l Merchandise Trade, Oct est -0.73b (0.42b prior)
10:00 AM Ivey Purchasing Managers Index SA, Nov (61.8 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