Market Update
US tsys mixed, short end slightly lower, long end higher before payrolls, 10Y 2.90% (unch), close to the lows of August having rallied 10bps this week alone. Nov Payrolls expected at 198k with the unemployment rate unch at 3.7% and AHE 3.1%. Equity futures lower, off the lows, S&P -8.5 while crude is up 1.2% as OPEC appears close to deal to cut prod, thou Iran has not agreed as yet. Core EGBs have reversed lower, bunds fading since equities pared losses. GOC slightly higher before Cdn employment data, 10Y 2.06% – big move in Can/US driven by BOC , spreads 10-15bps tighter out to 10yrs, with long cdas lagging as the 10s30s curve has widened 6bps over the week.
News headlines
U.S. Stock Futures Buck Rebound in Europe and Asia: Markets Wrap (Bloomberg) European stocks rebounded from the worst day in more than two years and Asian shares posted modest gains as investors sought to end a bruising week on a more upbeat note. Signs of stress remained, however, as U.S. equity futures declined and Treasuries rose. The Stoxx Europe 600 Index, which on Thursday dropped the most since the U.K. voted to leave the EU in 2016, jumped as every sector rallied. S&P 500 futures came off their lows as the European session wore on, but remained in the red for a second day. Japanese equities outperformed as most Asian gauges nudged higher. Italian debt climbed as European bonds largely drifted. The dollar edged up and the pound was steady as U.K. Prime Minister Theresa May was said to be weighing a plan to postpone the vote on her Brexit deal.
Huawei Arrest Tests China-Canada Ties as Trudeau Weighs Risk (Bloomberg) The arrest of a Huawei executive on Canadian soil represents another setback to Justin Trudeau’s push for stronger ties with Beijing, which are already strained by differences over trade and investments. Canada arrested Huawei Technologies Co. Chief Financial Officer Wanzhou Meng on Saturday in Vancouver as she was switching flights in the Pacific coast city. The arrest was made at the request of U.S. authorities, who want to extradite her. The arrest comes amid a probe of suspected violations of Iran trade sanctions.
What Economists Are Saying Before the November U.S. Jobs Report (Bloomberg) U.S. employers probably kept up a robust pace of hiring in November that was closer to the 2018 trend rate after hurricanes distorted data for the prior two months. Nonfarm payrolls rose 198,000, according to the median of estimates in Bloomberg’s survey of economists before the Labor Department releases its monthly employment report Friday at 8:30 a.m. in Washington. While that’s well below the 250,000 increase in October, it’s close to the 210,000 average over the past 12 months.
U.K. Tells Supermarkets to Maximize Stockpiles Before Brexit (Bloomberg) Theresa May’s government has told supermarkets to keep as much stock as possible in warehouses around the country in case the U.K. crashes out of the European Union without a Brexit deal, a senior official said. The request is being made because in the worst-case scenario, a no-deal Brexit would cut the capacity of the country’s main EU trading route from the French port of Calais to Dover in southeast England to just 13 percent of the current level due to additional border checks, according to the person.
OPEC talks stall as Saudis refuse to exempt Iran from oil cut (Reuters) OPEC talks on oil production cuts reached deadlock on Friday as the group’s leader Saudi Arabia refused to grant sanctions-hit Iran exemptions from planned reductions, OPEC sources said. Saudi Energy Minister Khalid al-Falih, asked on Friday whether he was confident the day’s meetings would produce a deal, said: “No.”
Tobacco giant Altria enters pot business with $2.4B Cronos stake (BNN) Altria Group Inc., the maker of Marlboro cigarettes for the U.S. market, is pushing into the Canadian cannabis industry, marking the major tobacco company’s first foray into the nascent sector. Altria agreed to acquire 146.2 million newly issued shares for $16.25 each — a 16 per cent premium from yesterday’s close. That would give Altria a 45 per cent stake in the Canadian cannabis producer. Altria will also get warrants that will give the option to increase its stake to 55 per cent.
CPP’s biggest enhancements in more than a decade to begin rolling out in 2019 (BNN) The biggest change to the country’s pension plans in more than a decade will take place in the new year, but the effects will be felt differently depending on which generation you belong to. Beginning in early 2019, the Canada Pension Plan and Quebec Pension Plan will phase in enhanced benefits over the next seven years to provide more financial support for Canadians after they retire. However, while pension contributions will gradually increase for all employees and employers, the younger generations will see the lion’s share of enhanced benefits as the improvements slowly make their way through the system.
Overnight markets
Overview: US 10yr note futures are down -0.078% at 120-10, S&P 500 futures are down -0.29% at 2683.25, Crude oil futures are up 1.34% at $52.18, Gold futures are up 0.18% at $1245.8, DXY is up 0.07% at 96.88, CAD/USD is up 0.01% at 0.7471.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.979% | 2 Year | 2.768% |
| 5 Year | 1.991% | 5 Year | 2.756% |
| 10 Year | 2.066% | 10 Year | 2.888% |
| 30 Year | 2.218% | 30 Year | 3.149% |
US Economic Data
| 8:30 AM | Change in Nonfarm Payrolls, Nov est 198k (250k prior) |
| Change in Private Payrolls, Nov est 198k (246k prior) | |
| Change in Manufact. Payrolls, Nov est 18k (32k prior) | |
| Unemployment Rate, Nov est 3.7% (3.7% prior) | |
| Average Hourly Earnings MoM, Nov est 0.3% (0.2% prior) | |
| Average Hourly Earnings YoY, Nov est 3.1% (3.1% prior) | |
| 10:00 AM | Wholesale Inventories MoM, Oct est 0.7% (0.7% prior) |
| Wholesale Trade Sales MoM, Oct (0.2% prior) | |
| U. of Mich. Sentiment, Dec est 97.0 (97.5 prior) | |
| U. of Mich. Current Conditions, Dec (112.3 prior) | |
| U. of Mich. Expectations, Dec (88.1 prior) | |
| U. of Mich. 1 Yr Inflation, Dec (2.8% prior) | |
| U. of Mich. 5-10 Yr Inflation, Dec (2.6% prior) | |
| 15:00 PM | Consumer Credit, Oct est 15.000b (10.92b prior) |
Canadian Economic Data
| 8:30 AM | Net Change in Employment, Nov est 10.0k (11.2k prior) |
| Unemployment Rate, Nov est 5.8% (5.8% prior) | |
| Hourly Wage Rate Permanent Employees, Nov est 1.8% (1.9% prior) | |
| Full Time Employment Change, Nov (32k prior) | |
| Part Time Employment Change, Nov (-22.6k 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