Market Update
Tsys lower and flatter, avg volume in TY futures, 10Y 2.38%. ‘Risk on’ with equities in Europe higher, S&P futures +5.5 before payrolls. Economic numbers out of Japan/China much better than exp, Brexit deal supproting risk assets. Tsys pressured in Europe with gilts, after UK and EU agreed on Brexit pact as well as UK payout, UK gilt yields 3-4bps higher out the curve in a bear steepener. Peripherals tighter led by Greece on new Basel rules and implications for lower quality credits. GOCs lower, underperforming tsys by1 bp in 10s & longs, 10Y 1.87%. Provis tighter yesterday on back of strong buying post QC 10Y deal – came at 59.5, now 58.5/58 on screens. Provi credit curves flatter, QC 48/27 0.5bps on the week (10.7/10.3) along with similar move in Ont 48/27 curve.
News headlines
Brexit Breakthrough Struck as Path Cleared for Tough Trade Talks (Bloomberg) The U.K. and the European Union sealed a deal to unlock divorce negotiations, opening the way for talks on what businesses are keenest to nail down — the nature of the post-Brexit future.
European Stock Bulls Are Laughing All the Way to the Banks (Bloomberg) Buoyed by speculation that new capital rules will free up more cash than expected for dividends, banks on the Stoxx Europe 600 Index rose 3 percent on Friday, beating the broader gauge by the most since April and breaking through multiple technical milestones. ABN Amro Group NV soared 6 percent, while BNP Paribas SA — which has said that its payout target depended on regulation — added 4.1 percent.
Japan’s Economy Expands More Than Expected on Strong Investment (Bloomberg) Japan’s economy expanded a faster-than-expected 2.5 percent in the third quarter, as a nearly year-long recovery in exports helped fuel business investment.
Dollar Gains Again as Stocks Rebound; Pound Falls: Markets Wrap (Bloomberg) The dollar’s solid week continued on Friday, with the greenback gaining as the U.S. government averted a shutdown and tax reform negotiations made progress before what’s expected to be a healthy jobs report. The upbeat mood also helped stocks after Asian data bolstered the global growth story, while the pound dropped even after a Brexit breakthrough.
Spending Talks Continue After Congress Sends Trump Short-Term Bill (Bloomberg) The U.S. Congress sent President Donald Trump a two-week extension of federal funding that averts a government shutdown this week but defers contentious decisions on spending on defense and domestic programs.
TSX set for higher open as oil prices rise (Reuters) Futures pointed to a higher opening for Canada’s main stock index on Friday ahead of Canadian housing data and as oil prices edged up on rising Chinese demand.
Overnight markets
Overview: US 10yr note futures are down -0.038% at 124-08, S&P 500 futures are up 0.23% at 2648.25, Crude oil futures are up 1.75% at $57.68, Gold futures are down -0.33% at $1249, DXY is up 0.23% at 94.01, CAD/USD is down -0.13% at 0.7789.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.504% | 2 Year | 1.811% |
| 5 Year | 1.674% | 5 Year | 2.153% |
| 10 Year | 1.876% | 10 Year | 2.38% |
| 30 Year | 2.185% | 30 Year | 2.767% |
US Economic Data
| 8:30 AM | Change in Nonfarm Payrolls, Nov est 195k (261k prior) |
| Change in Private Payrolls, Nov est 195k (252k prior) | |
| Change in Manufact. Payrolls, Nov est 15k (24k prior) | |
| Unemployment Rate, Nov est 4.1% (4.1% prior) | |
| Average Hourly Earnings MoM, Nov est 0.3% (0.0% prior) | |
| Average Hourly Earnings YoY, Nov est 2.7% (2.4% prior) | |
| 10:00 AM | Wholesale Inventories MoM, Oct est -0.4% (-0.4% prior) |
| Wholesale Trade Sales MoM, Oct est 0.3% (1.3% prior) | |
| U. of Mich. Sentiment, Dec est 99.0 (88.9 prior) |
Canadian Economic Data
| 8:15 AM | Housing Starts, Nov 252.2k est 213k (222.8k prior) |
| 8:30 AM | Capacity Utilization Rate, 3Q (85.0% 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