Market Update
US tsys slightly lower, US 10Y 2.86%, yield curve flatter, paring gains as equities rebound from losses – S&P futures +2.75 (were down 20 early). Core Euro bonds mixed – UK gilts higher, yields 3-5bps lower with the GBP at 18 month lows ad it appears PM May will delay tomorrow’s crucial Brexit vote for fear of defeat. German bunds sold off at the open as equities moved higher, despite muted EGB issuance this week. Focus in the US on Wed CPI & Friday retail sales. In Canada, GOCs slightly higher, outperforming tsys by 1bp with GOC curve flatter after Friday’s huge Nov Payrolls which saw the largest one month gain on record at 94k vs 10k exp, with odds of a Jan hike rising to 17% from 8% prior to the report.
News headlines
China Says Canada Violated Bilateral Agreement in Huawei Arrest (Bloomberg) China accused Canada of violating a bilateral agreement by failing to speedily inform its consulate of the arrest of Huawei Technologies Co. Chief Financial Officer Meng Wanzhou, as tensions between the nations continue to escalate. “According to the China-Canada consular agreement, if a Chinese citizen is arrested by the Canadian government, the Canadian government should immediately notify the Chinese embassy,” Chinese Foreign Ministry spokesman Lu Kang told reporters in Beijing on Monday. “But the Canadian government didn’t do that.”
U.K. Economy Loses Steam as Battle Over Brexit Rages (Bloomberg) The U.K. economy lost momentum in the three months through October, a further sign of the toll being taken by Brexit uncertainty. Growth slowed to 0.4 percent from 0.6 percent in the third quarter, the Office for National Statistics said Monday. In October alone, growth was just 0.1 percent, with the economy being spared a third month of stagnation by a rebound in the dominant services industry.
ECB Heads for Crunch Time After Weeks of Holding Its Nerve (Bloomberg) European Central Bank officials have gone silent on monetary policy after weeks of holding their nerve in the face of waning confidence, slowing growth and mounting economic risks. The Governing Council is just days out from its Dec. 13 meeting, when it will probably call time on one of its major crisis tools. The buildup to the end of net asset purchases after spending 2.6 trillion euros ($3 trillion) has been anything but smooth, with multiple indicators falling and two of the euro area’s biggest economies – Germany and Italy – contracting.
Stocks Drop as Trade Concerns Fester; Pound Falls: Markets Wrap (Bloomberg) U.S. equity futures declined and European stocks followed Asian shares lower as traders fret over the outlook for global growth and a potential escalation of tensions between Washington and Beijing. The pound weakened as Theresa May was said to delay a crucial parliamentary vote on Brexit. Chemical companies led the retreat in the Stoxx Europe 600 Index as contracts on the Dow Jones, Nasdaq and S&P 500 indexes all languished in the red. The glum mood follows weak economic data out of China and news the country’s vice foreign minister summoned the U.S. ambassador to protest the arrest of Huawei Technologies Co.’s CFO. The euro strengthened on upbeat German trade data, while the dollar drifted. Treasuries and European sovereign bonds were mixed.
China urges Canada to free Huawei CFO or face consequences (Reuters) China warned Canada on Saturday that there would be severe consequences if it did not immediately release Huawei Technologies Co Ltd’s [HWT.UL] chief financial officer, calling the case “extremely nasty”. Meng Wanzhou, Huawei’s global chief financial officer, was arrested in Canada on Dec. 1 and faces extradition to the United States, which alleges that she covered up her company’s links to a firm that tried to sell equipment to Iran despite sanctions.
Shoppers Drug Mart granted licence to sell medical marijuana online (BNN) Shoppers Drug Mart has been granted a licence to sell medical marijuana online. Health Canada’s list of authorized cannabis sellers and producers has been updated to reflect that the pharmacy can sell dried and fresh cannabis, as well as plants, seeds and oil. A website has been set up by the company, which says that patients « with a valid medical document will soon be able to purchase a wide selection of medical cannabis products » from Shoppers. A spokeswoman for Shoppers’ parent company Loblaw Companies Ltd. says it’s too soon to say when people will be able to start making orders.
Consumer insolvencies climb 9% in Canada amid higher rates (BNN) Insolvencies filed by Canadian consumers jumped by the most in two years amid signs recent interest rate increases are filtering through to the economy. Insolvencies climbed to 11,641 in October, an increase of 9.2 per cent from a year earlier, according to a report from the Office of the Superintendent of Bankruptcy Canada. Insolvencies surged 16 per cent from September, and are 1.5 per cent higher than 2017 on a year-to-date basis. The Bank of Canada has raised borrowing costs five times since July 2017, and Governor Stephen Poloz reiterated Thursday rates will need to rise “into a neutral range” somewhere around 2.5 per cent to 3.5 per cent, from the current 1.75 per cent, as the economy operates near capacity. That view was reinforced by data Friday that show the country posted a record employment gain in November.
Overnight markets
Overview: US 10yr note futures are down -0.039% at 120-22, S&P 500 futures are up 0.01% at 2636.25, Crude oil futures are down -1.39% at $51.88, Gold futures are down -0.01% at $1252.5, DXY is up 0.14% at 96.649, CAD/USD is down -0.12% at 0.7515.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.006% | 2 Year | 2.719% |
| 5 Year | 2.008% | 5 Year | 2.701% |
| 10 Year | 2.074% | 10 Year | 2.854% |
| 30 Year | 2.235% | 30 Year | 3.134% |
US Economic Data
| 10:00 AM | JOLTS Job Opening, Oct est 7100 (7009 prior) |
Canadian Economic Data
| 8:15 AM | Housing Starts, Nov est 198.0k (205.9k prior) |
| 8:30 AM | Building Permits MoM, Oct est -0.3% (0.4% prior) |
| 10:00 AM | Bloomberg Nanos Confidence, Dec 7th (53.6 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