11/10/2018

Market Update Tsys trading weaker, US 10Y 3.18%, despite risk off tone in equity markets (S&P fut -12.75), after yesterday afternoon’s plunge in stocks saw the 10Y rally after a somewhat disappointing auction from 3.24% to 3.17%. The USD index is lower (95.125 – 0.38), while gold is higher for a third day 1,203. European stocks seeing milder declines, the Euro Stoxx -1.2%. Key US Sep CPI coming up after Trump’s comments on Fed tightening despite inflation being in check, consensus is for a 0.2% /2.3% y/y. The US auctions $15bln in 30Y bonds at 1:00ET.  GOCs lower in line with tsys, 10Y 2.55% from 2.61% early yest morning. Provis closed 1bp wider yest, Ontario longs underperforming, the Ont 28/48 box 15.9bps, +1.5bps since last week. 

News headlines

Mnuchin, Fed Officials Downplay Market Rout as Sell-Off Widens (Bloomberg) Global finance chiefs played down the economic risks posed by the biggest U.S. stock sell-off since February, with many describing the decline as a long-awaited correction. “The fundamentals of the U.S. economy continue to be extremely strong, I think that’s why the stock market has performed as well as it has,” U.S. Treasury Secretary Steven Mnuchin told Bloomberg News at the IMF’s annual meeting in Bali, Indonesia. “The fact that there’s somewhat of a correction given how much the market has gone up is not particularly surprising.”

OPEC Sees Weaker Demand for Its Crude Next Year as Rivals Surge (Bloomberg) OPEC is under intense pressure right now from consumers to ease prices by pumping more crude, but for 2019 it sees a more doubtful picture. The cartel cut its estimate for global demand for its crude next year due to weakening economic growth and higher output from rivals, notably U.S. shale drillers. The world will need almost 900,000 fewer barrels from the group each day in 2019 — equivalent to Libya’s average output this year.

Trump Says Blame ‘Loco’ Fed, Not China Trade War, for Sell-Off (Bloomberg) President Donald Trump slammed the Federal Reserve as “going loco” for its interest-rate increases this year in comments hours after the worst U.S. stock market sell-off since February. Trump said in a telephone interview on Fox News late Wednesday night the market plunge wasn’t because of his trade conflict with China: “That wasn’t it. The problem I have is with the Fed,” he said. “The Fed is going wild. They’re raising interest rates and it’s ridiculous.”

Stock Rout Spreads as Bonds, Currencies Stay Calm: Markets Wrap (Bloomberg) There was little respite for equity investors on Thursday as the biggest U.S. stock selloff in months rolled through Asia and Europe and futures pointed to another drop at the New York open. Core European bonds gained and Treasuries turned lower before U.S. consumer price data. The worst of the stock declines were in Asia, where China’s Shanghai Composite gauge closed down more than 5 percent. Taiwan’s technology-heavy TWSE Index plummeted more than 6 percent in the region’s worst performance. By comparison, European losses were more contained, with the Stoxx Europe 600 Index and Britain’s FTSE 100 both slipping no more than 2 percent. Italian equities headed for a bear market, however, and LeasePlan Group NV pulled a planned IPO.

China car dealers push for tax cut as auto growth stalls (Reuters) China’s top auto dealers’ association has asked the government to halve taxes on car purchases to revive faltering sales, sources said, as worries grow the country’s auto market could shrink this year for the first time in decades. The China Automobile Dealers Association (CADA) submitted documents last month to the country’s finance and commerce ministries proposing the 10 percent auto purchase tax be halved, two people at the industry body told Reuters.

SEC, Tesla support approval of settlement (Reuters) The U.S. Securities and Exchange Commission, Tesla Inc (TSLA.O) and Chief Executive Officer Elon Musk submitted a joint filing late on Wednesday in support of a settlement, saying the terms were in the best interest of investors. “We therefore respectfully submit that the court should accept and enter the proposed consent judgments,” they said in a letter filed with the U.S. District Court, Southern District of New York.

SNC plunges as Canada rules out negotiated deal on graft charges (BNN) SNC-Lavalin Group Inc. () tumbled the most in more than six years after Canadian prosecutors ruled out a negotiated settlement with the company over past corruption charges. The Public Prosecution Service of Canada won’t open negotiations for a so-called Remediation Agreement, SNC-Lavalin said in a statement Wednesday. Canada’s biggest engineering and construction company said it “strongly disagrees” with the government’s position and is reviewing appeal options.

Overnight markets

Overview: US 10yr note futures are up 0.252% at 118-02, S&P 500 futures are down -0.42% at 2769.25, Crude oil futures are down -1.45% at $72.11, Gold futures are up 1.13% at $1206.9, DXY is down -0.4% at 95.123, CAD/USD is down -0.16% at 0.7664. 

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	2.305%	2 Year	2.857%
5 Year	2.428%	5 Year	3.025%
10 Year	2.548%	10 Year	3.184%
30 Year	2.544%	30 Year	3.365%

US Economic Data

8:30 AM	CPI MoM, Sep est 0.2% (0.2% prior)
	CPI Ex Food and Energy MoM, Sep est 0.2% (0.1% prior)
	CPI YoY, Sep est 2.4% (2.7% prior)
	CPI Ex Food and Energy YoY, Sep est 2.3% (2.2% prior)
	CPI Index NSA, Sep est 252.697 (252.146 prior)
	CPI Core Index SA, Sep est 258.629 (258.141 prior)
	Real Avg Weekly Earnings YoY, Sep (0.5% prior)
	Real Avg Hourly Earning YoY, Sep (0.2% prior)
	Initial Jobless Claims, Oct 6th est 207k (207k prior)
	Continuing Claims, Sep 29th est 1660k (1650k prior)
9:45 AM	Bloomberg Consumer Comfort, Oct 7th (61.6 prior)
10/11-10/18	Monthly Budget Statement, Sep est 75.0b (7.9b prior)

Canadian Economic Data

8:30 AM	New Housing Price Index MoM, Aug est 0.1% (0.1% prior)
	New Housing Price Index YoY, Aug est 0.5% (0.5% prior)

 

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