12/10/2018

Market Update Tsys trading weaker as US equity futures are rebounding strongly from two days of losses, US 10Y 3.165%(+1.5bps), yields off the highs of Asia where 10s hit 3.18%. S&P futures +1.1%, Nasdaq +1.6%, VIX 22 after spiking to 29 yest aft, highest since March. Core EGBs have recovered from sharp drops at the open, Italian BTPs slightly higher, supply picks up next week with ~E20bln including E4bln German 2Y, Spain 3,10 & 30Y and 5Y French OAT. GOCs lower in line with tsys, 10Y 2.51%, 2s10s 5bps flatter on the week as this week’s FTQ rally has been led by 10s (-8bps vs 2s/30s). 

News headlines

IMF Says Yuan Is Fairly Valued Ahead of U.S. Currency Manipulation Report (Bloomberg) The yuan is “broadly in line” with China’s economic fundamentals, a senior IMF official said, days before the U.S. Treasury Department is scheduled to release a closely watched report on currency manipulation. China’s currency has fallen more than 6 percent this year against the dollar, prompting speculation it may fall through the key level of 7 per dollar. The decline has attracted the notice of the U.S., which is locked in a tit-for-tat tariff dispute with Beijing. In an interview Thursday, Treasury Secretary Steven Mnuchin said the U.S. wants to make sure the depreciation isn’t a “competitive devaluation.”

World’s Largest Car Market Faces Historic Drop (Bloomberg) China’s car market has been one of the most reliable engines of global growth for decades. Now that all might be coming to an end. Purchases of passenger vehicles by dealerships plunged for a third straight month, an industry group said Friday. With trade ties with the U.S. worsening by the day and car sales barely up for the year already, the industry is now facing the prospect of its first contraction since at least the 1990s.

Stocks Gain With Earnings in Focus; Treasuries Dip: Markets Wrap (Bloomberg) Stocks staged a broad recovery on Friday as strong trade data from China buoyed markets, with investor focus turning to third-quarter earnings at the end of a tumultuous week. The dollar steadied as Treasury yields ticked higher. U.S. equity-index futures jumped, suggesting the S&P 500 may snap its six-day losing streak when American markets open. JPMorgan Chase & Co. kicked of the third-quarter reporting season with earnings broadly in line with analysts’ estimates. The Stoxx Europe 600 index rose for the first time in three days with miners leading the advance, though the gauge is still headed for its worst week since February as most sectors trimmed early gains.

Oil Pares Weekly Loss as Supply Concerns Offset Flight From Risk (Bloomberg) Oil pared a weekly loss as investor focus shifted from broader market turmoil spurred by a plunge in U.S. equities to looming shortages from Iran’s dwindling exports. Futures in New York rose 0.7 percent, trimming the weekly drop to 3.9 percent. The International Energy Agency, while cutting estimates for global oil-demand growth for this year and next, warned that prices will remain high as spare crude supplies diminish.

Canada sees little chance of quick end to U.S. metals tariffs (Reuters) Canada does not hold out much hope that Washington will quickly lift tariffs that it imposed on steel and aluminum exports and is resisting a U.S. push to agree to strict quotas, two sources familiar with the matter said. The administration of U.S. President Donald Trump imposed the sanctions on Canada and Mexico in June, citing national security reasons. Although Canada and Mexico agreed a renewed continental trade deal last week, the measures remain in place.

Canada new home prices unchanged in August (Reuters) New home prices in Canada were unchanged in August, Statistics Canada said on Thursday. Ottawa registered the largest month-over-month gain, which was the eleventh consecutive rise in that market, while Toronto was flat.

Balsillie sounds alarm on USMCA’s impact on data in Canada (BNN) The former chairman and co-CEO of Research In Motion is voicing his concerns over letting big data collection companies like Google into the country amid a new trilateral trade deal that saw Canada make concessions on data and intellectual property. “If you’re going to invite them in, set very, very clear parameters of how you generate and control [intellectual property] right up front — and how you’re going to manage the data right up front, so that you generate intangible assets for the benefit of the Canadian economy and Canadian citizens,” Jim Balsillie told BNN Bloomberg in an interview Wednesday, when asked about concerns regarding smart city projects like Sidewalk Labs in Toronto.

Overnight markets

Overview: US 10yr note futures are down -0.211% at 118-05, S&P 500 futures are up 1.12% at 2776.25, Crude oil futures are up 1.06% at $71.72, Gold futures are down -0.08% at $1226.6, DXY is up 0.12% at 95.132, CAD/USD is down -0.17% at 0.7686. 

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	2.277%	2 Year	2.859%
5 Year	2.397%	5 Year	3.018%
10 Year	2.512%	10 Year	3.167%
30 Year	2.521%	30 Year	3.338%

US Economic Data

8:30 AM	Import Price Index MoM, Sep est 0.2% (-0.6% prior)
	Import Price Index ex Petroleum MoM, est -0.1% (-0.2% prior)
	Import Price Index YoY, Sep est 3.1% (3.7% prior)
	Export Price Index MoM, Sep est 0.2% (-0.1% prior)
	Export Price Index YoY, Sep est 2.9% (3.6% prior)
10:00 AM	U. of Mich Sentiment, Oct est 100.5 (100.1 prior)
	U. of Mich Current Conditions, Oct (115.2 prior)
	U. of Mich Expectations, Oct (90.5 prior)
	U. of Mich 1 Yr Inflation, Oct (2.7% prior)
	U. of Mich 5-10 Yr Inflation, Oct (2.5% prior)

Canadian Economic Data

8:30 AM	Teranet/National Bank HP Index, Sep (226.12 prior)
	Teranet/National Bank HPI MoM, Sep (0.2% prior)
	Teranet/National Bank HPI YoY, Sep (1.4% prior)

 

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