Market Update

Tsys higher overnite on moderate volume (375k TY), 10Y 2.885% (-3bps), equities lower in Europe and Asia after weak European PMIs as well as China retail sales.  Positive news on trade after China will temporarily remove a 25% tariff on US autos.  GOCs higher, in line with tsys after seeing underperformance across the curve yest, particularly in longs which are 6bps wider vs tsys wk/wk vs 1-2bps 2s-10s. Late yest Moody’s downgraded Ontario’s credit rating to Aa3 from Aa2, citing its fall economic stmt which forecast a $14.5bln deificit for FY 2019, more than double previous projections. Ontario spds opening 1bp wider this morn

News headlines

China to Cut Tax on U.S. Vehicles to Ease Trade Tensions (Bloomberg) China will remove the retaliatory duty on automobiles imported from the U.S. for three months in an effort to defuse trade tensions with the world’s biggest economy. The 25 percent tariff it imposed in a tit-for-tat measure will be scrapped starting Jan. 1, the finance ministry said Friday. Earlier this week, Bloomberg News reported that China was considering cutting the duties.

Trump Ordered Payments to Women Knowing It Was Wrong, Cohen Says (Bloomberg) President Donald Trump directed Michael Cohen to make hush payments to women alleging affairs with him out of concern about “how this would affect the election,” the attorney said in an interview with ABC News. The interview marked Cohen’s first since being sentenced to three years in prison after pleading guilty to breaking campaign-finance laws by arranging the payments, as well as lying to Congress and banks.

GOP Hurtles Toward Shutdown With No Plan to Avoid It (Bloomberg) House Republican leaders sent their members home for a six-day break Thursday without revealing any plan to avoid a looming government shutdown. In Paul Ryan’s waning days as House speaker, leaders are wavering about whether to try to pass a spending bill with the $5 billion President Donald Trump is demanding for his wall at the Mexican border. Senate Republicans also haven’t announced any plan to fund the government.

Global Stock Sell-Off Resumes as Growth Signs Flag: Markets Wrap (Bloomberg) U.S. equity futures and European stocks dropped, tracking a slump across Asia as worries over global growth brought a downbeat end to a rocky week. Treasuries and the dollar jumped. The Stoxx Europe 600 Index headed for a weekly loss, led lower by carmakers after regional sales slumped in November for the third month in a row. S&P 500 futures also pointed to a drop at the open, though both declines were tempered somewhat on news that China will temporarily remove a retaliatory duty on U.S.-imported automobiles. Earlier equities had slumped across Asia, with shares in Hong Kong and Japan leading the retreat after a slew of Chinese data reinforced concern about a slowdown in the world’s second-largest economy.

Ahead of China anniversary, trade war fans calls for faster market reforms (Reuters) China’s trade war with the United States is spurring some Chinese entrepreneurs, government advisers and think-tanks to call for faster reforms in the world’s second-largest economy and the freeing of a private sector stifled by state controls. The calls for change have become louder as China approaches a key anniversary later this month, although there are no signs that the government is planning to shift any key policies.

Bombardier CEO blasts ‘incomprehensible’ Siemens contract win with Via Rail (BNN) Bombardier Inc.’s () top executive says he can’t figure out how Canada’s government-owned passenger train operator could pick a foreign rival without demanding a minimum amount of local production. “It’s incomprehensible,’’ Bombardier Chief Executive Officer Alain Bellemare told reporters Thursday in Montreal. “We work in many countries around the world, and all countries require significant local content. We see it in the U.S. It’s difficult to understand that here, we can’t find ways of protecting innovation, technology and jobs that are similar to all the other countries in the world.’’

Moody’s downgrades Ontario’s credit rating (BNN) Bond rating agency Moody’s has downgraded the province of Ontario’s credit rating. The agency announced the downgrade from Aa3 to Aa2 today, citing the province’s $14.5-billion deficit in 2018-2019 and projections that it will continue to post deficits in the coming years. Moody’s says the combination of increased debt and slow revenue growth will result in a faster than previously anticipated increase of the province’s debt burden.

Overnight markets

Overview: US 10yr note futures are up 0.195% at 120-15, S&P 500 futures are down -0.82% at 2627.75, Crude oil futures are down -0.44% at $52.35, Gold futures are down -0.46% at $1241.7, DXY is up 0.54% at 97.588, CAD/USD is up 0.17% at 0.7475.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 2.043% 2 Year 2.731%
5 Year 2.055% 5 Year 2.72%
10 Year 2.12% 10 Year 2.882%
30 Year 2.291% 30 Year 3.143%

US Economic Data

8:30 AM Retail Sales Advance MoM, Nov est 0.1% (0.8% prior)
  Retail Sales Ex Auto MoM, Nov est 0.2% (0.7% prior)
  Retail Sales Ex Auto and Gas, Nov est 0.4% (0.3% prior)
9:15 AM Industrial Production MoM, Nov est 0.3% (0.1% prior)
  Capacity Utilization, Nov est 78.6% (78.4% prior)
9:45 AM Markit US Composite PMI, Dec (54.7 prior)
  Markit US Manufacturing PMI, Dec est 55.0 (55.3 prior)
  Markit US Services PMI, Dec est 54.6 (54.7 prior)
10:00 AM Business Invetories, Oct est 0.6% (0.3% prior)

Canadian Economic Data

There is no Canadian economic data for today.

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