15/10/2018

Market Update US tsys trading slightly higher on above avg volume in TY futures (396k), US 10Y 3.16%(-1bp). Tsys near the lows of the session despite weaker  Sep Retail Sales (0.1% vs 0.6%, core -0.1% vs 0.4%) as European equities claw back earlier losses, core EGBs lower led by bunds. UK gilts higher, outperforming bunds while the GBP fell to the lowest in a week as Brexit talks have hit another impasse. In Canada, GOCs higher, 0.5bps narrower in 10s, 10Y 2.49% from 2.61% last Wed, highest since Jan 2014.  Much anticipated BOC outlook survey scheduled for 10:30AM, after the BOS indicator rose to near record levels in Q2, focus will be on any impact from US tariffs thou the ‘NAFTA 2.0’ deal signed in October may blunt some of the report’s impact. 

News headlines

Trump’s Claim of Currency Manipulation Tested in Treasury Report (Bloomberg) The U.S. Treasury is poised to render a verdict on President Donald Trump’s claim that China is manipulating its currency as a trade war between the two nations intensifies and rattles markets. While the U.S. hasn’t designated China as a currency manipulator since 1994, Wall Street is bracing for the prospect that the Treasury Department will do so this week in its semi-annual foreign-exchange report. Such a move wouldn’t trigger penalties, but it would likely escalate tensions between the world’s two largest economies.

Bank of America’s Lending Business Boosted by Higher Rates (Bloomberg) Bank of America Corp. got another boost from rising interest rates in the third quarter. The firm’s lending business produced the most interest income since 2011 and its net interest margin climbed to 2.42 percent, better than analysts estimated. That helped propel profit to a record.

Saudi Arabia Begins Internal Probe Into Khashoggi Disappearance (Bloomberg) Saudi Arabia has begun an internal investigation into the disappearance of a prominent journalist at its Istanbul consulate and could hold people accountable if the evidence warrants it, according to a Saudi official. King Salman over the weekend ordered the Saudi public prosecutor to investigate the fate of Jamal Khashoggi, partly due to information received from Turkish authorities, the Saudi official said on Monday. He spoke anonymously because he wasn’t authorized to discuss the matter. While Saudi Arabia and Turkey have already said they would cooperate in a joint investigation, this would be a separate inquiry, the official said.

Stock Slump Resumes; Oil Advances on Saudi Tension: Markets Wrap (Bloomberg) Stocks resumed a selloff in Asia and Europe while equity futures pointed to declines also in the U.S. on Monday, as growing tension between America and Saudi Arabia added to a list of investor concerns and drove up oil prices. Gold rose with Treasuries and the yen as the dollar fell. Industrial goods makers and financial-services companies were the biggest losers in the Stoxx Europe 600 index. The S&P 500 index was set to deepen declines after its biggest weekly retreat since March. Equities fell in Japan and Hong Kong and China’s stocks touched the lowest in almost four years following a weekend of warnings on global economic fragility from finance chiefs meeting at an annual IMF gathering.

JP Morgan and Ford cancel plans for Saudi investor event (Reuters) JP Morgan & Chase Co (JPM.N) Chief Executive Jamie Dimon and Ford Motor Co (F.N) Chairman Bill Ford canceled plans to attend a Saudi investor conference, the companies said on Sunday, the latest such high-profile announcements after the disappearance of Saudi journalist Jamal Khashoggi. The cancellations could add pressure on other U.S. firms like Goldman Sachs Group Inc (GS.N), Mastercard Inc (MA.N) and Bank of America Corp (BAC.N) to reconsider their plans to attend the investor event.

Canada home prices flat in Sept, up 2.1 percent on year (Reuters) Canadian home prices were unchanged in September from August as the number of areas across the country posting price gains declined, data showed on Friday. The flat monthly reading for the Teranet-National Bank Composite House Price Index, which measures changes for repeat sales of single-family homes, matched the historical average for September since 2010, Teranet said.

Sears files for bankruptcy protection in U.S (BNN) Sears Holdings Corp., the 125-year-old retailer that became an icon for generations of American shoppers, filed for bankruptcy, saddled with billions of dollars of debt racked up as it struggled to adjust to the rapid shift toward online consumption. The company filed for Chapter 11 protection from creditors with the U.S. Bankruptcy Court in White Plains, New York, early Monday and said Eddie Lampert is stepping down immediately as chief executive officer. At the same time, Lampert’s ESL Investments Inc. is negotiating a financing deal while also discussing buying “a large portion of the company’s store base,” Sears said in a statement.

Overnight markets

Overview: US 10yr note futures are down -0.092% at 118-08, S&P 500 futures are down -0.13% at 2765, Crude oil futures are up 0.9% at $71.98, Gold futures are up 0.92% at $1233.3, DXY is down -0.12% at 95.102, CAD/USD is up 0.01% at 0.7676. 

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	2.269%	2 Year	2.849%
5 Year	2.377%	5 Year	3.006%
10 Year	2.485%	10 Year	3.156%
30 Year	2.504%	30 Year	3.336%

US Economic Data

8:30 AM	Empire Manufacturing, Oct 21.1 est 20.0 (19.0 prior)
	Retail Sales Advance MoM, Sep 0.1% est 0.6% (0.1% prior)
	Retail Sales Ex Auto MoM, Sep -0.1% est 0.4% (0.3% prior)
	Retail Sales Ex Auto and Gas, Sep 0.0% est 0.3% (0.2% prior)
	Retail Sales Control Group, Sep 0.5% est 0.4% (0.1% prior)
10:00 AM	Business Invetories, Aug est 0.5% (0.6% prior)

Canadian Economic Data

9:00 AM	Existing Home Sales MoM, Sep est -0.0% (0.9% prior)
10:00 AM	Bloomberg Nanos Confidence, Oct 12th (55.7 prior)
10:30 AM	BoC Business Outlook Future Sales, 3Q (6.00 prior)
	BoC Senior Loan Survey, 3Q (-8.9 prior)
	BoC Overall Business Outlook Survey, 3Q (3.1 prior)

 

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