Market Update US tsys trading modestly higher, 10Y 3.103 (-0.7bps), above avg volume in TY futures (460k). Relatively quiet on eco front with only Ind Prod/Cap Util and LT TICS flows at 16:00ET. Core EGBs lower led by UK gilts where yields 3-4bps higher, partial reversal of yest rally as PM May found support from her environmental secretary Michael Gove, amongst others. Equities weaker, S&P futures -20, GE in focus as CDS continues to move wider, while the US IG Corp Index widened to 122 yest the most since July, +7bps in the last two days.  Crude higher for a third day, 57.44(+1.7%), while Western Cda Select fell below $14 yest for the first time since Feb 2016 to a record low $13.46. The risk-off tone in equities & lower crude has spilled over to Cdn credit – subdebt & utilities 10-15 bps wider , lower rated BBBs and reits ~30bps wider. 

News headlines

Fed Rate Pause Possible in 2019 as Powell Highlights Headwinds (Bloomberg) Federal Reserve Chairman Jerome Powell has laid out a scenario for a pause in the central bank’s interest-rate hiking campaign sometime next year by highlighting potential headwinds to the U.S. economy. While generally upbeat about the outlook, Powell on Wednesday listed three possible challenges to growth in 2019: slowing demand abroad, fading fiscal stimulus at home and the lagged economic impact of the Fed’s past rate increases.

Trump and Xi Likely to Get Only Framework Trade Deal, Ross Says (Bloomberg) The U.S. still plans to raise tariffs on Chinese imports in January with President Donald Trump and China’s Xi Jinping likely at best to agree to a “framework” for further talks to resolve trade tensions at an upcoming meeting, Commerce Secretary Wilbur Ross said. The U.S. and China are now discussing the agenda for the two leaders’ meeting on the sidelines of the Nov. 30-Dec. 1 Group of 20 summit in Buenos Aires and what a realistic outcome could be. When asked about a report that China this week had presented a list of possible concessions ahead of the talks, Ross said in an interview Thursday that everything leading up to the meeting is just “preparatory.”

Draghi Sees Euro-Area Growth Lasting Even as Trade Risks Mount (Bloomberg) Mario Draghi expects the euro area to continue growing in coming years even amid risks from protectionism that need to be monitored “very carefully.” The European Central Bank president’s remarks in Frankfurt come after the region’s expansion slowed to 0.2 percent in the third quarter, the weakest pace in more than four years. The ECB will decide at its final policy meeting of the year on Dec. 13 whether to end its bond-buying program as planned, a key step toward slowly normalizing policy.

Stocks Decline as Trade War Simmers; Dollar Steady: Markets Wrap (Bloomberg) U.S. stock futures fell along with European equities after a mixed session in Asia as investors gauged whether China and America can de-escalate their trade dispute before the G-20 summit later this month. Treasuries and the dollar were steady, while oil held above $57 a barrel in New York. Futures on the S&P 500, Dow and Nasdaq declined after Nvidia Corp. gave a disappointing sales forecast and Commerce Secretary Wilbur Ross damped hopes of any imminent trade deal with China. The Stoxx Europe 600 Index headed for its first weekly drop in three, with Friday’s gains turning into losses as technology companies fell and AstraZeneca Plc’s drop weighed on the gauge after a cancer-drug setback. Asian shares were led lower by declines in Japan, even as those in China and Hong Kong climbed. Sterling advanced as investors grapple with the U.K.’s political turmoil.

BlackBerry to buy cybersecurity firm Cylance for $1.4 billion (Reuters) BlackBerry Ltd raised its bets on artificial intelligence and cybersecurity on Friday with the $1.4 billion purchase of California-based machine-learning specialists Cylance. The Canadian technology company, which dominated the smartphone market a decade ago, has shifted to selling software to manage mobile devices, as well as emerging areas like autonomous cars. Privately owned Cylance uses machine learning to preempt security breaches before they occur. Its applications seek to block malware or infiltration attempts rather than react after a breach.

Canadian regulator asks Bombardier to halt executive share sales plan (Reuters) The Canadian province of Quebec’s securities watchdog said on Thursday it asked Bombardier Inc (BBDb.TO) to halt stock trades under a plan set up to facilitate share sales by certain senior executives at the company. The Autorité des marchés financiers (AMF) said in a statement released after markets closed that it is “reviewing” transactions and “various announcements” related to Bombardier’s creation of an Automatic Securities Disposition Plan on Aug. 15. Automatic Securities Disposition Plans allow executives with insider knowledge to sell their stock based on pre-arranged instructions provided when they are not in possession of any material undisclosed information. Bombardier’s plan allowed for certain executives to sell their stock as part of their overall performance-based compensation.

Heavy Canadian crude falls to record low amid production cuts (BNN) Heavy Western Canadian Select crude fell to a record low as several oil producers shut in production and some demand the Alberta government intervene to mandate across-the-board cuts. The oil-sands benchmark fell US$2.29 to US$13.46 a barrel Thursday, the lowest in Bloomberg data extending back to 2008. The price broke a previous record set in early 2016, when West Texas Intermediate crude futures were trading under US$30 a barrel amid a world-wide supply glut.

Ontario forecasts deficit of $14.5B, introduces low-income tax credit (BNN) Ontario’s Progressive Conservative government says it has cut the province’s deficit by $500 million, bringing the figure down to $14.5 billion in its first few months in office. The change is announced in the government’s Fall Economic Statement for 2018-2019, its first major fiscal update since winning the spring election. « The fiscal hole is deep, » Finance Minister Vic Fedeli said in presenting the document to the legislature on Thursday afternoon. « The road ahead is not an easy one and will require difficult decisions. Everyone across the province will be required to make sacrifices, without exception. »

Overnight markets

Overview: US 10yr note futures are up 0.105% at 118-30, S&P 500 futures are down -0.72% at 2714.75, Crude oil futures are up 1.65% at $57.39, Gold futures are up 0.21% at $1217.5, DXY is down -0.02% at 96.908, CAD/USD is up 0.04% at 0.7586.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 2.235% 2 Year 2.85%
5 Year 2.309% 5 Year 2.929%
10 Year 2.379% 10 Year 3.101%
30 Year 2.434% 30 Year 3.352%

US Economic Data

9:15 AM Industrial Production MoM, Oct est 0.2% (0.3% prior)
  Capacity Utilization, Oct est 78.2% (78.1% prior)
  Manufacturing (SIC) Production, Oct est 0.2% (0.2% prior)
11:00 AM Kansas City Fed Manf. Activity, Nov est 11 (8 prior)
16:00 PM Total Net TIC Flows, Sep (108.2b prior)
  Net Long-term TIC Flows, Sep (131.8b prior)

Canadian Economic Data

8:30 AM Int’l Securities Transactions, Sep (2.82b prior)
  Manufacturing Sales MoM, Sep est 0.1% (-0.4% 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