Market Update US tsys slightly higher, US 10Y 3.16%, TY futures near highs on o/n range on avg volume (330k). Equity futures lower, S&P fut -13.5, Nasdaq -44 despite blowout Q3 from Netflix. Sep FOMC minutes this aft – focus on removal of ‘accommodative’ language from the stmt and further clues as to where the Fed believes ‘neutral’ lies. GOCs higher in line with tsys, Ontario in the mkt yest with well anticipated $600mln reopening of the 2.9%/2049 issue @78, spds unch 78/77 thou the Ont 48/28 box is 0.6bps narrower @15.5 this morning.
News headlines
Cannabis Goes Legal in Canada as Investors Ride Stocks Higher (Bloomberg) Canada’s drive to legalize marijuana kicks off early Wednesday with store openings on the Atlantic Coast, giving the country a massive head start in developing a global pot market that some analysts peg at $150 billion. Stores in St. John’s, Newfoundland are set to be the first to sell recreational cannabis, with some planning to open at 12:01 a.m. local time, followed by more than 100 outlets and websites opening across the country of 37 million people. It’s an historic moment for an industry that has rapidly moved from the fringe to the mainstream.
U.K. Inflation Slowdown Gives BOE Time Amid Brexit Perils (Bloomberg) U.K. inflation slowed more than expected in September, giving the Bank of England room to move slowly on the path of raising interest rates. While faster pay growth may be strengthening price pressures, the uncertainty from Britain’s imminent divorce from the European Union is also undermining the economy. BOE Governor Mark Carney says a limited and gradual series of rate hikes are needed to keep inflation in check, and markets expect the next move to come after the U.K. formally leaves the bloc in March.
Saudis Know to Act Fast on Khashoggi Probe, Pompeo Says (Bloomberg) Saudi Arabia understands the need to conclude its investigation into the disappearance of government critic Jamal Khashoggi in a timely and rapid fashion, Secretary of State Mike Pompeo said. “They told me they were going to conduct a thorough, complete, transparent investigation” and made a commitment to holding anyone connected to any wrongdoing accountable, Pompeo told reporters Wednesday as he headed to Turkey, where the journalist was last seen entering the kingdom’s consulate in Istanbul.
U.S. Futures Slip, Dollar Rises as Good Mood Fades: Markets Wrap (Bloomberg) U.S. equity futures declined on Wednesday and European stocks erased an advance as the investor confidence that powered gains a day earlier faded. The dollar strengthened and Treasuries were steady. Contracts across the three main U.S. gauges fell, pointing to a retreat at the open following Tuesday’s surge. Automakers dragged the Stoxx Europe 600 Index down after data showed car sales in the region plunged in September. The moves outweighed a gain for technology companies in the wake of solid results from chip maker ASML Holding NV. Caution was evident in the debt market, where Treasuries were stable and most European government bonds climbed.
Canada tariff exemptions offer auto industry relief (Reuters) Canada has excluded a long list of steel and some aluminum products from its 25 percent tariff on U.S. metal, offering short-term relief to the country’s auto sector, which relies heavily on U.S.-made steel. The exemptions, which reduce vehicle and parts manufacturers’ costs, show the Canadian government is willing to protect autos, a key export industry, even when that benefits U.S. steelmakers in the midst of a trade war.
U.S. oil service firms face tough quarter despite high crude prices (Reuters) Even as crude prices hover near four-year highs, U.S. oilfield service firms’ third-quarter results due out in coming days will reflect a shaky recovery, as their customers face drilling constraints and pressure to hold down spending. Oil producers are holding off finishing new wells, and cost pressures from tight labor markets and U.S. tariffs on imported steel are driving up service firms’ costs. Meanwhile, shale producers including Devon Energy Corp (DVN.N) and Oasis Petroleum Inc (OAS.N) are doing more work traditionally handled by service companies.
‘Latest whammy’: Ceci says WCS discount further hamstrings Alberta (BNN) A widening Canadian crude discount is not what Alberta needs right now as it puts recession in its rearview mirror, according to the province’s finance minister. “The recession was incredibly difficult on Alberta,” Joe Ceci told BNN Bloomberg in an interview on Tuesday, referring to the economic downturn that plagued his province between 2014 and 2016. “We’re through the recession, into recovery.” “This latest whammy… We certainly don’t need this,” he added. The “whammy” comes in the form of the more than US$45 per-barrel discount on Western Canadian Select compared to the benchmark West Texas Intermediate. WCS fell below US$20 per barrel last Thursday, reaching a more-than-two-year low, but has since rebounded to trade at US$26.12 as of 12:35 p.m. ET on Tuesday.
Netflix crushes subscriber growth estimates, renewing investor faith (BNN) Netflix Inc.’s Cinderella story isn’t over just yet. The world’s largest paid online TV network added far more subscribers than analysts forecast in the third quarter and issued an upbeat outlook for the current three months, rebounding from a slowdown. Netflix signed up 6.96 million customers in the quarter, according to a statement Tuesday, boosting its global total to 137.1 million. The results should extend Netflix’s () reign as one of the best-performing stocks on Wall Street, giving the company leeway to spend billions of dollars more on original programming. Netflix justifies its mushrooming budget for TV shows and movies as necessary to attract customers, especially in newer markets outside the U.S.
Overnight markets
Overview: US 10yr note futures are down -0.04% at 118-06, S&P 500 futures are down -0.36% at 2807.5, Crude oil futures are down -0.64% at $71.46, Gold futures are down -0.12% at $1229.5, DXY is up 0.39% at 95.423, CAD/USD is up 0.31% at 0.7707.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.301% | 2 Year | 2.866% |
| 5 Year | 2.399% | 5 Year | 3.022% |
| 10 Year | 2.491% | 10 Year | 3.16% |
| 30 Year | 2.51% | 30 Year | 3.33% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Oct 12th -7.1% (-1.7% prior) |
| 8:30 AM | Housing Starts, Sep 1201k est 1210k (1282k prior) |
| Housing Starts MoM, Sep -5.3% est -5.6% (9.2% prior) | |
| Building Permits, Sep 1241kest 1275k (1229k prior) | |
| Building Permits MoM, Sep -0.6%est 2.0% (-5.7% prior) | |
| 14:00 PM | FOMC Meeting Minutes |
Canadian Economic Data
| 8:30 AM | Manufacturing Sales MoM, Aug -0.4% est -0.6% (0.9% 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