Market Update US tsys continuing lower from yesterday’s post FOMC minutes slide led by the front end, curve bear flattening with the 2Y 2.905 (+1.5bps), 10Y 3.20%. No reaction to stronger than exp Phili Fed index (22 Equities weaker as well, China CSI Comp fell -2.4% to the lowest since Dec 2014. Core EGBs lower, curves bear steepening in contrast to tsys. 10Y gilt (1.58% +1bp) rallying since mid morning – Retail sales were weaker than exp, Theresa May is said to be willing to extend the Brexit transition period. Italian BTPs under pressure after a larger than exp buyback operation. GOCs either side of unch, 10Y 2.51% – the J29/10Y roll 0.4bps tighter from yesterday’s pre auction levels, now 0.8/0.7 (1.2)
News headlines
Trump Attacks the Weak Link Powell Can’t Ignore in Fed Rate Plan (Bloomberg) Donald Trump has attacked the soft underbelly of the Federal Reserve’s campaign to raise interest rates, exposing what Jerome Powell himself probably recognizes is a potential vulnerability. Amid his recent avalanche of criticism, the president has repeatedly lambasted the Fed chairman and his colleagues for hiking rates when inflation isn’t a problem.
What to Watch in China GDP Report: Trade, Autos, Manufacturing (Bloomberg) With China’s economic expansion expected to slow as trade wars heat up, a closer look at the data may offer a better look at what’s really happening in the world’s second-largest economy. Gross domestic product probably expanded 6.6 percent from a year earlier in the third quarter, according to a Bloomberg survey of economists ahead of the report, due Friday morning in Beijing. Forecasters also expect data on retail sales and fixed-asset investment to show growth held steady in September, while growth of industrial production probably ticked a notch lower.
Bank of Korea Holds Fire on Rates as Risks to Economy Grow (Bloomberg) The Bank of Korea left its key interest rate unchanged, citing an escalating U.S.-China trade war as among rising risks to Asia’s fourth-largest economy. It trimmed growth forecasts for this year and next. Governor Lee Ju-yeol made clear that for now price stability and caring for the economy — the BOK’s primary goals by law, he noted — would take priority over trying to curb financial imbalances such as record household debt and soaring house prices. Still, he said, those imbalances are a growing concern and the time to focus on them is coming near.
Fed Minutes Weigh on Stocks, Bonds; Yuan Slips: Markets Wrap (Bloomberg) U.S. equity futures fell and benchmark Treasury yields climbed back toward seven-year highs after minutes showing the Federal Reserve may favor more rate hikes next year. The dollar was steady. S&P 500 futures pointed to a softer open after a flat session on Wednesday, while stocks in Europe bucked earlier losses in Asia to climb on the back of positive earnings. The 10-year Treasury yield rose to 3.21 percent after minutes showed Fed officials appeared to favor an eventual move in rates above the level they see as neutral for the economy. The yuan weakened against the greenback as the U.S. Treasury refrained from naming China a currency manipulator, while at the same time escalating scrutiny of the country’s exchange-rate policy.
Blackstone concedes defeat to Canada’s Oxford in battle for Australia’s Investa (Reuters) Private equity giant Blackstone Group (BX.N) has quit a takeover battle for Australian office-block owner Investa Office Fund (IOF.AX) after it was gazumped by Canadian landlord Oxford Properties Group’s A$3.35 billion ($2.4 billion) bid. Blackstone told Investa it would not match the offer, Investa said on Thursday, all but handing the sought-after target to Oxford as office rents boom, especially in Sydney where Investa’s 20 towers are concentrated.
Futures lower as oil price drop weighs on energy shares (Reuters) Futures for Canada’s main stock index were marginally lower on Thursday, as a drop in oil prices led to losses in energy shares. Oil slipped below $80 a barrel as an increase in U.S. crude inventories suggested ample supply, while Saudi-U.S. tension and falling Iranian exports lent support. December futures on the S&P/TSX index were slightly down 0.08 percent at 7:10 a.m. ET. The Toronto Stock Exchange S&P/TSX composite index closed down 49.84 points, or 0.32 percent, at 15,529.90 on Wednesday.
U.S. spares China from yuan-manipulator label amid trade war (BNN) The Treasury Department stopped short of declaring China a currency manipulator in its semi-annual report on foreign-exchange rates, averting an escalation of a trade war while serving notice that the U.S. will closely watch the yuan after its recent slide. “Of particular concern are China’s lack of currency transparency and the recent weakness in its currency,” Treasury Secretary Steven Mnuchin said in a statement. “We will continue to monitor and review China’s currency practices, including through ongoing discussions with the People’s Bank of China.”
Overnight markets
Overview: US 10yr note futures are down -0.159% at 117-28, S&P 500 futures are down -0.49% at 2802.5, Crude oil futures are down -1.42% at $68.76, Gold futures are up 0.04% at $1227.9, DXY is up 0.02% at 95.594, CAD/USD is up 0.17% at 0.7666.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.324% | 2 Year | 2.903% |
| 5 Year | 2.427% | 5 Year | 3.062% |
| 10 Year | 2.521% | 10 Year | 3.205% |
| 30 Year | 2.539% | 30 Year | 3.372% |
US Economic Data
| 8:30 AM | Philadelphia Fed Business Outlook, Oct est 20.0 (22.9 prior) |
| Initial Jobless Claims, Oct 13th est 211k (214k prior) | |
| Continuing Claims, Oct 6th est 1663k (1660k prior) | |
| 9:45 AM | Bloomberg Economic Expectations, Oct (57.5 prior) |
| Bloomberg Consumer Comfort, Oct 14th (59.5 prior) | |
| 10:00 AM | Leading Index, Sep est 0.5% (0.4% 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