Market Update
US tsys trading higher, yields 2-3bps lower with the 10Y 2.83% (-3bps), a four-month low, on above avg volume in TY futures (400k). US equity futures higher (S&P + 17) after yesterday’s 2% drop brought the S&P to new lows for the year. Asian stocks lower on headlines that the Chinese president failed to offer any new concessions on trade in an o/n speech. Crude down for a third day, -2.3% @ 48.76 a one-year low. GOCs higher, 1bp wider vs tsys, the 10Y 2.04% (-1bp) after yesterday’s 5bps rally. Provis 2.5-3bps wider yest, spds at the wides, 10Y Ont 83.5 +20bps since mid Nov.
News headlines
$3.5 Trillion Cash Injection Changes Little for Ordinary Japanese (Bloomberg) It’s been the most radical cash injection in history — a staggering $3.5 trillion, pumped into Japan’s economy over more than five years to slay deflation and kick growth into higher gear. That’s still not enough to save Tomoaki Nagai’s metal parts factory near Osaka and it’s a similar story throughout the world’s third-largest economy.
Trump Opposes Short-Term Funding to Avoid Shutdown, Source Says (Bloomberg) President Donald Trump isn’t inclined to support a one- or two-week stopgap spending measure that would avert a partial government shutdown over the holidays, according to a person familiar with White House planning. The hardening of the White House position increases the difficulty lawmakers face in finding a solution before government funding expires on Friday night for nine government departments and various independent agencies.
Trump Offers Flynn Luck Ahead of Sentencing for Lying to FBI (Bloomberg) President Donald Trump offered public well wishes to Michael Flynn, hours before his former national security adviser is set to be sentenced for lying to investigators about his contacts during the 2016 campaign with the Russian ambassador. “Good luck today in court to General Michael Flynn,” Trump said Tuesday on Twitter. “Will be interesting to see what he has to say, despite tremendous pressure being put on him, about Russian Collusion in our great and, obviously, highly successful political campaign. There was no Collusion!”
U.S. Equity Futures Gain, Europe Shares Pare Drop: Markets Wrap (Bloomberg) U.S. equity futures stabilized on Tuesday while shares in Europe pared a drop as investor nerves steadied after yet another rout in American stocks a day earlier. Treasuries, gold and the Japanese yen advanced amid a cautious mood. To the disappointment of many investors, Chinese President Xi Jinping offered no fresh commitments to open or stimulate the world’s second-biggest economy in a keynote speech. That compounded the gloom surrounding riskier assets, and the MSCI Asia Pacific and MSCI Emerging Market indexes both retreated. The Stoxx Europe 600 Index initially followed suit, but recovered much of its loss as the session progressed. S&P 500 Index futures showed a small rebound after the underlying gauge plunged to the lowest in 14 months on Monday.
General Dynamics warns Canada: Canceling Saudi deal would cost billions (Reuters) General Dynamics Corp (GD.N) on Monday put pressure on Ottawa over the sale of armored vehicles to Saudi Arabia, warning that the federal government would incur “billions of dollars of liability” by unilaterally scrapping the deal. The remarks by the Canadian unit of General Dynamics – which one defense expert called unusual – reflect increasing tensions over a $13 billion agreement that is becoming politically awkward for the Liberal government.
Go West: Pacific Coast LNG plans get fresh look as market shifts (Reuters) The scramble for new projects to export liquefied natural gas (LNG) is shifting to the Pacific Northwest, where longstanding proposals are getting a renewed look as rising shipping rates make the region’s easy access to Asia more appealing, with gas price shifts sweetening the deal. In October, Royal Dutch Shell and its Asian partners approved construction of a $30 billion export terminal in British Columbia, surprising investors by saying the plant would deliver the super-cooled fuel to Asia at a more competitive price than new U.S. Gulf Coast projects.
Vancouver home prices fall most since 2008, extending declines (BNN) Home prices in Vancouver fell 1.9 per cent in November from a month earlier, the most in a decade, extending a recent run of declines for Canada’s most expensive real estate market. The figures suggest momentum earlier this year may have been just a blip, as consumers adjust to tougher federal mortgage qualification rules. After rebounding to a record in May, prices nationwide have dropped for six straight months, the Canadian Real Estate Association reported Monday, and are hovering at levels little changed from mid-2017, when interest rates started to rise. “The decline in home ownership affordability caused by this year’s new mortgage stress-test remains very much in evidence,” said Gregory Klump, CREA’s Chief Economist. “While national home sales were anticipated to recover in the wake of a large drop in activity earlier this year due to the introduction of the stress-test, the rebound appears to have run its course.”
Trump says it’s ‘incredible’ U.S. Fed ‘even considering’ raising rates (BNN) U.S. President Donald Trump slammed the Federal Reserve on the eve of a pivotal policy meeting for “even considering” another interest-rate increase, and suggested the central bank has no reason to move because inflation is low and the U.S. currency is strong. “It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike,” Trump said in a tweet on Monday. “Take the Victory!”
Overnight markets
Overview: US 10yr note futures are up 0.142% at 120-27, S&P 500 futures are up 0.67% at 2572.75, Crude oil futures are down -2.45% at $48.66, Gold futures are down -0.08% at $1250.8, DXY is down -0.26% at 96.852, CAD/USD is down -0.01% at 0.746.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.953% | 2 Year | 2.667% |
| 5 Year | 1.97% | 5 Year | 2.663% |
| 10 Year | 2.035% | 10 Year | 2.828% |
| 30 Year | 2.205% | 30 Year | 3.086% |
US Economic Data
| 8:30 AM | Housing Starts, Nov est 1228k (1228k prior) |
| Housing Starts MoM, Nov est 0.0% (1.5% prior) | |
| Building Permits, Nov est 1260k (1263k prior) | |
| Building Permits MoM, Nov est -0.4% (-0.6% prior) |
Canadian Economic Data
| 8:30 AM | Manufacturing Sales MoM, Oct est 0.4% (0.2% 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