Market Update
US tsys trading higher, yields 3-5bps lower with the 10Y 1.74% (-4.5bps), risk off tone after US Congress passed Hong Kong bill in support of protest, which drew rebuke from China. WSJ article said trade talks between the US and China have stalled as both sides remain divided over core issues. S&P futures off the lows, now down just 0.20% – both Target (+10% pre mkt) and Lowes beat on Q3 earnings.Core Euro bonds higher, bunds lagging the rally in tsys by 1bp, 10Y tsy/bund close to narrowest since Feb 18. Fed releases minutes from Oct 30th meeting at 2:00ET. In Canada, GOCs rallying in line with tsys -Oct CPI as expected (0.3%,1.9% y/y) with the Core 2.2% from 2.1% in Sep.
News headlines
Lowe’s to shutter 34 stores across Canada beginning in January (BNNBloomberg) Lowe’s Canada will close 34 underperforming stores, including 26 Rona locations, the company said Wednesday. The move comes following a strategic review of the North Carolina-based retailer’s operations.
Wilkins says Canada’s financial system resilient despite threats (BNNBloomberg) Bank of Canada Deputy Governor Carolyn Wilkins cautioned against complacency in the face of financial stability risks at a time of growing global uncertainty.In a speech titled “Financial Stability in an Uncertain World,” Wilkins highlighted the need to “have the right safeguards in place” in a world of rising uncertainty — from the trade war between China and the U.S. to Brexit and social unrest in Hong Kong.
Resilient growth in Canada just got a fresh warning signal (BNNBloomberg) For the first time this year, the Canadian economy is coming in below analyst expectations, according to a closely watched gauge of economic surprises. The index from Citigroup Inc. — which falls when data prove worse than forecast — dropped below zero on Tuesday, for the first time since December. It indicates that Canada’s growth might be slowing down at a faster pace than what analysts expect, fuelled by trade war concerns. The Canadian dollar has also weakened against the greenback this month, making it one of the worst currencies against its Group of 10 counterparts.
Beijing tariff demands may expand U.S.-China ‘phase one’ trade deal significantly (Reuters) A “phase one” trade deal between the United States and China was supposed to be a limited agreement that would allow leaders from both countries to claim an easy victory while soothing financial markets.
Shadow banks, weak lenders among euro zone’s top vulnerabilities: ECB (Reuters) A largely unregulated shadow banking sector and anemic profitability among traditional lenders are among the euro zone’s biggest financial vulnerabilities, the European Central Bank said in a biannual stability assessment on Wednesday.
Encana disappointed after investor blasts plan to redomicile (BNNBloomberg) One of the largest Encana Corp. shareholders says the oil and natural gas producer’s plan to move to the U.S. is “highly discriminatory” against Canadian investors.Letko, Brosseau & Associates Inc., which has a stake of about four per cent, will vote against Encana’s plan to relocate to the U.S., the investor said Tuesday in a statement. The Montreal-based firm says the move would force investors holding the shares through indexed Canadian funds or Canadian-only investment policies to sell the stock, likely at a loss given where the shares are now trading.
Target soars after raising outlook, avoiding U.S. retail gloom (BNNBloomberg) Target Corp. surged after raising its full-year outlook again on strong sales and profitability, providing a safe haven after several retailers unnerved investors.Third-quarter comparable sales, a key retail metric, rose 4.5 per cent, a full percentage point above what analysts polled by Consensus Metrix had projected. Profit this year excluding some items will be between US$6.25 and US$6.45 a share, Target said Wednesday. The shares rose as much as 12 per cent in early trading, nearing what would be an intraday high.
Market Overview: US 10yr note futures are up 0.205% at 129-23, S&P 500 futures are down -0.19% at 3112.5, Crude oil futures are up 0.62% at $55.55, Gold futures are down -0.19% at $1471.5, DXY is up 0.15% at 98.004, CAD/USD is up 0.25% at 0.7518.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.496% | 2 Year | 1.576% |
| 5 Year | 1.42% | 5 Year | 1.589% |
| 10 Year | 1.408% | 10 Year | 1.745% |
| 30 Year | 1.546% | 30 Year | 2.216% |
US Economic Data
| 07:00 AM | MBA Mortgage Applications, 42309 Survey: — Actual: -2.20% Prior: 9.60% |
| 10:30 AM | DOE U.S. Crude Oil Inventories, 42309 Survey: 1500k Prior: 2219k |
| DOE U.S. Gasoline Inventories, 42309 Survey: 750k Prior: 1861k | |
| 02:00 PM | FOMC Meeting Minutes, 11232 Survey: — Prior: — |
Canadian Economic Data
| 08:30 AM | CPI NSA MoM, Oct Survey: 0.30% Actual: 0.30% Prior: -0.40% |
| CPI YoY, Oct Survey: 1.90% Actual: 1.90% Prior: 1.90% | |
| Consumer Price Index, Oct Survey: 136.6 Actual: 136.6 Prior: 136.2 | |
| CPI Core- Median YoY%, Oct Survey: 2.20% Actual: 2.20% Prior: 2.20% | |
| CPI Core- Common YoY%, Oct Survey: 1.90% Actual: 1.90% Prior: 1.90% | |
| CPI Core- Trim YoY%, Oct Survey: 2.10% Actual: 2.10% Prior: 2.10% |
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, Émile Bordeleau
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