Market Update US tsys trading slightly lower, recouping earlier losses after very weak Durable goods (-4.4vs vs -2.6%), yields 0.5-1bp higher, with the 10Y 3.06%, heavy volume in TY futures (773k). Stocks rebounding, S&P futures +25, crude 54.70 (+2.4%). Busy day on the US eco front due to tomorrow’s holiday – Oct durable goods, existing home sales, LEI & $11bln 10Y TIPs auction. GOCs rising off the lows with tsys,10Y 2.35%.
News headlines
Strong Economy Gives Canada Room for Tax Breaks in Mini-Budget (Bloomberg) Recent turmoil in oil and financial markets aside, Canadian Finance Minister Bill Morneau’s budget update Wednesday will paint a rosy enough picture to finance tax breaks for corporations without fueling additional deficits. The federal government will probably revise revenue projections upward by at least C$7 billion ($5.5 billion) over three fiscal years beginning with the current one, according to Bloomberg calculations. That’s thanks to a better-than-expected economic outlook and signs of stronger tax collection, and excludes higher revenue from a new carbon tax on some provinces.
Goldman, JPMorgan Still Betting on Five Fed Hikes by End of 2019 (Bloomberg) Goldman Sachs Group Inc. and JPMorgan Chase & Co. are sticking with forecasts for the Federal Reserve to hike interest rates five more times by the end of 2019 even as financial markets shudder. In reports released in the past 24 hours as the Standard & Poor’s 500 index tumbled toward a correction, economists at the Wall Street giants predicted Chairman Jerome Powell and colleagues will raise their benchmark interest rate again in December, ultimately reaching 3.50 percent by the end of next year.
Kashkari Repeats View the Fed Should Take a Pause on Rate Hikes (Bloomberg) Federal Reserve Bank of Minneapolis President Neel Kashkari, who’s repeatedly called for caution on raising interest rates, said further tightening could trigger a recession. “One of my concerns is that if we preemptively raise interest rates, and it’s not in fact necessary, we might be the cause of ending the expansion” and triggering the next recession, Kashkari said in a National Public Radio interview posted online Tuesday. He said the Fed should “pause and see how the economy continues to evolve.”
U.S. Futures Gain With Europe Stocks; Dollar Drops: Markets Wrap (Bloomberg) U.S. stock futures climbed with European equities, trimming recent losses after the sharp declines across asset classes on Tuesday. Treasuries pared a drop and the dollar edged lower amid speculation the Federal Reserve may soften its policy stance. Contracts on the S&P 500, Dow and Nasdaq all pointed to a firmer open, while banks and telecommunications companies led an advance in the Stoxx Europe 600 Index. The previous session’s plunge in Apple Inc.’s stock hit suppliers in Asia earlier after all major U.S. benchmarks fell more than 1.5 percent Tuesday. The greenback edged lower after MNI reported the Fed is considering ending a cycle of interest rate hikes as early as the spring.
Bank of Canada to review policy framework, hints at big changes (Reuters) The Bank of Canada will review its monetary policies and is open to making major changes, including a move away from its long-standing practice of targeting inflation, a senior official said on Tuesday. The deadline for the review is late 2021, when the central bank is due to renew its five-year inflation control agreement with the federal government. The inflation target has been 2 percent for the last 23 years.
Bombardier to cut Belfast workforce by 490 (Reuters) Canada’s Bombardier Inc (BBDb.TO) plans to reduce its Belfast workforce by 490, the BBC reported on Wednesday citing union sources. The cuts are part of a previously announced plan to reduce its global workforce by 5,000.
The Daily Chase: Morneau to deliver fall fiscal update; OECD cuts global growth forecast (BNN) Finance Minister Bill Morneau delivers his Fall Economic Statement this afternoon. Three basic questions will frame our coverage: 1. Is Canada on a sustainable fiscal track? Recall the spring budget pegged the deficit for this fiscal year at $18.1 billion, with no line of sight to balance. Also recall the Liberals campaigned on a plan to balance the books in 2019.
Overnight markets
Overview: US 10yr note futures are down -0.209% at 119-03, S&P 500 futures are up 0.91% at 2664, Crude oil futures are up 2.49% at $54.76, Gold futures are up 0.26% at $1224.4, DXY is down -0.25% at 96.594, CAD/USD is down -0.25% at 0.7534.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.237% | 2 Year | 2.816% |
| 5 Year | 2.302% | 5 Year | 2.904% |
| 10 Year | 2.368% | 10 Year | 3.081% |
| 30 Year | 2.427% | 30 Year | 3.334% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Nov 16th -0.1% (-3.2% prior) |
| 8:30 AM | Durable Goods Orders, Oct est -2.6% (0.7% prior) |
| Durable Goods Ex Transportation, Oct est 0.4% (0.0% prior | |
| Cap Goods Orders Nondef Ex Air, Oct est 0.2% (-0.1% prior) | |
| Cap Goods Ship Nondef Ex Air, Oct est 0.3% (-0.1% prior) | |
| Initial Jobless Claims, Nov 17th est 215k (216k prior) | |
| Continuing Claims, Nov 10th est 1653k (1676k prior) | |
| 9:45 AM | Bloomberg Consumer Comfort, Nov 18th (60.5 prior) |
| Bloomberg Economic Expectations, Nov (58.5 prior) | |
| 10:00 AM | Leading Index, Oct est 0.1% (0.5% prior) |
| Existing Home Sales, Oct est 5.20m (5.15m prior) | |
| Existing Home Sales MoM, Oct est 1.0% (-3.4% prior) | |
| U. of Mich. Sentiment, Nov est 98.3 (98.3 prior) | |
| U. of Mich. Current Conditions, Nov (113.2 prior) | |
| U. of Mich. Expectations, Nov (88.7 prior) | |
| U. of Mich. 1 Yr Inflation, Nov (2.8% prior) | |
| U. of Mich. 5-10 Yr Inflation, Nov (2.6% prior) |
Canadian Economic Data
| 8:30 AM | Wholesale Trade Sales MoM, Sep est 0.3% (-0.1% 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