Market Update US tsys slightly higher, upper-end of narrow range in TY futures on heavy volume (430k), US 10Y 3.19%. ‘Risk on’ rally in global equities after China moves to shore up economy (tax cut, verbal pledge to support non-state firms…). S&P futures moving steadily higher thru the morning, now +12, USD higher, crude unch at one-month lows (69.12). UK gilts bid, with the 10Y yield at three-week low 1.55% (-3bps)- possible cabinet revolt against PM May over her Brexit plans. GOCs higher, outperforming tsys by 0.5bps in 10s, 10Y 2.48%. BOC decision this Wed – 25bp rate hike priced in, odds slightly lower after CPI (96%). Quebec back in issuance mode with possible 10 or 30Y deal today.
News headlines
Trump’s EU Trade Talks Quickly Become Contentious (Bloomberg) The European Union and U.S. are reviewing their trade ties, spurred by U.S. accusations that the bloc is duping American businesses. But don’t expect a complete overhaul of their more than $1 trillion commercial relationship anytime soon. Even though President Donald Trump notified Congress Oct. 16 that the U.S. intends to begin official trade talks with the 28-nation EU, formal negotiations are yet to get underway and quarreling between the two sides signals an arduous process lays ahead.
China Says U.S. Should `Think Twice’ About Leaving Missile Pact (Bloomberg) China called on the U.S. to reconsider pulling out of a three-decade-old arms control treaty with Russia, saying the move would generate “multiple negative effects.” President Donald Trump said Saturday he planned to pull out of the Intermediate-Range Nuclear Forces Treaty, known as INT, claiming that Moscow had breached the agreement on intermediate-range conventional and nuclear weapons. The New York Times reported the move was in part to enable the U.S. to counter a Chinese arms buildup in the Pacific.
European Union, Singapore Sign Free-Trade and Investment Pacts (Bloomberg) The European Union and Singapore signed free-trade and investment protection agreements in Brussels on Friday in a bid to improve bilateral business ties amid rising global trade conflicts. The EU and Singapore will remove tariffs, reduce technical barriers, and provide better opportunities in services and government procurement under the deals, the Singapore government said in a statement Friday.
Stocks Jump After China Rally; Italian Bonds Climb: Markets Wrap (Bloomberg) U.S. equity futures advanced alongside European stocks after Chinese officials pledged to support the world’s second-biggest economy, helping to kick start a rally in Asia. The dollar and Treasuries were steady, while Italian bonds climbed. Insurance and mining shares led gainers on the Stoxx Europe 600 Index as both the regional benchmark and S&P 500 futures contracts headed for the first increase in four sessions. In China, the Shanghai Composite Index surged more than 4 percent, the biggest increase since March 2016, in the wake of verbal interventions from authorities at the end of last week and plans to cut personal income taxes. Chinese President Xi Jinping vowed “unwavering” support for the country’s private sector.
Bombardier sues Mitsubishi jet program over trade secrets (Reuters) Canadian airplane maker Bombardier Inc (BBDb.TO) has sued the aircraft unit of Japan’s Mitsubishi Heavy Industries Ltd (7011.T), saying former Bombardier employees passed on trade secrets to help Mitsubishi’s oft-delayed regional jet project. Bombardier filed the lawsuit late Friday in a federal court in Seattle against Mitsubishi Aircraft Corporation, Seattle-based Aerospace Testing Engineering & Certification Inc (AeroTEC) and several former Bombardier employees.
Canadian airlines urge Ottawa to delay carbon tax rollout; warn fares could rise (BNN) Canadian airlines are urging Ottawa to exempt them from the Jan. 1 imposition of a federal carbon tax, which they warn will boost airfares and push passengers across the border to rival carriers and airports. The National Airlines Council of Canada sent a letter to three federal ministers Friday cautioning the government about the reduction the levy would cause to revenues as well as marginal domestic routes. « A carbon tax is probably the worst tool that you can envisage for aviation if you want to reduce emissions, » said lobby group president Massimo Bergamini in an interview.
Bank of Canada likely to raise rates despite soft data: Economists (BNN) There is little doubt the Bank of Canada will raise interest rates next week, despite a pair of soft economic reports Friday, as the overall economy remains strong and the weight of trade uncertainty has finally been lifted, according to some analysts and economists. “I don’t believe that this is going to materially change the Bank of Canada’s longer term perspective, that this is an economy operating at capacity and that normalization of interest rates is required,” Frances Donald, head of macroeconomic strategy at Manulife Asset Management, said in an interview with BNN Bloomberg’s Jon Erlichman after retail and inflation data was released Friday.
Overnight markets
Overview: US 10yr note futures are up 0.053% at 118-01, S&P 500 futures are up 0.42% at 2779.25, Crude oil futures are up 0.03% at $69.14, Gold futures are down -0.32% at $1224.8, DXY is up 0.11% at 95.816, CAD/USD is down -0.13% at 0.764.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.291% | 2 Year | 2.904% |
| 5 Year | 2.394% | 5 Year | 3.043% |
| 10 Year | 2.488% | 10 Year | 3.188% |
| 30 Year | 2.52% | 30 Year | 3.37% |
US Economic Data
| 8:30 AM | Chicago Fed nat Activity Index, Sep 0.17 est 0.22 (0.18 prior) |
Canadian Economic Data
| 8:30 AM | Wholesale Trade Sales MoM, Aug est -0.2% (1.5% prior) |
| 10:00 AM | Bloomberg Nanos Confidence, Oct 19th (56.3 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