Market Update US tsy yields 3-5bps lower in strong ‘risk off’ rally, with the US 10Y 3.145% (-5.5bps), heavy volume in TY futures more than 2x avg (752k). Huge declines in global equities overnight – Hang Send -3%, CSI 300 -2.66%. US equity futures extending losses with the DOW -380, S&P -40 after Caterpillar -6.8% reported lower full-year guidance despite beat on revenue & eps. Core Euro bonds also higher, thou trailing the advance in tsys, 10Y bund/tsy spd 3bps tighter . GOCs higher, lagging the adance in tsys by ~2bps, 10Y 2.44% three-week low. BOC decision & MPR tommorrow consensus is for 25bp rate hike , focus on statement and whether BOC will drop the ‘gradual approach’ language since some degree of uncertainty was lifted after the Oct signing of the USMCA deal.
News headlines
Hot Economy Puts Onus on Bank of Canada Amid Trudeau’s Deficits (Bloomberg) For the first time in a decade, Canada’s policy makers are worrying the economy is running too hot instead of too cold. The federal government and Bank of Canada are set to release key reports that will paint a picture of an economy running at full steam, with the jobless rate at near-historic lows, consumer spending and housing holding up in the face of rising interest rates, and businesses starting to invest again. A booming U.S. economy, coupled with averting a trade war with Canada’s biggest trading partner, is only stoking growth.
U.S. GDP Report Expected to Give Trump a Win Ahead of Midterms (Bloomberg) The U.S. economy is poised for its best back-to-back quarters of growth since 2014, handing President Donald Trump a $20 trillion talking point just in time for the midterm congressional elections. The report due Friday, the last data before the Nov. 6 vote, will show gross domestic product expanded at a 3.4 percent annualized pace in the July-September period after a 4.2 percent gain in the prior quarter, according to the median estimate of economists surveyed by Bloomberg. Consumer spending and business investment probably drove growth, and inventory accumulation also contributed.
Italy May Force the EU Into an Unprecedented Budget Rebuke (Bloomberg) The European Commission will likely decide Tuesday on whether to formally demand a member state to take back, revise and resubmit its budget, a step it has never taken before. Vice President Valdis Dombrovskis and economic affairs chief Pierre Moscovici have already stated that Italy’s budget is in serious breach of European Union rules and asked the populist government to change tack. Italy, so far, has refused.
U.S. Futures Tumble as Caterpillar, 3M Disappoint: Markets Wrap (Bloomberg) U.S. futures extended losses, with contracts on the Dow Jones Industrial Average off more than 400 points, after results from Caterpillar and 3M added to concern that global growth is faltering. The yen, gold and Treasuries all rose on demand for haven assets. The sell-off in U.S. equities put the S&P 500 Index on track for its 12th loss in 14 days as investors grow concerned that the trade war and rising interest rates have put an end to runaway expansion of corporate profits. Caterpillar sank 6 percent in early trading after flagging concern over rising materials costs, while 3M dropped 5 percent after cutting its forecast.
Mexico to consider all actions in response to Canadian steel tariffs (Reuters) Mexico will consider all possible actions in response to Canadian steel tariffs, including the possibility of going to the World Trade Organization, Deputy Economy Minister Juan Carlos Baker said on Monday. Mexico’s government has rejected Canada’s move to impose new quotas and tariffs on imports of seven categories of steel from many countries, including Mexico.
Canada’s FSD Pharma to buy Israeli medical cannabis firm Therapix (Reuters) Canada’s FSD Pharma Inc signed a letter of intent to acquire Israel’s Therapix Biosciences Ltd for $48 million in stock, combining two complementary businesses focused on the research and development of cannabinoid treatments. Therapix shareholders will receive about 130 million class B subordinate shares of FSD Pharma, nearly 10 percent of the company, FSD said on Tuesday. The price per share of Therapix is $13.7, triple its close of $4.4 on Monday.
Trump giving Xi someone to blame for China’s slowing economy (BNN) U.S. President Donald Trump sought to pressure Beijing to open its markets by undermining its economy. Instead, he may be providing Chinese counterpart Xi Jinping with the perfect cover story if things get worse. China’s economy has shown signs of slowing in recent months, expanding in the third quarter at the weakest pace since the depths of the financial crisis in 2009. The slowdown — predicted by the ruling Communist Party and market observers long before Trump’s rise — has nonetheless fanned anxiety among a population that has grown accustomed to decades of breakneck growth.
Conservatives say Energy East would solve dependence on foreign oil (BNN) The federal Conservatives are invoking the risk of dependence on oil from countries like Saudi Arabia as an argument to revive the Energy East pipeline, even though the pipeline was intended to carry oil almost entirely for export. Pierre Paul-Hus, a Quebec MP, told reporters Monday that it is time to stop being “hypocritical” about energy supply. He said Conservative Leader Andrew Scheer’s proposal to sit down with TransCanada is aimed at making Canada self-sufficient in oil. Study of the project, which was opposed by many Quebec municipalities, revealed that it would have served almost exclusively to export Alberta oil to foreign markets. TransCanada abandoned the pipeline one year ago after the National Energy Board modified the environmental assessment process. In a speech Sunday aimed at beginning the countdown to the Oct. 21, 2019 federal election, Scheer said a Conservative government would seek to revive the project. The pipeline, opposed by environmentalists and Indigenous groups among others, was a key issue in the last federal campaign, especially in Quebec.
Overnight markets
Overview: US 10yr note futures are up 0.318% at 118-12, S&P 500 futures are down -1.34% at 2719.5, Crude oil futures are down -1.85% at $68.08, Gold futures are up 1.32% at $1240.8, DXY is down -0.16% at 95.857, CAD/USD is up 0.04% at 0.763.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.27% | 2 Year | 2.879% |
| 5 Year | 2.364% | 5 Year | 3.002% |
| 10 Year | 2.449% | 10 Year | 3.147% |
| 30 Year | 2.486% | 30 Year | 3.343% |
US Economic Data
| 10:00 AM | Richmond Fed Manufact. Index, Oct est 24 (29 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