Market Update US tsys trading lower, 10Y 3.125% (3.5bps), heavy volume (600k) TY futures, tracking equities as the latter rebounds from yesterday’s steep losses (S&P erasing gains for the yr). S&P futures +21.5, Nasdaq +93 (+1.4%). Core Euro bonds little changed, gilts paring gains as EU and UK are close to agreeing on Brexit deal according to EU Secretary Raab. The ECB left rates unch as expected, asset purchases to continue at E15bln per month until Dec 2018. Attention turns to Draghi press conf. GOCs lower, outperforming tsys ~2bps across the curve, 10Y 2.45%, curve maintain flattening bias after yesterday’s ‘hawkish’ BOC. OIS now pricing in ~60% odds of an additional hike to 2.0% by March 2019, with Poloz emphasizing that every meeting is ‘live’, and that rates will need to rise further.
News headlines
Trudeau’s Human Stimulus Helps Canada Match Trump’s Tax Cuts (Bloomberg) The U.S. has its fiscal stimulus. The Canadian economy? Well, it has its human stimulus. The biggest population increase in six decades, driven by international migration, is one reason the Bank of Canada has been able to match the Federal Reserve hike-for-hike since June 2017 — making the two easily the most hawkish central banks in the Group of Seven. In its latest increase Wednesday, the Ottawa-based central bank highlighted how the surge has bolstered consumption and housing activity.
Bank of Canada Raises Rates, Says Stimulus No Longer Warranted (Bloomberg) The Bank of Canada pressed ahead with a fresh interest rate increase and acknowledged for the first time in more than a decade it expects to completely remove monetary stimulus from the economy. The Ottawa-based central bank raised its overnight benchmark rate by a quarter point to 1.75 percent Wednesday, the third hike this year and fifth since it began tightening in 2017. More importantly, it dropped references to taking a “gradual approach” and added language about the need to bring rates to levels that are “neutral,” or no longer expansionary.
ECB Sticks to Plan to Rein in Stimulus (Bloomberg) The European Central Bank still intends to cap its bond-buying by year-end and leave room for an interest-rate increase late next year, even amid mounting signs that the euro-area economy is wilting under global pressures. The Frankfurt-based institution said it will buy 15 billion euros ($17 billion) of bonds a month through December, with a final decision to end the program contingent on incoming information. Policy makers reiterated that interest rates will remain at their present record lows “at least through the summer” of 2019.
U.S. Stock Futures Climb; Euro Holds Gains on ECB: Markets Wrap (Bloomberg) An equities rout that wiped out the year’s gains in U.S. stocks took a breather Thursday, as futures advanced and European shares steadied, even as Asia gauges extended declines. The euro held on to earlier gains as the European Central Bank held its key rate unchanged. The single currency rose against the dollar as the ECB said it still intended to cap its bond-buying by year-end. Core continental government bonds held gains, while peripheral bonds climbed and Treasuries fell. The Stoxx Europe 600 Index was little changed and futures on the S&P 500 Index advanced, with positive results from Tesla Inc. brightening the mood. The sentiment was darker in Asia, where shares headed lower for a third day, with Japan’s Topix index falling to the lowest in more than a year. Oil advanced from a two-month low.
U.S. dairy farmers get little help from Canada trade deal (Reuters) The dairy industry was a sticking point in the contentious renegotiations of the free trade deal between the U.S., Canada and Mexico that concluded last month. U.S. President Donald Trump demanded concessions from the protected Canadian dairy industry and said on Twitter that Canada was hurting U.S. farmers with high tariffs. After Canada gave some ground, Trump claimed a big victory and said farmers would have more export options. But Canada opened less than 4 percent of its dairy market to U.S. farmers.
Tesla shares jump as Musk delivers quarterly profit, cash (Reuters) Tesla Inc (TSLA.O) reported a net profit, positive cash flow and wider-than-expected margins for the latest quarter on Wednesday, delivering on Chief Executive Elon Musk’s promise to turn the electric carmaker profitable as higher production volumes of its new Model 3 began to pay off.
Saudi, Turkey team finds Khashoggi killing premeditated (BNN) Saudi Arabia’s prosecutor has received information from Turkish investigators suggesting the killing of government critic Jamal Khashoggi was premeditated, adding new pressure on the kingdom just as its de facto ruler courts foreign investors. The Saudi prosecution is continuing its interrogations of the suspects in light of the information and the findings of its preliminary investigations, the official Saudi Press Agency reported. The announcement comes as Central Intelligence Agency Director Gina Haspel prepares to brief U.S. President Donald Trump following a quick trip to Turkey this week. The Washington Post reported that Haspel heard an audio tape allegedly made of Khashoggi’s interrogation and killing at the Saudi consulate in Istanbul on Oct. 2.
Maple Leaf’s Q3 profit, sales fall compared with a year ago (BNN) Maple Leaf Foods Inc. (MLF.TO) saw its third-quarter profit fall compared with a year ago as its sales also slipped lower. The company says it earned $26.6 million or 21 cents per diluted share for the quarter ended Sept. 30, compared with a profit of $37.6 million or 29 cents per diluted a year ago. Sales totalled $874.8 million, down from $908.4 million.
Overnight markets
Overview: US 10yr note futures are down -0.092% at 118-17, S&P 500 futures are up 0.84% at 2686.75, Crude oil futures are up 0.34% at $67.05, Gold futures are up 0.22% at $1233.8, DXY is down -0.13% at 96.311, CAD/USD is down -0.07% at 0.7664.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.323% | 2 Year | 2.855% |
| 5 Year | 2.406% | 5 Year | 2.975% |
| 10 Year | 2.458% | 10 Year | 3.136% |
| 30 Year | 2.49% | 30 Year | 3.356% |
US Economic Data
| 8:30 AM | Advance Goods Trade Balance, Sep -76.0b est -75.1b (-75.8b prior) |
| Wholesale Inventories MoM, Sep 0.3% est 0.5% (1.0% prior) | |
| Retail Inventories MoM, Sep 0.1% (0.7 prior) | |
| Durable Goods Orders, Sep 0.8% est -1.5% (4.4% prior) | |
| Durables Ex Transportation, Sep 0.1% est 0.4% (0.0% prior) | |
| Cap Goods Orders Nondef Ex Air, Sep -0.1% est 0.5% (-0.9% prior) | |
| Cap Goods Ship Nondef Ex Air, Sep 0.0% est 0.4% (-0.2% prior) | |
| Initial Jobless Claims, Oct 20th 215k est 215k (210k prior) | |
| Continuing Claims, Oct 13th 1636k est 1644k (1640k prior) | |
| 9:45 AM | Bloomberg Consumer Comfort, Oct 21st (60.8 prior) |
| 10:00 AM | Pending Home Sales MoM, Sep est 0.0% (-1.8% prior) |
| Pending Home Sales NSA YoY, Sep est -2.6% (2.5% prior) | |
| 11:00 AM | Kansas City Fed Manf. Activity, Oct est 14 (13 prior) |
Canadian Economic Data
| 6:00 AM | CFIB Business Barometer, Oct 60.5 (61.4 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