27/09/2018

Market Update US tsys slightly higher, at lows of o/n range after having given up gains from Europe, 10Y 3.05%, off the lows after in line Q2 GDP and stronger August Durable Goods, thou Durable Goods ex transport weaker (0.1% vs 0.4%. Tsys rose with bunds/gilts on Italy budget concerns, 5Y BTP/bund spd +8bps. Still Italy managed to sell E4bln in 5 & 10Y bonds at a higher bid/cover than previous auction – 10Y b/c 1.44x vs 1.37x prev. GOCs higher, outperforming tsys by 1bp across the curve, 10Y 2.41% vs 2.47% high from Tuesday. Provis well bid, Ontarios lifted in 10s& longs, rumours of Quebec long yest never transpired. 

News headlines

Trump Says He Refused Meeting With Trudeau Over Trade Talks (Bloomberg) President Donald Trump said he rejected a one-on-one meeting with Canadian Prime Minister Justin Trudeau at the United Nations General Assembly because he’s dissatisfied with trade negotiations with Ottawa. “We’re very unhappy with the negotiations and the negotiating style of Canada,” Trump said in a news conference on Wednesday. “Canada has treated us very badly. Canada has a long way to go.”

Trade Tensions, Italian Uncertainty Put a Cloud on Europe’s Mood (Bloomberg) Euro-area economic confidence slid for a ninth month, the longest streak of declines since 2011, as protectionism and political uncertainty cast a cloud over the outlook. The latest drop in sentiment coincided with Germany having its growth outlook slashed and the WTO downgrading its view of global trade. The latter also warned that the U.S.-China tariff spat is already hurting corporate investment.

Powell Sees Bright Moment for Economy With More Hikes Ahead (Bloomberg) Ten years after the peak of the financial crisis, Jerome Powell’s Federal Reserve sees a U.S. economy capable of humming along without support from monetary policy. Unemployment is low. Inflation is stable and anchored. Financial conditions merit watching, but don’t look overly worrisome. And against that backdrop, policy makers are raising interest rates gradually despite renewed criticism from President Donald Trump.

Stocks Mixed After Fed; Euro, Italian Bonds Drop: Markets Wrap (Bloomberg) U.S. equity futures edged higher, while stocks in Europe and Asia slipped Thursday as investors digested the likelihood of more Federal Reserve interest-rate increases stretching into next year. The euro declined with Italian bonds as the country is due to decide on deficit targets. Futures on the S&P 500 pointed to a slightly firmer open after sharp losses late in the previous session. Banks led the way lower in the Stoxx Europe 600 Index, following a downbeat session in Asia after the Federal Reserve signaled tightening policy was here to stay. The dollar climbed and the single currency dropped, and though an auction of Italian bonds was well received, the debt fell alongside the country’s shares as political jockeying continued with 2019 budget targets in the balance. Britain’s pound fell as the EU was said to discuss no-deal contingencies.

U.S. says Canada not making concessions needed for NAFTA deal (Reuters) Canada is not making concessions needed to reach a deal with the United States for a trilateral NAFTA pact and is running out of time before Washington proceeds with a Mexico-only agreement, a top U.S. official said on Tuesday. U.S. President Donald Trump’s administration recently began increasing the pressure on Canada, urging it to conclude a deal by Sunday or face exclusion from a revised North American Free Trade Agreement. A spokesman for Canadian Foreign Minister Chrystia Freeland brushed off the latest remarks from the United States, saying Canada was not interested in focusing on timelines.

TSX set to open higher as oil prices rise (Reuters) Stock futures pointed to a higher opening for Canada’s main stock index on Thursday as oil prices rose on prospects of a global supply shortfall due to U.S. sanctions on major crude exporter Iran. September futures on the S&P/TSX index SXFc1 were up 0.13 percent at 6:55 a.m. ET. The Toronto Stock Exchange’s S&P/TSX .GSPTSE edged up 9.78 points, or 0.06 percent, to 16,169.28 on Wednesday. Dow Jones Industrial Average e-mini futures 1YMc1 were up 0.08 percent at 6:55 a.m. ET, while S&P 500 e-mini futures ESc1 were up 0.11 percent and Nasdaq 100 e-mini futures NQc1 were up 0.31 percent.

RBC uses trash day reminders and tire changes to lure clients (BNN) There’s a company in Toronto that has built programs to help new immigrants, keep track of car maintenance and tell homeowners what day to haul their trash to the curb. But the firm isn’t a software developer — it’s one of Canada’s biggest banks. Royal Bank of Canada has spent more than two years building a fintech startup within its operations. RBC Ventures Inc. now has about 150 employees working on nine projects in various stages of development out of a glass office tower near Toronto’s waterfront, two blocks south of the bank’s headquarters.

Bed Bath & Beyond plunges amid surprise drop in same-store sales (BNN) U.S. consumers are opening their wallets again, but Bed Bath and Beyond Inc. (BBBY.O) is still struggling to lure them into its stores. The home-furnishings and cookware retailer reported a surprise drop in same-store sales — a key metric. Shares fell as much as 12 per cent in late trading Wednesday. Bed Bath & Beyond has been exploring ways to boost in-store traffic while increasing its struggling online presence. While Chief Executive Officer Steven Temares has said improvement is needed in e-commerce, in-store promotions will be the key to keeping shoppers loyal as competition heats up from powerful online rivals like Amazon.com Inc.

Overnight markets

Overview: US 10yr note futures are up 0.066% at 118-26, S&P 500 futures are up 0.09% at 2914, Crude oil futures are up 0.98% at $72.27, Gold futures are down -0.14% at $1197.4, DXY is up 0.38% at 94.55, CAD/USD is up 0.38% at 0.7652.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	2.181%	2 Year	2.819%
5 Year	2.314%	5 Year	2.948%
10 Year	2.407%	10 Year	3.05%
30 Year	2.413%	30 Year	3.182%

US Economic Data

8:30 AM	Advance Goods Trade Balance, Aug est -70.6b (-72.2b prior)
	Wholesale Inventories MoM, Aug est 0.3% (0.6% prior)
	Retail Inventories MoM, Aug (0.4% prior)
	GDP Annualized QoQ, 2Q est 4.2% (4.2% prior)
	Personal Consumption, 2Q est 3.8% (3.8% prior)
	GDP Price Index, 2Q est 3.0% (3.0% prior)
	Core PCE QoQ, 2Q est 2.0% (2.0% prior)
	Durable Goods Orders, Aug est 2.0% (-1.7% prior)
	Durables Ex Transportation, Aug est 0.4% (0.1% prior)
	Cap Goods Orders Nondef Ex Air, Aug est 0.4% (1.6% prior)
	Cap Goods Ship Nondef Ex Air, Aug est 0.5% (1.0% prior)
	Initial Jobless Claims, Sep 22nd est 210k (201k prior)
	Continuing Claims, Sep 15th est 1678k (1645k prior)
9:45 AM	Bloomberg Consumer Comfort, Sep 23rd (60.2 prior)
10:00 AM	Pending Home Sales MoM, Aug est -0.5% (-0.7% prior)
	Pending Home Sales NSA YoY, Aug est -1.0% (-0.5% prior)
11:00 AM	Kansas City Fed Manf. Activity, Sep est 17 (14 prior)

Canadian Economic Data

6:00 AM

CFIB Business Barometer, Sep 61.4 (61.6 prior)