Market Update Tsys trading slightly lower, near top of overnite range on heavy volume in TY futures (900k) due to ongoing Dec/Mar rolling. Consumer confidence for Nov at 10:00, while the US auctions $40bln 5Y notes at 1:00PM. Core EGBs higher led by 10Y gilts reversing earlier losses on trade news as Trump is considering new tariffs on China. US stock futures are lower, S&P -12, European equities -0.50%. GOCs are higher, in line with tsys, 10Y 2.34%, quiet in terms of data until Friday Q3 GDP. Provis starting 0.5bps wider on expectations of supply.
News headlines
Trump signals he’ll boost China tariffs to 25% (BNN) President Donald Trump said he’ll likely push forward with plans to increase tariffs on $200 billion of Chinese goods, indicating he would also slap duties on all remaining imports from the Asian nation if negotiations with China’s leader Xi Jinping fail to produce a trade deal. Trump, in an interview with the Wall Street Journal published Monday, said he’s prepared to impose tariffs on a final batch of US$267 billion of Chinese shipments if he can’t make a deal with Xi when they meet at the Group of 20 meeting in Argentina, which starts Nov. 30. The rate could be either 10 per cent or 25 per cent, Trump said.
Another Warning Sign That the U.S. Economy Will Slow Next Year (Bloomberg) Juiced by President Donald Trump’s tax cuts, business investment helped deliver a robust U.S. economy in the first half of 2018, but signs have multiplied that the growth driver is faltering. Companies face tariff-related uncertainty, cooling global demand and rising borrowing costs, while plunging oil prices are menacing the energy sector. Meanwhile, the U.S. and China are settling in for a protracted trade war, the boost from lower taxes is projected to fade next year and a politically divided Congress will probably shirk from additional stimulus.
Deep in the Data, China’s Bank Funding Squeeze Is Easing Off (Bloomberg) China’s beleaguered private companies may be on the cusp of better times, with signs emerging that a government push to boost bank lending is working. The private sector, which makes up about 80 percent of employment in the world’s second-biggest economy, has been struggling with a credit squeeze triggered by a campaign to shrink China’s shadow-banking industry. With corporate defaults hitting a record this year, policy makers acted to restart the credit flow, notably by verbally directing banks to provide more loans.
EU Is Said to Discuss Russia Sanctions After Ukraine Naval Clash (Bloomberg) European Union governments are discussing sanctions on Russia in the wake of its latest confrontation with Ukraine, though no action is likely until the facts are fully established, a German official said. The balancing act is a sign of Europe’s constraints in getting tough with President Vladimir Putin after imposing a series of sanctions, championed by German Chancellor Angela Merkel, to punish Russia’s annexation of Crimea and meddling in Ukraine. Merkel called for de-escalation in a phone call with Putin late Monday, according to the chancellery in Berlin.
Stocks Drop as Trade Talk Weighs; Copper Declines: Markets Wrap (Bloomberg) U.S. stock futures and European shares fell on Tuesday while gains in Asian equities were limited after President Donald Trump said he’d likely increase tariffs again on Chinese imports, just days before meeting with his counterpart Xi Jinping. Commodities retreated, led by copper. Contracts on the Dow, S&P and Nasdaq all pointed to a drop at the opening, while Treasuries and the dollar held steady before the Federal Reserve’s top two officials speak in the coming two days. Equity benchmarks rose in Japan, but were steady in Hong Kong and China, in the wake of signals from Trump that he’s prepared to enact higher tariffs. While China’s foreign ministry urged the U.S. to work toward a positive outcome for the meeting planned at the Group of 20 summit this week, Apple’s shares fell in premarket trading.
Scotiabank to exit nine countries in Caribbean shake-up (Reuters) Bank of Nova Scotia (BNS.TO) on Tuesday reported fourth-quarter earnings which were marginally below expectations and said it planned to exit nine countries in the Caribbean as part of a shake-up of that business. The bank, which has operated in the Caribbean since 1889, said that it would refocus its business in the region by selling its insurance operations in Jamaica and Trinidad & Tobago to Sagicor Financial Corporation, with whom it will partner to sell insurance products in those countries.
Air Canada says TD, CIBC and Visa to continue as Aeroplan partners (BNN) Air Canada has signed a definitive agreement to buy the Aeroplan loyalty program from Aimia Inc. for $450 million in cash, adding that it has committed to TD Bank, CIBC and Visa as loyalty card partners. Under the deal, Air Canada will also assume $1.9 billion of Aeroplan miles liability. The definitive agreement with Aimia follows an announcement in August of a tentative sale.
Overnight markets
Overview: US 10yr note futures are up 0.079% at 119-08, S&P 500 futures are down -0.41% at 2659, Crude oil futures are down -0.35% at $51.45, Gold futures are up 0.1% at $1229.9, DXY is up 0.04% at 97.116, CAD/USD is up 0.01% at 0.7545.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.228% | 2 Year | 2.829% |
| 5 Year | 2.289% | 5 Year | 2.887% |
| 10 Year | 2.336% | 10 Year | 3.055% |
| 30 Year | 2.391% | 30 Year | 3.311% |
US Economic Data
| 9:00 AM | FHFA House Price Index MoM, Sep est 0.4% (0.3% prior) |
| House Price Purchase Index QoQ, 3Q (1.1% prior) | |
| S&P CoreLogic CS 20-City MoM SA, Sep est 0.20% (0.09% prior) | |
| S&P CoreLogic CS 20-City YoY NSA, Sep est 5.20% (5.49% prior) | |
| S&P CoreLogic CS 20-City NSA Index, Sep (213.72 prior) | |
| S&P CoreLogic CS US HPI NSA Index, Sep (205.81 prior) | |
| S&P CoreLogic CS US HPI YoY NSA, Sep (5.77% prior) | |
| 10:00 AM | Conf. Board Consumer Confidence, Nov est 135.9 (137.9 prior) |
| Conf. Board Present Situation, Nov (172.8 prior) | |
| Conf. Board Expectations, Nov (114.6 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