Market Update
US tsys higher, yields 1.5-4.5bps lower led by the 10Y @3.01% (-4.7bps), the lowest since Sep 17th. Crude rebounding after falling below $50, Russia to cut oil production along with OPEC, WTI @50.82 (+0.48). US equity futures lower, S&P -7, European stocks giving up most of earlier gains, Stoxx +0.20%. UK gilts rallying, GBP lower after PM May warned the UK should be ready for no deal on Brexit. In Canada, GOCs are higher led by the 10Y trading below 2.30% for the first time since Sep 10th, longs lagging in a big way, 10s30s approaching 10bps the steepest since May, +5bps this week alone with yest long provi supply & RRB auction weighing on the long end. Provis opening up 0.5-1bps wider, Ont 28s 72/71.5, the Ont 48/28 box has come in ~2.5bps offsetting some of the widening in the GOC curve since Oct.
News headlines
ECB Singles Out Italy as Financial Stability Challenges Rise (Bloomberg) The European Central Bank singled out Italy as an example of how quickly investors lose confidence in a government if they’re confronted with policy uncertainty, as it said the risks to financial stability in the bloc have become “more challenging.” In its twice-yearly Financial Stability Review, the ECB said concerns relating to debt-sustainability and liquidity at investment funds have both risen since the previous report. Two other key risks — disorderly adjustments in financial markets, and the ability of banks to provide credit — were largely unchanged.
Powell Put Spurs Record $1 Billion Inflow to Emerging-Market ETF (Bloomberg) The second-largest exchange-traded fund for emerging-market equities received a record one-day inflow of more than $1 billion Wednesday, as investors pared back U.S. interest-rate bets for next year. The iShares Core MSCI EM ETF, ticker IEMG, saw its market capitalization climb back above the $50 billion mark for the first time since June, as dovish comments from Federal Reserve chair Jerome Powell revived global demand for riskier assets.
Trump Renews Auto Tariff Threat as Trade Czar Aims at China (Bloomberg) President Donald Trump raised the prospect of slapping a 25 percent tariff on imported cars and ordered a review of China’s retaliatory auto tariffs against the U.S. as his administration continued to scramble to respond to General Motors Co.’s announcement of plant closures this week.
Treasury Yields Touch 3% as U.S. Stock Futures Dip: Markets Wrap (Bloomberg) Benchmark Treasury yields briefly fell below 3 percent for the first time since September in the wake of the Fed’s dovish tilt, but a stock rally faded as U.S. equity futures dropped and gains in Europe were muted. The dollar fluctuated. The 10-year Treasury yield extended its decline after Fed Chairman Jerome Powell fueled speculation the central bank may pause interest rate increases next year, while the greenback drifted in a tight range following Wednesday’s drop. European bonds rose, including Italian notes despite demand for five-year debt at an auction falling to the lowest since June. The euro pared an earlier advance after a raft of weak economic data and the pound came under pressure as Prime Minister Theresa May raised the prospect of a “no deal” Brexit.
Canada’s Alberta province to buy rail cars to reduce oil glut (Reuters) Canada’s Alberta province is in talks to buy rail cars to transport 120,000 barrels per day of crude oil and expects a deal to be concluded within weeks, Premier Rachel Notley said on Wednesday, as the oil-rich province tries to move oil stuck in the region because of a lack of pipeline capacity.
Canada’s Toronto-Dominion Bank quarterly earnings up 20 percent (Reuters) Canada’s Toronto-Dominion Bank (TD.TO) reported on Thursday a 20 percent rise in fourth-quarter earnings, marginally ahead of analysts’ expectations, helped by strong growth at its U.S. retail business. TD said earnings per share, excluding one-off items, rose to C$1.63 in the quarter ended Oct. 31, compared with C$1.36 a year ago. Analysts had, on average, forecast earnings of C$1.62, according to IBES data from Refinitiv.
Oil drops below US$50 on concern OPEC won’t cut output decisively (BNN) Oil dropped below US$50 a barrel in New York for the first time in more than a year as traders fretted that OPEC won’t act decisively to clear a resurgent surplus in the global crude market. All eyes are on this weekend’s G20 summit in Argentina, where Russia’s Vladimir Putin and Saudi Arabia’s Mohammed bin Salman are likely to discuss how to coordinate oil policy, but both leaders have reasons for caution. Shielded by a budget surplus and a weak ruble, Putin said yesterday current prices suit Russia fine. The crown prince, under pressure after the killing of Jamal Khashoggi, can’t afford to alienate President Donald Trump.
Overnight markets
Overview: US 10yr note futures are up 0.183% at 119-20, S&P 500 futures are down -0.32% at 2732.75, Crude oil futures are up 1.19% at $50.89, Gold futures are up 0.18% at $1232, DXY is down -0.01% at 96.772, CAD/USD is down 0% at 0.7533.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.19% | 2 Year | 2.793% |
| 5 Year | 2.245% | 5 Year | 2.828% |
| 10 Year | 2.296% | 10 Year | 3.012% |
| 30 Year | 2.392% | 30 Year | 3.302% |
US Economic Data
| 8:30 AM | Personal Income, Oct est 0.4% (0.2% prior) |
| Personal Spending, Oct est 0.4% (0.4% prior) | |
| Real Personal Spending, Oct est 0.2% (0.3% prior) | |
| PCE Deflator MoM, Oct est 0.2% (0.1% prior) | |
| PCE Core MoM, Oct est 0.2% (0.2% prior) | |
| PCE Core YoY, Oct est 1.9% (2.0% prior) | |
| Initial Jobless Claims, Nov 24th est 220k (224k prior) | |
| Continuing Claims, Nov 17th est 1663k (1668k prior) | |
| 9:45 AM | Bloomberg Consumer Comfort, Nov 25th (61.3 prior) |
| 10:00 AM | Pending Home Sales MoM, Oct 0.5% (0.5% prior) |
| Pending Home Sales NSA YoY, Oct est -2.8% (-3.4% prior) | |
| 14:00 AM | FOMC Meeting Minutes, Nov 8th |
Canadian Economic Data
| 6:00 AM | CFIB Business Barometer, Nov 61.2 (60.5 prior) |
| 8:30 AM | Current Account Balance, 3Q est -12.00b (-15.88b 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