Market Update Tsys trading lower, curve steeper, yields 1.5-2.5bps higher with the 10Y 3.15 (+2.7bps), prices weakening further after ADP came in above exp (227k vs 187k). Risk-on with equities higher, S&P fut +25, Nasdaq +100. Core EGBS also lower, UK 10Y gilt 4bps higher @ 1.44% – S&P noting that a no deal Brexit would result in recession. GOCs 1-2bps wider vs tsys after Aug GDP rose 0.1% vs 0.0% exp, led by oil&gas and finance. Adding to GOC underperformance Poloz late day comments yest that mon policy is still stimulative and ratee have to rise further to neutral. Provis opening 1bp tighter, Ont 49s 82/81 Ont 28s 67/66.5
News headlines
China Signals More Support Needed Amid Pressure on Economy (Bloomberg) China’s leadership signaled that further stimulus measures are being planned, as economic data pointed to a broad slowdown taking hold. The nation’s economic situation is changing, downward pressure is increasing, and the government needs to take timely measures to counter this, according to a statement from a Politburo meeting Wednesday chaired by President Xi Jinping.
Euro-Area Inflation Accelerates Despite Economic Slowdown (Bloomberg) Euro-area inflation accelerated in October and underlying price pressures increased, complicating policy makers’ choices after the economy grew at its weakest pace since 2014. Consumer prices jumped 2.2 percent from a year earlier while a measure that strips out volatile components rose to 1.1 percent.
Wall Street Tries to Shape Democratic Victory by Backing Moderates (Bloomberg) Wall Street is opening its checkbook to soften the blow from a blue wave. For the first time in a decade, the securities and investment industries are spending more on Democrats than Republicans ahead of the Nov. 6 midterm elections. Bankers are also giving to Democrats.
Stocks Rally to End Turbulent Month; Bonds Decline: Markets Wrap (Bloomberg) European stocks jumped on Wednesday, tracking a rebound across Asia as U.S. futures extended gains on the last day of one of the worst months for global equities in years. The dollar edged higher alongside Treasury yields. Almost every sector on the Stoxx Europe 600 Index advanced, with miners and industrial companies leading the way as U.S. shares looked set to build on their rally from a day earlier. Italian bonds bucked a decline as core European debt followed Treasuries lower. The euro edged down as inflation accelerated in October and underlying price pressures increased, handing policy makers a headache after growth data disappointed.
Air Canada profit misses on higher fuel costs (Reuters) Air Canada, the country’s biggest airline operator, reported a lower-than-expected quarterly profit on Wednesday, hurt by higher fuel costs. The company’s fuel costs per liter rose 39.7 percent in the third quarter from a year earlier. Air Canada and other carriers are contending with rising fuel costs that is weighing on profits, even as demand for air travel is strong. To combat that higher cost, airlines have increased ticket prices and hiked baggage fees.
Spruce Point sees Dollarama stock price tumbling (Reuters) Spruce Point Capital Management, which focuses on in-depth research of companies’ vulnerabilities, sees room for Dollarama Inc’s (DOL.TO) stock price to tumble roughly 40 percent after the Canadian retailer raised prices and fewer customers are shopping at its stores.
Canadians should get used to idea of 3% interest rates: Poloz (BNN) Bank of Canada governor Stephen Poloz wants Canadians to get used to the idea of three per cent interest rates as the new normal, now that the era of rock-bottom borrowing costs is gradually fading away. Poloz raised the benchmark rate last week for the fifth time in just over a year to 1.75 per cent – its highest level in about a decade. He sent signals that future hikes could arrive sooner than previously expected, in large part due to the economy’s resilience and the removal of some business uncertainty following the recent agreement on an updated North American trade pact.
CN Rail buying trucking company TransX (BNN) Canadian National Railway Co. () has signed a deal to acquire the Winnipeg-based TransX Group of Companies. Financial terms of the deal for the privately owned trucking firm were not disclosed. CN chief executive JJ Ruest says the deal will help strengthen the company’s intermodal business, notably the refrigerated segment.
Overnight markets
Overview: US 10yr note futures are down -0.21% at 118-17, S&P 500 futures are up 0.76% at 2705.75, Crude oil futures are up 0.39% at $66.44, Gold futures are down -0.43% at $1220, DXY is down -0.06% at 96.957, CAD/USD is up 0.16% at 0.7614.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.319% | 2 Year | 2.863% |
| 5 Year | 2.41% | 5 Year | 2.975% |
| 10 Year | 2.469% | 10 Year | 3.142% |
| 30 Year | 2.51% | 30 Year | 3.385% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Oct 26th -2.5% est -2.5% (4.9% prior) |
| 8:15 AM | ADP Employment Change, Oct 227k est 187k (230k prior) |
| 8:30 AM | Employment Cost Index, 3Q 0.8% est 0.7% (0.6% prior) |
| 9:45 AM | Chicago Purchasing Manager, Oct est 60.0 (60.4 prior) |
Canadian Economic Data
| 8:30 AM | Industrial Product Price MoM, Sep 0.1% est 0.0% (-0.5% prior) |
| Raw Materials Price Index MoM, Sep -0.9% (-4.6% prior) | |
| GDP MoM, Aug 0.1% est 0.0% (0.2% prior) | |
| GDP YoY, Aug 2.5% est 2.4% (2.4% 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