Market Update

Tsys trading higher on ‘risk off’, 10Y 1.73% (-4bps), heavy volume in TY futures (590k). China said to have doubts over a long-term trade deal, S&P futures fell 13pts mid morning on the news but have since retraced 50% of the losses.  Sep Per Inc/Spending as expected, PCE core lower (unch vs +0.1%). MNI Chicago PMI on tap.  GOCs higher, in line with tsys, 10Y ~18bps lower and 5s30s 6bps steeper since dovish BOC yest – consensus had been building the BOC would be on hold thru 2020, so it came as a shock the BOC disclosed it had discussed an ‘insurance’ cut for yest meeting.  2Y auction at noon – $3bln new Feb 2022s with the WI/2Y roll 0.5/0.3

News headlines

Fed cuts rates for the third time as US economy slows (CNN) The Federal Reserve cut interest rates for the third time this year as the US economy continued slowing amid ongoing trade disputes and weak global growth. The federal funds rate, which affects the cost of mortgages, credit cards and other borrowing, will now hover between 1.5% and 1.75%. Federal Reserve Chairman Jerome Powell strongly suggested at a press conference Wednesday that the Fed would hold rates steady for the foreseeable future. Powell said the current level is « likely to remain appropriate » given the Fed’s economic outlook of moderate economic growth, a strong labor market and inflation growing at around 2%.

Bank of Canada holds rates, warns economy will be ‘tested’ (BNN) The Bank of Canada forecast a weaker outlook for the domestic economy amid heightened global downside risks, potentially giving itself more leeway to lower borrowing costs. In a decision Wednesday, policy makers kept their current 1.75 per cent policy rate unchanged for an eighth straight meeting, calling the level “appropriate” even as they cut their growth forecasts for the next two years.

China casts doubts that a long-term trade deal is possible with Trump (BNNBloomberg) Chinese officials are casting doubts about reaching a comprehensive long-term trade deal with the U.S. even as the two sides get close to signing a “phase one” agreement. In private conversations with visitors to Beijing and other interlocutors in recent weeks, Chinese officials have warned they won’t budge on the thorniest issues, according to people familiar with the matter. They remain concerned about President Donald Trump’s impulsive nature and the risk he may back out of even the limited deal both sides say they want to sign in the coming weeks.

Hong Kong falls into first recession in 10 years: government estimate (BI) Hong Kong slid into recession for the first time since the global financial crisis in the third quarter, advance estimates showed on Thursday, weighed down by increasingly violent anti-government protests and the protracted U.S.-China trade war. The economy shrank 3.2% in July-September from the preceding period, contracting for a second straight quarter and meeting the technical definition of a recession, according to the preliminary government data.

Apple forecasts strong holiday sales due to Apple Watch, AirPods and streaming (CBC) Apple is forecasting sales for the crucial holiday shopping quarter higher than Wall Street expectations, with chief executive Tim Cook saying that new iPhone 11 models were off to « a very, very good start » as sales of AirPods, Apple Watches and streaming services continue to rise. The outlook released Wednesday reaffirms Cook’s strategy to remake a company that consistently depended on iPhone sales for well over half its revenue to one that depends on services and wearables. Since 2017, Cook has had to implement the strategy while also shepherding Apple through a trade dispute between two of its most important markets, the United States and China.

Boeing CEO grilled on 737 Max 8 system failures, his $23M pay package (CBC) Boeing chief executive Dennis Muilenburg acknowledged the company made mistakes in the development of a key safety system at the centre of two fatal 737 Max 8 crashes, and was hammered over his compensation at a U.S. House hearing on Wednesday. Muilenburg acknowledged « we made some mistakes » on the development of Maneuvering Characteristics Augmentation System (MCAS), an anti-stall system that automatically pushed the plane’s nose down, leaving pilots fighting for control.

Beijing could ax extra tariffs on U.S. farm products to boost imports – China trade association chief (Reuters) Beijing could remove extra tariffs imposed since last year on U.S. farm products to ease the way for importers to buy up to $50 billion worth, rather than direct them to buy specific amounts, the head of a government-backed trade association said.

Market Overview: US 10yr note futures are up 0.35% at 129-30, S&P 500 futures are down -0.22% at 3041, Crude oil futures are down -1.09% at $54.46, Gold futures are up 0.85% at $1509.4, DXY is down -0.38% at 97.276, CAD/USD is down 0% at 0.7599.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.532% 2 Year 1.58%
5 Year 1.422% 5 Year 1.577%
10 Year 1.418% 10 Year 1.735%
30 Year 1.598% 30 Year 2.209%

US Economic Data

07:30 AM Challenger Job Cuts YoY, Oct  Survey: —  )Actual: -33.50% Prior: -24.80%
08:30 AM Employment Cost Index, 3Q  Survey: 0.70%  )Actual: 0.70% Prior: 0.60%
     Personal Income, Sep  Survey: 0.30%  )Actual: 0.30% Prior: 0.40%
     Personal Spending, Sep  Survey: 0.30%  )Actual: 0.20% Prior: 0.10%
     Real Personal Spending, Sep  Survey: 0.20%  )Actual: 0.20% Prior: 0.10%
     PCE Deflator MoM, Sep  Survey: 0.00%  )Actual: 0.00% Prior: 0.00%
     PCE Deflator YoY, Sep  Survey: 1.40%  )Actual: 1.30% Prior: 1.40%
     PCE Core Deflator MoM, Sep  Survey: 0.10%  )Actual: 0.00% Prior: 0.10%
     PCE Core Deflator YoY, Sep  Survey: 1.70%  )Actual: 1.70% Prior: 1.80%
     Initial Jobless Claims, 46296  Survey: 215k  )Actual: 218k Prior: 212k
     Continuing Claims, 43739  Survey: 1679k  )Actual: 1690k Prior: 1682k
09:45 AM MNI Chicago PMI, Oct  Survey: 4800.00%  Prior: 4710.00%
     Bloomberg Consumer Comfort, 46.66  Survey: —  Prior: 63.40

Canadian Economic Data

06:00 AM CFIB Business Barometer, Oct  Survey: —  Actual: 59.80 Prior: 59.30
08:30 AM GDP MoM, Aug  Survey: 0.20%  Actual: 0.10% Prior: 0.00%
     GDP YoY, Aug  Survey: 1.40% Actual: 1.30% Prior: 1.30%
     Industrial Product Price MoM, Sep  Survey: 0.20%  )Actual: -0.10% Prior: 0.20%
      Raw Materials Price Index MoM, Sep  Survey: 2.50%  )Actual: 0.00% Prior: -1.80%

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, Émile Bordeleau

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