Commentaires

Market Update Tsys trading weaker as US equity futures are rebounding strongly from two days of losses, US 10Y 3.165%(+1.5bps), yields off the highs of Asia where 10s hit 3.18%. S&P futures +1.1%, Nasdaq +1.6%, VIX 22 after spiking to 29 yest aft, highest since March. Core EGBs have recovered from sharp drops at the open, Italian BTPs slightly higher, supply picks up next week with ~E20bln including E4bln German 2Y, Spain 3,10 & 30Y and 5Y French OAT. GOCs lower in line with tsys, 10Y 2.51%, 2s10s 5bps flatter on the week as this week’s FTQ rally has been led by 10s (-8bps vs 2s/30s). 

News headlines

IMF Says Yuan Is Fairly Valued Ahead of U.S. Currency Manipulation Report (Bloomberg) The yuan is “broadly in line” with China’s economic fundamentals, a senior IMF official said, days before the U.S. Treasury Department is scheduled to release a closely watched report on currency manipulation. China’s currency has fallen more than 6 percent this year against the dollar, prompting speculation it may fall through the key level of 7 per dollar. The decline has attracted the notice of the U.S., which is locked in a tit-for-tat tariff dispute with Beijing. In an interview Thursday, Treasury Secretary Steven Mnuchin said the U.S. wants to make sure the depreciation isn’t a “competitive devaluation.”

World’s Largest Car Market Faces Historic Drop (Bloomberg) China’s car market has been one of the most reliable engines of global growth for decades. Now that all might be coming to an end. Purchases of passenger vehicles by dealerships plunged for a third straight month, an industry group said Friday. With trade ties with the U.S. worsening by the day and car sales barely up for the year already, the industry is now facing the prospect of its first contraction since at least the 1990s.

Stocks Gain With Earnings in Focus; Treasuries Dip: Markets Wrap (Bloomberg) Stocks staged a broad recovery on Friday as strong trade data from China buoyed markets, with investor focus turning to third-quarter earnings at the end of a tumultuous week. The dollar steadied as Treasury yields ticked higher. U.S. equity-index futures jumped, suggesting the S&P 500 may snap its six-day losing streak when American markets open. JPMorgan Chase & Co. kicked of the third-quarter reporting season with earnings broadly in line with analysts’ estimates. The Stoxx Europe 600 index rose for the first time in three days with miners leading the advance, though the gauge is still headed for its worst week since February as most sectors trimmed early gains.

Oil Pares Weekly Loss as Supply Concerns Offset Flight From Risk (Bloomberg) Oil pared a weekly loss as investor focus shifted from broader market turmoil spurred by a plunge in U.S. equities to looming shortages from Iran’s dwindling exports. Futures in New York rose 0.7 percent, trimming the weekly drop to 3.9 percent. The International Energy Agency, while cutting estimates for global oil-demand growth for this year and next, warned that prices will remain high as spare crude supplies diminish.

Canada sees little chance of quick end to U.S. metals tariffs (Reuters) Canada does not hold out much hope that Washington will quickly lift tariffs that it imposed on steel and aluminum exports and is resisting a U.S. push to agree to strict quotas, two sources familiar with the matter said. The administration of U.S. President Donald Trump imposed the sanctions on Canada and Mexico in June, citing national security reasons. Although Canada and Mexico agreed a renewed continental trade deal last week, the measures remain in place.

Canada new home prices unchanged in August (Reuters) New home prices in Canada were unchanged in August, Statistics Canada said on Thursday. Ottawa registered the largest month-over-month gain, which was the eleventh consecutive rise in that market, while Toronto was flat.

Balsillie sounds alarm on USMCA’s impact on data in Canada (BNN) The former chairman and co-CEO of Research In Motion is voicing his concerns over letting big data collection companies like Google into the country amid a new trilateral trade deal that saw Canada make concessions on data and intellectual property. “If you’re going to invite them in, set very, very clear parameters of how you generate and control [intellectual property] right up front — and how you’re going to manage the data right up front, so that you generate intangible assets for the benefit of the Canadian economy and Canadian citizens,” Jim Balsillie told BNN Bloomberg in an interview Wednesday, when asked about concerns regarding smart city projects like Sidewalk Labs in Toronto.

Overnight markets

Overview: US 10yr note futures are down -0.211% at 118-05, S&P 500 futures are up 1.12% at 2776.25, Crude oil futures are up 1.06% at $71.72, Gold futures are down -0.08% at $1226.6, DXY is up 0.12% at 95.132, CAD/USD is down -0.17% at 0.7686. 

US Economic Data

Canadian Economic Data

Disclosure and Disclaimer

Market Update Tsys trading weaker, US 10Y 3.18%, despite risk off tone in equity markets (S&P fut -12.75), after yesterday afternoon’s plunge in stocks saw the 10Y rally after a somewhat disappointing auction from 3.24% to 3.17%. The USD index is lower (95.125 – 0.38), while gold is higher for a third day 1,203. European stocks seeing milder declines, the Euro Stoxx -1.2%. Key US Sep CPI coming up after Trump’s comments on Fed tightening despite inflation being in check, consensus is for a 0.2% /2.3% y/y. The US auctions $15bln in 30Y bonds at 1:00ET.  GOCs lower in line with tsys, 10Y 2.55% from 2.61% early yest morning. Provis closed 1bp wider yest, Ontario longs underperforming, the Ont 28/48 box 15.9bps, +1.5bps since last week. 

News headlines

Mnuchin, Fed Officials Downplay Market Rout as Sell-Off Widens (Bloomberg) Global finance chiefs played down the economic risks posed by the biggest U.S. stock sell-off since February, with many describing the decline as a long-awaited correction. “The fundamentals of the U.S. economy continue to be extremely strong, I think that’s why the stock market has performed as well as it has,” U.S. Treasury Secretary Steven Mnuchin told Bloomberg News at the IMF’s annual meeting in Bali, Indonesia. “The fact that there’s somewhat of a correction given how much the market has gone up is not particularly surprising.”

OPEC Sees Weaker Demand for Its Crude Next Year as Rivals Surge (Bloomberg) OPEC is under intense pressure right now from consumers to ease prices by pumping more crude, but for 2019 it sees a more doubtful picture. The cartel cut its estimate for global demand for its crude next year due to weakening economic growth and higher output from rivals, notably U.S. shale drillers. The world will need almost 900,000 fewer barrels from the group each day in 2019 — equivalent to Libya’s average output this year.

Trump Says Blame ‘Loco’ Fed, Not China Trade War, for Sell-Off (Bloomberg) President Donald Trump slammed the Federal Reserve as “going loco” for its interest-rate increases this year in comments hours after the worst U.S. stock market sell-off since February. Trump said in a telephone interview on Fox News late Wednesday night the market plunge wasn’t because of his trade conflict with China: “That wasn’t it. The problem I have is with the Fed,” he said. “The Fed is going wild. They’re raising interest rates and it’s ridiculous.”

Stock Rout Spreads as Bonds, Currencies Stay Calm: Markets Wrap (Bloomberg) There was little respite for equity investors on Thursday as the biggest U.S. stock selloff in months rolled through Asia and Europe and futures pointed to another drop at the New York open. Core European bonds gained and Treasuries turned lower before U.S. consumer price data. The worst of the stock declines were in Asia, where China’s Shanghai Composite gauge closed down more than 5 percent. Taiwan’s technology-heavy TWSE Index plummeted more than 6 percent in the region’s worst performance. By comparison, European losses were more contained, with the Stoxx Europe 600 Index and Britain’s FTSE 100 both slipping no more than 2 percent. Italian equities headed for a bear market, however, and LeasePlan Group NV pulled a planned IPO.

China car dealers push for tax cut as auto growth stalls (Reuters) China’s top auto dealers’ association has asked the government to halve taxes on car purchases to revive faltering sales, sources said, as worries grow the country’s auto market could shrink this year for the first time in decades. The China Automobile Dealers Association (CADA) submitted documents last month to the country’s finance and commerce ministries proposing the 10 percent auto purchase tax be halved, two people at the industry body told Reuters.

SEC, Tesla support approval of settlement (Reuters) The U.S. Securities and Exchange Commission, Tesla Inc (TSLA.O) and Chief Executive Officer Elon Musk submitted a joint filing late on Wednesday in support of a settlement, saying the terms were in the best interest of investors. “We therefore respectfully submit that the court should accept and enter the proposed consent judgments,” they said in a letter filed with the U.S. District Court, Southern District of New York.

SNC plunges as Canada rules out negotiated deal on graft charges (BNN) SNC-Lavalin Group Inc. () tumbled the most in more than six years after Canadian prosecutors ruled out a negotiated settlement with the company over past corruption charges. The Public Prosecution Service of Canada won’t open negotiations for a so-called Remediation Agreement, SNC-Lavalin said in a statement Wednesday. Canada’s biggest engineering and construction company said it “strongly disagrees” with the government’s position and is reviewing appeal options.

Overnight markets

Overview: US 10yr note futures are up 0.252% at 118-02, S&P 500 futures are down -0.42% at 2769.25, Crude oil futures are down -1.45% at $72.11, Gold futures are up 1.13% at $1206.9, DXY is down -0.4% at 95.123, CAD/USD is down -0.16% at 0.7664. 

US Economic Data

Canadian Economic Data

Disclosure and Disclaimer

Market Update US tsys weaker across the curve, yields 1-1.5bps higher, 10Y 3.22%, prices off the lows with EGBs as equities weaken, USD moves lower. US tsy supply with two auctions today – $36bln in 3Y notes at 11:30 and $23bln 10Y notes at 1:00ET. US equity futures weaker, S&P -5.25 (-0.18%), Nasdaq -33 (-0.45%). GOCs lower, in line with tsys before US PPI data, with the latest rise in GOC yields OIS mkts pricing in 2 rate hikes in the near term – October and January 

News headlines

U.S. producer prices rebound in September (Reuters) U.S. producer prices increased 0.2 percent in September, reversing an unexpected decline in August and in line with expectations. A rise in services prices offset a slight drop in prices for goods. Final demand prices had fallen 0.1 percent in August. In the 12 months through September, the producer price index rose 2.6 percent, slightly less than expected.

Chinese finance ministry official says ‘optimistic’ on trade war breakthrough (Reuters) A Chinese finance ministry official said on Wednesday he felt “a little bit more optimistic” on the prospect of breaking an impasse in trade negotiations with Washington, saying both sides are too economically integrated to tolerate a fallout.

Tougher U.S. investment rules to get soft opening next month: official (Reuters) As of November 10, investors in 27 industries will come under tougher scrutiny as an inter-agency panel led by the U.S. Treasury Department begins tightening foreign investment rules as part of a pilot program, according to a senior treasury official.

Global financial stability risks rising with trade tensions, IMF says (Reuters) Risks to the global financial system have risen over the past six months and could increase sharply if pressures in emerging markets escalate or global trade relations deteriorate further, the International Monetary Fund said on Wednesday.

World’s biggest traders see oil at $65-$100 a barrel next year (Reuters) The world’s biggest trading houses said on Wednesday they saw oil prices not falling below $65 per barrel and possibly breaking above $100 next year as U.S. sanctions on Iran reduce crude exports from the Islamic republic.

Canadian Pacific sees shipment prices to rise 3 to 4 percent (Reuters) Canadian Pacific Railway Ltd (CP.TO) said on Thursday it expects shipment prices to rise 3 to 4 percent in the next eighteen to twenty four months.

U.S. Moves to Broaden Curbs on Chinese Investment (NYTimes) The Trump administration said it would begin reviewing foreign investments in American companies more broadly, initiating new powers that give the United States greater authority to block Chinese and other foreign transactions on national security grounds.

Overnight markets

Overview: US 10yr note futures are up 0.119% at 117-27, S&P 500 futures are down -0.26% at 2886.25, Crude oil futures are up 0.83% at $74.91, Gold futures are up 0.44% at $1193.8, DXY is down -0.08% at 95.683, CAD/USD is down -0.09% at 0.7724. 

US Economic Data

Canadian Economic Data

Disclosure and Disclaimer