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Market Update US tsys trading slightly higher on above avg volume in TY futures (396k), US 10Y 3.16%(-1bp). Tsys near the lows of the session despite weaker  Sep Retail Sales (0.1% vs 0.6%, core -0.1% vs 0.4%) as European equities claw back earlier losses, core EGBs lower led by bunds. UK gilts higher, outperforming bunds while the GBP fell to the lowest in a week as Brexit talks have hit another impasse. In Canada, GOCs higher, 0.5bps narrower in 10s, 10Y 2.49% from 2.61% last Wed, highest since Jan 2014.  Much anticipated BOC outlook survey scheduled for 10:30AM, after the BOS indicator rose to near record levels in Q2, focus will be on any impact from US tariffs thou the ‘NAFTA 2.0’ deal signed in October may blunt some of the report’s impact. 

News headlines

Trump’s Claim of Currency Manipulation Tested in Treasury Report (Bloomberg) The U.S. Treasury is poised to render a verdict on President Donald Trump’s claim that China is manipulating its currency as a trade war between the two nations intensifies and rattles markets. While the U.S. hasn’t designated China as a currency manipulator since 1994, Wall Street is bracing for the prospect that the Treasury Department will do so this week in its semi-annual foreign-exchange report. Such a move wouldn’t trigger penalties, but it would likely escalate tensions between the world’s two largest economies.

Bank of America’s Lending Business Boosted by Higher Rates (Bloomberg) Bank of America Corp. got another boost from rising interest rates in the third quarter. The firm’s lending business produced the most interest income since 2011 and its net interest margin climbed to 2.42 percent, better than analysts estimated. That helped propel profit to a record.

Saudi Arabia Begins Internal Probe Into Khashoggi Disappearance (Bloomberg) Saudi Arabia has begun an internal investigation into the disappearance of a prominent journalist at its Istanbul consulate and could hold people accountable if the evidence warrants it, according to a Saudi official. King Salman over the weekend ordered the Saudi public prosecutor to investigate the fate of Jamal Khashoggi, partly due to information received from Turkish authorities, the Saudi official said on Monday. He spoke anonymously because he wasn’t authorized to discuss the matter. While Saudi Arabia and Turkey have already said they would cooperate in a joint investigation, this would be a separate inquiry, the official said.

Stock Slump Resumes; Oil Advances on Saudi Tension: Markets Wrap (Bloomberg) Stocks resumed a selloff in Asia and Europe while equity futures pointed to declines also in the U.S. on Monday, as growing tension between America and Saudi Arabia added to a list of investor concerns and drove up oil prices. Gold rose with Treasuries and the yen as the dollar fell. Industrial goods makers and financial-services companies were the biggest losers in the Stoxx Europe 600 index. The S&P 500 index was set to deepen declines after its biggest weekly retreat since March. Equities fell in Japan and Hong Kong and China’s stocks touched the lowest in almost four years following a weekend of warnings on global economic fragility from finance chiefs meeting at an annual IMF gathering.

JP Morgan and Ford cancel plans for Saudi investor event (Reuters) JP Morgan & Chase Co (JPM.N) Chief Executive Jamie Dimon and Ford Motor Co (F.N) Chairman Bill Ford canceled plans to attend a Saudi investor conference, the companies said on Sunday, the latest such high-profile announcements after the disappearance of Saudi journalist Jamal Khashoggi. The cancellations could add pressure on other U.S. firms like Goldman Sachs Group Inc (GS.N), Mastercard Inc (MA.N) and Bank of America Corp (BAC.N) to reconsider their plans to attend the investor event.

Canada home prices flat in Sept, up 2.1 percent on year (Reuters) Canadian home prices were unchanged in September from August as the number of areas across the country posting price gains declined, data showed on Friday. The flat monthly reading for the Teranet-National Bank Composite House Price Index, which measures changes for repeat sales of single-family homes, matched the historical average for September since 2010, Teranet said.

Sears files for bankruptcy protection in U.S (BNN) Sears Holdings Corp., the 125-year-old retailer that became an icon for generations of American shoppers, filed for bankruptcy, saddled with billions of dollars of debt racked up as it struggled to adjust to the rapid shift toward online consumption. The company filed for Chapter 11 protection from creditors with the U.S. Bankruptcy Court in White Plains, New York, early Monday and said Eddie Lampert is stepping down immediately as chief executive officer. At the same time, Lampert’s ESL Investments Inc. is negotiating a financing deal while also discussing buying “a large portion of the company’s store base,” Sears said in a statement.

Overnight markets

Overview: US 10yr note futures are down -0.092% at 118-08, S&P 500 futures are down -0.13% at 2765, Crude oil futures are up 0.9% at $71.98, Gold futures are up 0.92% at $1233.3, DXY is down -0.12% at 95.102, CAD/USD is up 0.01% at 0.7676. 

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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

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