Commentaires

Market Update US tsys trading slightly higher, US 10Y 3.23%, after reaching a 7Y high 3.26% in European trading, heavy volume in TY futures (>700k), curve steeper as long end lags. Multiple Fed speaker including Fed Kaplan who expects strong GDP growth this year, solid consumer spending thou the fiscal boost expected to fade next yr. Core EGBS also lower, despite continued selloff in Italian debt, Fin Minister comments saying the govt would ‘do what it has to do’ if the BTP spd hit 400 or 500 bps (10Y spd 310bps). GOCs lower, in line with tsys, 10Y ~2.60% highest since Jan 2014. Provincials feel well supported with all in yields moving higher, supply easily absorbed, spds reaching their tights for the yr last week.  

News headlines

The IMF again downgrades outlook for the global economy (BI) The IMF announced it had reduced its outlook on the global economy to a 3.7% growth rate for this year and next, down 0.2% from what it had originally predicted in July. The organization’s assessment applies to the 19 nations of the European Union, as well as all countries in Central and Eastern Europe, Latin America, the Middle East and Sub-Saharan Africa. The IMF expects the US economy to continue growing this year at 2.9%, but sees that rate falling to 2.5% next year amid the country’s escalating trade war with China. While the IMF’s outlook for the Chinese economy stayed at 6.6% this year, its forecast for next year of 6.2% represents the slowest growth rate the Asian country has seen since 1990.

All eyes on rates: 10-year Treasury yield hits fresh 7-year high as bond market reopens. (CNBC) The yield on the benchmark 10-year Treasury note rose above 3.25 percent in early trading, returning to levels not seen in more then seven years. The 10-year yield is up more than 20 basis points over the last week amid a report showed the lowest U.S. unemployment rate in 49 years and rising wages. Concerns surrounding rising interest rates again took center stage after U.S. government debt yields hit highs not seen in several years during the bond market’s first day of trading this week. The yield on the benchmark 10-year Treasury note rose above 3.25 percent in early trading, returning to levels not seen in more then seven years. The yield on the 30-year Treasury bond was higher at 3.43 percent, its highest level since 2014.

Selloff sucks Europe back under after Asia sinks to 17-month low (Reuters) European stocks were sucked back into the red on Tuesday, as a four-day global selloff took Asia to a 17-month low and left Wall Street on course to equal its longest losing streak of the year. U.S. stock index futures fell on Tuesday, following European and Asian weakness, after the International Monetary Fund cut its global growth forecasts, squarely blaming the Sino-U.S. trade war.

China slashes U.S. LPG imports amid trade war (Reuters) China has choked back on imports of liquefied petroleum gas (LPG) from the United States, traders and analysts said, turning to the Middle East for extra supplies amid the two countries’ trade dispute.

China must take strong stimulus measures to support growth: state media (Reuters) China must take strong stimulus measures to support growth, with the country in a “critical” period of stabilizing its economy, according to a commentary in the Global Times, a state-backed Chinese tabloid.

Overnight markets

Overview: US 10yr note futures are down -0.04% at 117-21, S&P 500 futures are down -0.44% at 2881, Crude oil futures are up 0.65% at $74.77, Gold futures are up 0.12% at $1190, DXY is up 0.37% at 96.119, CAD/USD is up 0.31% at 0.7693. 

 US Economic Data

Canadian Economic Data

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Market Update US tsys trading lower, yields 1.5-2.0bps higher across the curve, 10Y 3.205% on above avg volume in TY (340k) before Sep Nonfarm payrolls. Core EGBs also lower, 10Y bund +2bps @0.55% to new high, despite renewed slide in Italian BTPs – 10Y BTP/Bund spd +2bps @282bps.  Gilts weighed by positive Brexit headlines, the GBP higher for a second day. Reuters cited source saying EU negotiators are close to Brexit deal. GOCs lower in line with tsys, 10Y 2.57%. Canadian employment is forecast to have rebounded 25k last month after falling 52K in August – thou that was entirely due to the 92k plunge in part-time positions , Ontario alone lost 80k jobs in August.Provis opening unch after closing 0.5bps wider yest, 10Y Ontario 5bps tighter over the past week despite over $5bln in supply, mostly risk off tone in equities.

News headlines

The Labor Department will release its official hiring and unemployment figures for September at 8:30 a.m. on Friday  (NYTimes) US employment data will take center stage today, as evidence of strong jobs growth and higher wages could see bond yields rise again. The bond market selloff on Wednesday night was partly due to strong ADP payroll figures, which raised expectations for a bumper jobs print later today. Economists expect the report to show that employers added about 168,000 jobs last month. That would be a modest slowdown from the 201,000 jobs added in August, but would nonetheless represent another solid month in what is already a record streak of growth.

Wells Fargo Is Planning Its First Post-Crisis Mortgage Bond (Reuters) Wells Fargo & Co is planning its first post-crisis offering of bonds tied to U.S. home loans without government backing, Bloomberg reported here on Thursday, citing people familiar with the matter.

Costco barely beats sales estimates, gross margins weigh (Reuters) Costco Wholesale Corp’s (COST.O) quarterly sales barely beat analysts’ estimates on Thursday as growth in online business decelerated to its slowest in the year amid intense competition, while gross margins fell on rising costs and higher investments.

Unilever backs down on headquarters move to Netherlands after investor revolt (TheGlobeandMail) Unilever scrapped plans to move its headquarters to the Netherlands on Friday in the face of a shareholder revolt, keeping one of Britain’s most valuable companies in London ahead of Brexit. The climbdown comes three weeks ahead of the planned vote on the proposal and is a victory for shareholders who opposed the move, which would have kicked the maker of Marmite, Dove soap and Ben & Jerry’s ice cream out of the benchmark FTSE 100 index .

Samsung Electronics Announces Earnings Guidance for 3Q 2018 (Samsung) Samsung Electronics on Friday said its third-quarter operating profit likely rose to a record high, on demand from data centers and improved production yields. The third quarter is, however, expected to mark a peak in earnings as a two-year super cycle of tight supply and soaring demand comes to an end, with prices of some types of chips already sliding sharply.

EU Eyes Quick U.S. Trade Pact to Avoid Trump Car-Duty Threat (Bloomberg) The European Union vowed to seek a quick and limited trade accord with the U.S. in the hope of keeping at bay the threat of American tariffs on EU cars and auto parts. The pledge at a gathering of commerce ministers from the EU in Innsbruck, Austria, on Friday showed that Europe is still trying to understand the trade-policy intentions of U.S. President Donald Trump’s administration and wary of being wrong-footed.

Overnight markets

Overview: US 10yr note futures are down -0.04% at 117-26, S&P 500 futures are down -0.14% at 2903.75, Crude oil futures are up 0.48% at $74.69, Gold futures are up 0.27% at $1204.8, DXY is up 0.02% at 95.77, CAD/USD is down -0.04% at 0.774. 

US Economic Data

Canadian Economic Data

Disclosure and Disclaimer

Market Update

US tsys trading lower, US 10Y traded above 3.20% for the first time since 2011, curve bear steepening with 2s30s 2bps steeper @ 48.5, 3month wides. Prices off the lows as equities come under pressure Very heavy volume in TY futures- 1.1mln vs 400k avg this week, also heavy option volume o/n including several block trades in TY puts – 45k TYX 117 puts. Fed chairman Powell sounding a very positive note in comments yest, saying “we are still a long way from neutral rates”. GOCs lower, in line with tsys, 10Y above 2.55%, high since Jan 2014. Provis trading down in risk off despite higher GOC yields, Ontarios 0.5bps wider -fairly mild move considering the province has piced 5 deals in the past week (over $5bln).

News headlines

Global bond yields just exploded (Business Insider) US bond yields rose across the curve on Wednesday, hitting multi-year highs in the process. Strong US economic data was the catalyst with service sector activity improving at the second-fastest pace on record while hiring in the private sector surged in September.

Canada Post raises wage, benefit proposals in new contract offer (BNN) Canada Post issued wide-ranging new contract offers to its employees Wednesday in the hope of preventing a work stoppage at the Crown corporation ahead of the busy holiday online shopping season, The Canadian Press has learned. The offers included “improvements to pay and benefits, adding job security for rural and suburban employees and no changes to the existing defined benefit pension plan,” the agency confirmed in an emailed statement.

Amazon Warehouse Workers Lose Bonuses, Stock Awards for Raises (Bloomberg) Amazon.com Inc. is eliminating monthly bonuses and stock awards for warehouse workers and other hourly employees after the company pledged this week to raise pay to at least $15 an hour. Warehouse workers for the e-commerce giant in the U.S. were eligible in the past for monthly bonuses that could total hundreds of dollars per month as well as stock awards, said two people familiar with Amazon’s pay policies. The company informed those employees Wednesday that it’s eliminating both of those compensation categories to help pay for the raises, the people said.

Honda to invest $2.75 billion in GM’s self-driving car unit (Reuters) Honda Motor Co Ltd (7267.T) will invest $2.75 billion and take a 5.7 percent stake in General Motors Co’s (GM.N) Cruise self-driving vehicle unit, to jointly develop autonomous vehicles for deployment in ride services fleets around the world. This comes months after Japan’s SoftBank Group (9984.T) made a multibillion-dollar commitment to Cruise. That puts Cruise in a league with Alphabet Inc’s (GOOGL.O) Waymo unit in terms of resources and aggressive plans to launch commercial services.  Moscow denied what its Foreign Ministry spokeswoman called a “diabolical perfume cocktail” of allegations by someone with a “rich imagination”. But the accusations will deepen Moscow’s isolation at a time when its diplomatic ties with the West have been downgraded over the poisoning of a spy in England and it is under U.S. and European sanctions over its actions in Ukraine.

UK, Netherlands accuse Russia of hacking, including chemical weapons watchdog (Reuters) Britain and the Netherlands accused Russia of running a global campaign of cyber attacks to undermine Western democracies, including what the Dutch government described as an attempt to hack into the U.N. chemical weapons watchdog. Dutch authorities said they had disrupted an attempt to hack into the Hague-based Organization for the Prohibition of Chemical Weapons (OPCW) in April. At the time, the U.N. watchdog was investigating the poison used to attack an ex-spy in Britain and chemical weapons which the West says were used in Syria by Russia’s ally President Bashar al-Assad.

Overnight markets

Overview: US 10yr note futures are down -0.146% at 117-31, S&P 500 futures are down -0.36% at 2921, Crude oil futures are down -0.76% at $75.83, Gold futures are up 0.35% at $1207.1, DXY is up 0.04% at 95.804, CAD/USD is up 0.04% at 0.7769. 

US Economic Data

Canadian Economic Data