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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. 

US Economic Data

Canadian Economic Data

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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

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