Commentaires

Market Update

US tsys weaker, yields ~2bps higher & curve steeper, 10Y 3.08%, heavy volume in TY futures (460k). Risk on session after relief rally in Italian debt as concessions made on deficit talks with EU (2.0% deficit by 2021). German bunds underperforming gilts, 10Y bund/gilt spd 2bps tighter. August ADP employmemt 230k vs  184k. exp. GOCs lower in line with tsys after stronger ADP, 10Y 2.48%. Canada 5Y auction at noon –  $3.0bln new March 2024s with the WI roll 2.4/2.2, which on an interpolated basis would be ~1bp too wide, given the J24/5Y roll is also 2.4/2.2. Ontario 2028 ~1bp tighter 61.5/,  10Y spd 5bps tighter since province emerged last week from blackout, despite $4.6bln across 4 deals.

News headlines

How the U.S. and Canada Ended Their Feud and Clinched a Nafta Deal (Bloomberg) The threats were growing graver and the prospects for a new Nafta deal looked dark. But then each side blinked. The trade accord between the U.S. and Canada that came together Sunday night emerged from a frenzied, 72-hour push that capped 13 months of glacial negotiations, according to U.S. and Canadian officials and other people familiar with the talks. And it happened as President Donald Trump weighed new tariffs after snubbing Canadian Prime Minister Justin Trudeau at the United Nations.

New York Tax Department Probes Trump Taxes From Decades Ago (Bloomberg) New York state tax authorities have opened an investigation into allegations reported in the New York Times that President Donald Trump and his family created their real estate empire through “instances of outright fraud,” evading taxes on hundreds of millions of dollars. “The Tax Department is reviewing the allegations in the New York Times article and is vigorously pursuing all appropriate avenues of investigation,” said James Gazzale, spokesman for Department of Taxation and Finance.

Italian Markets Find Relief After Budget-Deficit Concessions (Bloomberg) Italian markets got some respite after a report that the government bowed to pressure from the European Union to trim its budget-deficit target. Government bonds snapped four days of declines and the FTSE MIB Index of shares headed for the biggest gain in more than a week after the Corriere della Sera reported that the government will seek to contain the shortfall at 2 percent in 2021, down from 2.4 percent.

U.S. Stock Futures Follow Europe Gains; Oil Steady: Markets Wrap (Bloomberg) U.S. equity index futures rose and European stocks climbed as news the Italian government may rein in spending helped soothe investor nerves. The country’s bonds rallied as Treasuries and bunds slipped. Italian debt jumped after four days of selling and the Stoxx Europe 600 Index rebounded from Tuesday’s drop after a Corriere della Sera report that Italy’s draft budget plan will pledge to cut the deficit to 2 percent in 2021, revising the government’s initial proposal. The nation’s Deputy Premier Luigi Di Maio confirmed that ministers had discussed ways to lower the deficit target after 2019. The euro initially jumped but pared the gain through the European session.

Canada PM takes Quebec dairy gamble to preserve big trade deal (Reuters) With his political future at stake, Canadian Prime Minister Justin Trudeau will mount a charm offensive to placate dairy farmers who say he sold them out in order to win approval of a continental trade deal. Compounding Trudeau’s challenges in the influential province of Quebec, where many dairy farmers are based, voters there tossed out one of his allies on Monday in favor of a new center-right party that opposes immigration and supports supply management, as Canada’s dairy protection system is known.

Saudi Arabia, Russia agreed in Sept to lift oil output, told U.S. (Reuters) Russia and Saudi Arabia struck a private deal in September to raise oil output to cool rising prices and informed the United States before a meeting in Algiers with other producers, four sources familiar with the plan said. U.S. President Donald Trump has blamed the Organization of the Petroleum Exporting Countries (OPEC) for high crude prices and called on it to boost output to bring down fuel costs before the U.S. congressional elections on Nov. 6.

Morneau vows to address competitiveness in fall update (BNN) Finance Minister Bill Morneau says he is taking concerns around Canada’s ability to compete and attract business investment into account for his upcoming fall economic update amid ongoing pressures from corporate leaders.   “It is the case that there is investment going on in this country, but we can’t be complacent,” Morneau told BNN Bloomberg in an interview late Tuesday.

Vancouver home sales sink in September as listings hit multi-year highs (BNN) Home sales in Metro Vancouver fell sharply in September as slower sales activity since the spring allowed new listings to accumulate to levels not seen in four years.   There were 1,595 homes sold in the region in September, a 43.5 per cent drop from the 2,821 home sold during same month last year, according to the Real Estate Board of Greater Vancouver. Home sales dropped 17.3 per cent from August when 1,929 home were sold. “Fewer home sales are allowing listings to accumulate and prices to ease across the Metro Vancouver housing market,” Ashley Smith, REBGV president-elect, said in a release.

Overnight markets

Overview: US 10yr note futures are down -0.092% at 118-23, S&P 500 futures are up 0.33% at 2938.25, Crude oil futures are up 0.05% at $75.27, Gold futures are down -0.02% at $1206.7, DXY is up 0.03% at 95.534, CAD/USD is up 0.08% at 0.7793.

US Economic Data

Canadian Economic Data

There is no Canadian economic data for today.

Market Update US tsys higher, yields 1-2 bps lower across the curve, 10Y 3.058% (-2.6bps), heavy volume in TY futures (480k). Tsys benefitting from Italy related FTQ bid along with bunds/gilts. Italian 2Y yield 12 bps higher on comments from the newly elected govt suggesting Italy would be better off outside the EU, with the budget allowing for a 2.4% deficit target above EU 2% guidelines. In Canada, GOCs higher in line with tsys, 10Y 2.485%, yields ~1bp lower after yesterday’s post NAFTA drubbing, which saw 2Y yields rise the most since May 30th. Quebec spreads unch after historic CAQ majority victory, likely status quo in terms of economic policy, QC/Ont ~0.2bps tighter, lifted in 10s & 30s.

News headlines

Canada’s Quebec shifts right as CAQ set to win majority (Reuters) The center-right Coalition Avenir Quebec is on track to win power for the first time in Canada’s Quebec province on Monday, dealing a blow to the Liberal incumbents and allowing the party to make good on its promises to curb immigration. The business-friendly CAQ is expected to win a majority of seats in Canada’s second most populous province, according to early results from Elections Quebec and network projections.

Canada, buoyed by trade deal, to push U.S. on metal tariffs (Reuters) Canada, buoyed by a last-minute continental trade deal it sealed with the United States and Mexico, is pressing Washington to remove steel and aluminum tariffs, senior Canadian officials said on Monday. The agreement, reached on Sunday night, protects Canada’s automotive industry from potentially devastating U.S. tariffs, but includes no assurance that Washington will lift punitive measures it imposed on Canadian and Mexican steel and aluminum in June.

Trump Clears Deck for China Trade War With New Nafta Deal (Bloomberg) President Donald Trump looks to be preparing for a potentially protracted economic war with China by clearing the decks of disputes with America’s other trading competitors. In just the last few weeks, he’s struck a last-minute deal with Canada and Mexico, signed a trade agreement with South Korea and convinced Japan to begin bilateral economic negotiations. The North American accord also includes provisions seemingly aimed at keeping Chinese products out of the region.

Kavanaugh College Visit to Bar Erupted in Fight, Classmate Says (Bloomberg) Future Supreme Court nominee Brett Kavanaugh and two fellow Yale University students were in an off-campus bar back in 1985. They had just come from seeing the English reggae band UB40 at a nearby venue in New Haven, Connecticut, when they saw a man who resembled the lead singer. The man told the trio he wasn’t the singer and brusquely told them to stop looking at him. Kavanaugh couldn’t let the comment pass, according to one of the two friends with Kavanaugh that night.

Euro Drops as Italy Worries Simmer; Stocks Decline: Markets Wrap (Bloomberg) A downbeat mood settled over markets on Tuesday, as fears surrounding the populist Italian government’s fiscal plans topped a list of reasons for caution. The euro dropped a fifth day, European stocks and U.S. futures followed Asian declines, while Treasuries and bunds advanced. The common currency touched the weakest in six weeks after the head of Italy’s lower house budget committee said the nation would have solved its fiscal problems with its own currency, and the leader of the European Commission warned of a Greek-style crisis. Reassurances that the country has no plans to ditch the euro did little to calm nerves, and Italian bonds extended a recent slump, while the region’s safer “core bonds” climbed. The Stoxx Europe 600 Index fell for only the second time in six days as equities in Italy declined.

Swiss Chalet and other big restaurant chains hit by malware outbreak (BNN) Recipe Unlimited Corp. (RECP.TO) says some of its Swiss Chalet, Harvey’s, East Side Mario’s and other restaurants are experiencing a partial network outage after a malware outbreak. The company formarly known as Cara Operations says it learned of the outbreak on Friday and as a precaution took a number of its systems offline and suspended internet access to affected locations. Some restaurants have been unable to process credit and debit card transactions as a result, though all of them can manually process credit card charges.

Bank of Canada studying issues around designing a digital currency (BNN) The Bank of Canada is looking at the key questions around the design of a digital currency and the issues surrounding such an idea, a senior Bank of Canada official said Monday.

However, deputy governor Timothy Lane told a University of Calgary audience that unless the risks associated with a central bank digital currency can be managed through appropriate design, the bank would not recommend issuing such a currency. « The design of a CBDC has important implications for its risk and benefits, » Lane said according to the prepared text of his speech released in Ottawa.

Amazon to Raise Its Minimum U.S. Wage to $15 an Hour (WSJ) Amazon.com Inc. on Tuesday said it was raising the minimum wage it pays all U.S. workers to $15 an hour, a move that comes as the company faced increased criticism about pay and benefits for its warehouse workers. The new minimum wage will kick in Nov. 1, covering more than 250,000 current employees and 100,000 seasonal holiday employees. The company said it also will start lobbying Congress for an increase in the federal minimum wage, which was set nearly a decade ago and is currently $7.25 an hour.

Tax Cuts Provide Limited Boost to Workers’ Wages (WSJ) U.S. companies are putting savings from the corporate tax cut to use, but only a fraction of it is flowing to employees’ wallets, new data show. In the months after the December tax-code overhaul that lowered the corporate rate to 21% from 35%, dozens of companies such as Walmart Inc. and FedEx Corp. announced one-time bonuses and wage increases for hourly workers. Those moves earned praise from the Trump administration as evidence the cuts were quickly reaching many Americans.

Overnight markets

Overview: US 10yr note futures are up 0.079% at 118-25, S&P 500 futures are down -0.18% at 2924.75, Crude oil futures are up 0.31% at $75.53, Gold futures are up 0.23% at $1194.4, DXY is up 0.32% at 95.602, CAD/USD is up 0.14% at 0.7793.

US Economic Data

Canadian Economic Data

There is no Canadian economic data for today.

Market Update Tsys lower, off the lows of the session, in reaction to news of trade agreement between the US & Canada , 10Y 3.08% (+2bps), curve steeper. Equity futures surging on the news, S&P +13, Nasdaq +40. Sep ISM Man due at 10:00am, will be closely scrutinized for impact of US tariffs. GOC yields higher & significantly wider vs tsys on the NAFTA news, yields 5-6bps higher across the curve, the 10Y just under 2.50% the highest since May, the CAD higher (1.2813) enjoying its best two-day rally since Dec (+1.75%).

News headlines

Trump Clinches New Nafta as Canada Joins Pact With Mexico (Bloomberg) U.S. President Donald Trump is set to sign a successor to the North American Free Trade Agreement that will make modest revisions to a deal he once called a “disaster,” easing uncertainty for companies reliant on tariff-free commerce. U.S. and Canadian negotiators worked around the clock this weekend to secure an agreement just before a Sunday midnight deadline, allowing leaders from those nations and Mexico to sign the accord by late November. The 24-year-old Nafta will now be superseded by the U.S.-Mexico-Canada Agreement, or USMCA, covering a region that trades more than $1 trillion annually.

Tesla Shares Jump After SEC Settlement Leaves Musk as CEO (Bloomberg) Tesla Inc. jumped in pre-market trading after founder Elon Musk settled a lawsuit brought by regulators over his August tweet storm, reassuring investors he’ll still be calling the shots at the electric-car maker struggling to meet production goals. Under the agreement with the U.S. Securities and Exchange Commission, Musk and the company each will pay a $20 million penalty, and Musk will be removed as chairman for at least three years. In suing Musk, the agency had sought to oust him as both chairman and CEO.

U.K. Manufacturing Growth Unexpectedly Picks Up in September (Bloomberg) U.K. manufacturing growth unexpectedly picked up in September, rounding off the third quarter on an upbeat note. IHS Markit’s Purchasing Managers Index rose to 53.8 from a revised 53 in August and beating estimates for a drop to 52.5. Growth in output and new orders accelerated, while exports saw a modest recovery after a slump the previous month.

U.S. Stock Futures, Loonie, Peso Advance on Trade: Markets Wrap (Bloomberg) U.S. equity futures rallied alongside the currencies of Canada and Mexico as negotiators agreed to preserve a three-way trade bloc. The breakthrough supported equity markets, with European stocks climbing while havens including the yen and gold fell. S&P 500 futures indicated the gauge will add to its advance after finishing the best quarter since 2013 last week. The Stoxx Europe 600 Index rose for the fourth day in five, led by media and chemicals companies. Italian bonds extended their slide from last week and led European debt lower as uncertainty persisted over a budget accord. Investors will be watching the market closely; the ECB has cut monthly bond purchases in half to 15 billion euros ($17 billion) starting this month. The euro edged up, shrugging off data showing growth in euro-area factory output slid to the weakest pace in two years.

In tight election, Quebec weighs a shift to the right (Reuters) Voters in the Canadian province of Quebec will cast ballots on Monday in a close election primed to be a showdown between the long-dominant Liberals and a center-right party as immigration plays out as a key issue. The question of how many outsiders should be let into the majority French-speaking province – the second most populous in Canada – has eclipsed arguments over separatism that dominated Quebec in recent decades.

Canadian dollar, stocks rise as NAFTA salvaged (Reuters) Optimism about a reconstituted free trade agreement among the United States, Canada and Mexico and what it could mean for trade relations elsewhere helped world markets kick off the fourth quarter of the year in a positive vein. The United States and Canada salvaged NAFTA as a trilateral pact with Mexico, rescuing a $1.2 trillion open-trade zone that had been about to collapse after nearly a quarter century.

Shell, partners approve $40B LNG Canada project (BNN) Royal Dutch Shell Plc and its four partners have agreed to invest in a multibillion-dollar liquefied natural gas project in western Canada — the largest new one of its kind in years that would carve out the fastest route to Asia for North American gas. LNG Canada — comprised of Shell, Malaysia’s Petroliam Nasional Bhd, Mitsubishi Corp., PetroChina Co. and Korea Gas Corp. — is set to announce a final investment decision on the $40 billion project as early as Monday, said people with direct knowledge of the plans, who asked not to be identified because the matter isn’t public. The exact timing still hasn’t been decided. PetroChina and Korea Gas announced approvals of their share of the investment on Friday. The others partners declined to comment.

Husky Energy goes hostile with $3.3B offer for MEG Energy (BNN) Husky Energy Inc. made a $3.3 billion hostile bid for MEG Energy Corp., setting up a battle between Hong Kong billionaire Li Ka-shing’s Canadian oil company and Chinese energy giant CNOOC Ltd., a major investor in the targeted oil-sands producer. Husky Chief Executive Officer Rob Peabody says he’s taking the cash and stock proposal directly to shareholders after MEG’s board spurned an earlier offer and that his company remains prepared to speak with directors. There’s a compelling rationale in connecting MEG’s production from northwest Alberta’s oil sands with Husky’s refining system to gain the most value from each barrel of oil, he said.

Overnight markets

Overview: US 10yr note futures are down -0.145% at 118-20, S&P 500 futures are up 0.51% at 2934, Crude oil futures are up 0.25% at $73.43, Gold futures are down -0.36% at $1191.9, DXY is up 0.02% at 95.148, CAD/USD is down -0.78% at 0.7807.

US Economic Data

Canadian Economic Data