Commentaires

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

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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

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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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