Commentaires

Market Update Tsys rallying, 10Y 3.03% (-2bps) along with core EGBs on ‘risk off’ after Italy set its budget deficit target at 2.4% of GDP vs 2.0% exp. Italian bond yields are 30-40bps higher, 5Y BTP/bund spd 45bps wider @240bps, ~40bps high of the highs reached in August, while Euro equities are off 2.0% led by a 4.4% decline in financials.  GOCs higher, in line with tsys, 10Y 2.40%, before July GDP data. Flattening in the GOC curve the main theme over the past week heading into month end, led by the long end,10s30s now inverted again. Yesterday’s successful 3Y reopening (0.5bps thru). In corps deposit notes have gotten a bid since the 5Y Royal bail in bond issue , seeing as it was priced fairly tight, and deposit notes will continue to look attractive on scarcity value in our opinion. 

News headlines

What Happened This Week in the World Economy and Why It Matters (Bloomberg) Predictable, and still a bit jarring: The Federal Reserve forged ahead on the tightening path, and big-buck tariffs between the U.S. and China took effect, plunging those two economies further into trade hostilities. Meanwhile, the Bank for International Settlements warns that central banks aren’t ready for a storm that could be coming.

Euro-Area Inflation Rate Climbs Above 2 Percent on Energy (Bloomberg) Euro-area inflation accelerated in September amid a surge in energy costs, while underlying price moves remained more subdued. The core measure of inflation, which strips out volatile energy and food, fell to 0.9 percent from 1 percent. That’s a blow to European Central Bank President Mario Draghi, who just this week cited faster wage growth and a “relatively vigorous” pick-up in underlying price pressures.

Kavanaugh’s Fiery Denial Gives Republicans Cover to Vote ‘Yes’ (Bloomberg) Brett Kavanaugh’s passionate denial of allegations of sexual misconduct may have convinced Republicans who want to vote “yes” to put him on the Supreme Court that they can overlook his accuser’s credible and moving testimony. In combative testimony to the Senate Judiciary Committee, Kavanaugh rejected accusations of sexual assault made by Christine Blasey Ford, a California college professor, just hours before. He bashed Democratic senators who criticized him, assailed media reports on the allegations, and claimed to be the victim of a conspiracy driven by anger over President Donald Trump.

Stocks Decline on Italian Budget Gloom; Oil Steady: Markets Wrap (Bloomberg) Stocks in Europe dropped along with U.S. futures at the end of a volatile quarter as political concerns and disappointing price data sparked a flight to the safety of core European bonds and Treasuries. Italian assets took a beating after the country’s populist leaders gained the upper hand in a battle over spending. The Stoxx Europe 600 Index retreated, led by Italian shares as the country’s benchmark headed for the biggest drop in more than two years. The nation’s yields climbed the most in four months after the government set a wider budget deficit than some investors had anticipated. German bunds led gains in core European bonds and the euro fell to a three-week low, extending their moves after data showed inflation in the common-currency area — after stripping out energy and food costs — unexpectedly slowed in September.

Bank of Canada says it will continue to raise interest rates gradually (Reuters) The Bank of Canada will continue to raise interest rates gradually, Governor Stephen Poloz said on Thursday, stressing that despite economic uncertainties, the bank did not want to let inflation momentum build. The central bank has raised rates four times since July 2017 and most market players expect another hike on Oct. 24. Poloz said that while the bank did not know exactly where the economy was heading, that did not justify inaction.

BlackBerry quarterly profit more than doubles (Reuters) Canadian software maker BlackBerry Ltd’s second-quarter profit more than doubled, helped by higher billings at its software and services business and lower costs. Net profit was $43 million for the second quarter ended Aug. 31, up from a profit of $19 million, a year earlier. On a per share basis, the company reported a loss of 4 cents, compared with a loss of 8 cents per share during the year-ago quarter. Revenue fell to $210 million from $238 million.

Tesla shares fall after SEC accuses Musk of ‘misleading’ investors (BNN) Tesla Inc. chief executive officer Elon Musk was accused by the Securities and Exchange Commission of misleading investors when he tweeted that he had funding lined up to take the company private. The SEC’s allegation, contained in a lawsuit filed fewer than two months after Musk’s August tweet, sent Tesla’s shares () down more than 11 per cent in after-hours trading. It sought unspecified monetary penalties and added a market-rattling request — that a judge bar Musk from serving as an officer or director of a public company.

No NAFTA doesn’t mean no Aaa rating for Canada, Moody’s says (BNN) Canada’s Aaa sovereign rating and stable outlook could probably withstand even the worst-case Nafta scenario in which no agreement is reached and the country faces new tariffs, according to Moody’s Investors Service. While the base case for Moody’s is for Canada to ultimately sign a new North American Free Trade Agreement with the U.S. and Mexico, the rating company is confident the northern nation would be able to adapt if no deal is signed and the U.S. slaps it with auto tariffs.

Overnight markets

Overview: US 10yr note futures are up 0.158% at 118-30, S&P 500 futures are down -0.33% at 2910.25, Crude oil futures are up 0.04% at $72.15, Gold futures are down -0.06% at $1186.7, DXY is up 0.42% at 95.289, CAD/USD is down -0.26% at 0.7687.

US Economic Data

Canadian Economic Data

Market Update US tsys slightly higher, at lows of o/n range after having given up gains from Europe, 10Y 3.05%, off the lows after in line Q2 GDP and stronger August Durable Goods, thou Durable Goods ex transport weaker (0.1% vs 0.4%. Tsys rose with bunds/gilts on Italy budget concerns, 5Y BTP/bund spd +8bps. Still Italy managed to sell E4bln in 5 & 10Y bonds at a higher bid/cover than previous auction – 10Y b/c 1.44x vs 1.37x prev. GOCs higher, outperforming tsys by 1bp across the curve, 10Y 2.41% vs 2.47% high from Tuesday. Provis well bid, Ontarios lifted in 10s& longs, rumours of Quebec long yest never transpired. 

News headlines

Trump Says He Refused Meeting With Trudeau Over Trade Talks (Bloomberg) President Donald Trump said he rejected a one-on-one meeting with Canadian Prime Minister Justin Trudeau at the United Nations General Assembly because he’s dissatisfied with trade negotiations with Ottawa. “We’re very unhappy with the negotiations and the negotiating style of Canada,” Trump said in a news conference on Wednesday. “Canada has treated us very badly. Canada has a long way to go.”

Trade Tensions, Italian Uncertainty Put a Cloud on Europe’s Mood (Bloomberg) Euro-area economic confidence slid for a ninth month, the longest streak of declines since 2011, as protectionism and political uncertainty cast a cloud over the outlook. The latest drop in sentiment coincided with Germany having its growth outlook slashed and the WTO downgrading its view of global trade. The latter also warned that the U.S.-China tariff spat is already hurting corporate investment.

Powell Sees Bright Moment for Economy With More Hikes Ahead (Bloomberg) Ten years after the peak of the financial crisis, Jerome Powell’s Federal Reserve sees a U.S. economy capable of humming along without support from monetary policy. Unemployment is low. Inflation is stable and anchored. Financial conditions merit watching, but don’t look overly worrisome. And against that backdrop, policy makers are raising interest rates gradually despite renewed criticism from President Donald Trump.

Stocks Mixed After Fed; Euro, Italian Bonds Drop: Markets Wrap (Bloomberg) U.S. equity futures edged higher, while stocks in Europe and Asia slipped Thursday as investors digested the likelihood of more Federal Reserve interest-rate increases stretching into next year. The euro declined with Italian bonds as the country is due to decide on deficit targets. Futures on the S&P 500 pointed to a slightly firmer open after sharp losses late in the previous session. Banks led the way lower in the Stoxx Europe 600 Index, following a downbeat session in Asia after the Federal Reserve signaled tightening policy was here to stay. The dollar climbed and the single currency dropped, and though an auction of Italian bonds was well received, the debt fell alongside the country’s shares as political jockeying continued with 2019 budget targets in the balance. Britain’s pound fell as the EU was said to discuss no-deal contingencies.

U.S. says Canada not making concessions needed for NAFTA deal (Reuters) Canada is not making concessions needed to reach a deal with the United States for a trilateral NAFTA pact and is running out of time before Washington proceeds with a Mexico-only agreement, a top U.S. official said on Tuesday. U.S. President Donald Trump’s administration recently began increasing the pressure on Canada, urging it to conclude a deal by Sunday or face exclusion from a revised North American Free Trade Agreement. A spokesman for Canadian Foreign Minister Chrystia Freeland brushed off the latest remarks from the United States, saying Canada was not interested in focusing on timelines.

TSX set to open higher as oil prices rise (Reuters) Stock futures pointed to a higher opening for Canada’s main stock index on Thursday as oil prices rose on prospects of a global supply shortfall due to U.S. sanctions on major crude exporter Iran. September futures on the S&P/TSX index SXFc1 were up 0.13 percent at 6:55 a.m. ET. The Toronto Stock Exchange’s S&P/TSX .GSPTSE edged up 9.78 points, or 0.06 percent, to 16,169.28 on Wednesday. Dow Jones Industrial Average e-mini futures 1YMc1 were up 0.08 percent at 6:55 a.m. ET, while S&P 500 e-mini futures ESc1 were up 0.11 percent and Nasdaq 100 e-mini futures NQc1 were up 0.31 percent.

RBC uses trash day reminders and tire changes to lure clients (BNN) There’s a company in Toronto that has built programs to help new immigrants, keep track of car maintenance and tell homeowners what day to haul their trash to the curb. But the firm isn’t a software developer — it’s one of Canada’s biggest banks. Royal Bank of Canada has spent more than two years building a fintech startup within its operations. RBC Ventures Inc. now has about 150 employees working on nine projects in various stages of development out of a glass office tower near Toronto’s waterfront, two blocks south of the bank’s headquarters.

Bed Bath & Beyond plunges amid surprise drop in same-store sales (BNN) U.S. consumers are opening their wallets again, but Bed Bath and Beyond Inc. (BBBY.O) is still struggling to lure them into its stores. The home-furnishings and cookware retailer reported a surprise drop in same-store sales — a key metric. Shares fell as much as 12 per cent in late trading Wednesday. Bed Bath & Beyond has been exploring ways to boost in-store traffic while increasing its struggling online presence. While Chief Executive Officer Steven Temares has said improvement is needed in e-commerce, in-store promotions will be the key to keeping shoppers loyal as competition heats up from powerful online rivals like Amazon.com Inc.

Overnight markets

Overview: US 10yr note futures are up 0.066% at 118-26, S&P 500 futures are up 0.09% at 2914, Crude oil futures are up 0.98% at $72.27, Gold futures are down -0.14% at $1197.4, DXY is up 0.38% at 94.55, CAD/USD is up 0.38% at 0.7652.

US Economic Data

Canadian Economic Data

Market Update

US tsys higher, yields 0.5-1.5bps lower, 10Y below 3.10% (3.08 -1.5bps), curve flatter, moderate volume in TY futures before FOMC decision this afternoon. Core EGBs higher led by gilts rallying on Brexit uncertainty, JPM recommendation to buy 10Y gilts, 10Y gilt 1.605% (-2.4bps). US equity futures higher taking their cue from rally in Asian stocks after China announced it would cut import tariffs on Nov 1st FOMC expected to raise rates 25bps to 2.0-2.25% (77% odds of additional hike in Dec based on FF futures), focus on the ‘dot plot’ and any revision to the 2019 year end forecast. GOCs higher in line with tsys, 10Y 2.45%, from yesterday’s 2.47% intraday high, 10s30s trading close to flat , strong bid in longs yest afternoon.  Provis unch from yest close, Ontarios managed to tighten 1bp after a succesful 10Y reopening yest aft

News headlines

Lighthizer Says U.S. Won’t Wait for Canada on New Nafta Pact (Bloomberg) The U.S. is moving forward on its bilateral trade deal with Mexico even if Canada is left out because negotiators can’t resolve their sharp differences over dairy and a dispute resolution system, U.S. Trade Representative Robert Lighthizer said. The Trump administration soon plans to present to Congress a text of the U.S.-Mexico trade agreement that was announced last month to revise portions of the North American Free Trade Agreement, Lighthizer said at an event in New York on Tuesday. The timeline is important because current Mexican President Enrique Pena Nieto wants to sign the deal before he’s succeeded by Andres Manuel Lopez Obrador in December, Lighthizer said.

Nafta Blowup Could Sink the Loonie by 10 Percent, JPMorgan Says (Bloomberg) Should the U.S. follow through on threats to withdraw from the North American Free Trade Agreement, the Canadian dollar would absorb much of the blow. That’s the view of JPMorgan Chase & Co., who forecast that the loonie could crumble nearly 10 percent against the dollar in the worst case “NoFTA” scenario. A U.S. withdrawal would likely entail 25 percent tariffs on autos and dairy, disrupting supply chains and forcing the Bank of Canada to slash interest rates, according to analysts including Daniel Hui.

China to Cut Tariffs on Imports Including Machinery, Textiles (Bloomberg) China will cut import tariffs on goods including machinery, paper, textiles and construction materials from Nov. 1, in a move that would lower costs for consumers and companies as a trade war with the U.S. deepens. The decision will lower tariffs for 1,585 products, cutting the tax burden on consumers and companies by about 60 billion yuan ($8.7 billion), state radio reported, citing a meeting of the State Council. This will lower the average most-favored nation tariff rate to 7.5 percent from 9.8 percent.

U.S. Stock Futures Climb Before Fed; Oil Slips: Markets Wrap (Bloomberg) U.S. equity futures advanced alongside Asian stocks while European equities held steady as markets largely entered a holding pattern before the Federal Reserve’s rate decision. The dollar edged higher and Treasuries advanced. Contracts on the S&P 500, Nasdaq and Dow all climbed, while the Stoxx Europe 600 Index drifted. Automakers underperformed in the wake of BMW’s outlook cut and news of a CEO change at Daimler. Japan’s Topix ended just below its highest point in almost eight months, while stocks rallied in Hong Kong as traders returned from a holiday and Chinese shares rose after MSCI Inc. said it’s considering increasing the country’s weight in its global indexes.

In a U.S. manufacturing hub, no illusions about tariffs and jobs (Reuters) In a town where a 30-feet tall chair is the chief landmark, and which is synonymous with a U.S. furniture industry decimated over the years by imports from China, many greet the possibility of tariffs on Chinese goods with a shrug. No wonder. Of three once bustling Thomasville furniture plants in the city limits, one is being demolished and cleared for parkland, another may become the site of a new police station, and a third is being converted into apartments.

Facebook faces political hurdle in China, where it seeks toehold (BNN) Facebook Inc. finds itself entangled in yet another political spat — this time with China, a market the social media giant is seeking to enter. Police in Hong Kong, a semi-autonomous part of China, have asked the company to remove the official page of the pro-independence National Party, which was slapped with an unprecedented government ban this week. The prohibition pledges fines and imprisonment for those aiding the group. Hong Kong officials made their request of Facebook after the measure was announced on Monday, according to the South China Morning Post.

Teck’s Frontier oil sands project inks ‘participation agreement’ with Mikisew Cree (BNN) The company proposing the $20.6-billion Frontier Oil Sands Mine says it has achieved its target of signing deals with all of the Indigenous groups who live near the northern Alberta megaproject. Doug Brown, director of public affairs for Vancouver-based Teck Resources Ltd., says it has successfully concluded negotiations with the Mikisew Cree First Nation of Fort Chipewyan, a small community near the project site north of Fort McMurray. The news of a 14th deal being signed emerged as joint federal-provincial review hearings for the project began Tuesday in Fort McMurray.

Overnight markets

Overview: US 10yr note futures are up 0.092% at 118-18, S&P 500 futures are up 0.13% at 2925, Crude oil futures are down -0.57% at $71.87, Gold futures are down -0.25% at $1202.1, DXY is up 0.22% at 94.341, CAD/USD is up 0.05% at 0.7716.

US Economic Data

Canadian Economic Data

There is no Canadian economic data for today