Commentaires

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

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.