Commentaires

Market Update US tsys paring losses after weaker Aug Retail Sales (0.1% vs 0.4%), 10Y 2.985 (+1.5bps), highest since Aug 2nd on avg overnight volume in TY futures (330k). USD index bouncing off the lows after falling to a two week low. Core Euro bonds lower, underperforming tsys. 10Y gilts 3.5bps higher after BOE Carney warned rates could rise on a ‘no-deal’ Brexit outcome. GOCs lower, 1bp wider vs tsys, 10Y above 2.35% for the first time since August 9th, 2.35% also 62% retracement of the May-June rally. CMB 5Y to be priced this morning , Dec 15 2023 in the area of 31.5bps – we have sold out of our allocation, and see decent RV based on ONT/CMB 23 ~12.5bps closer to the low end of the six month range (11-18bps).

News headlines

Talking Won’t End Trump’s Growing China Trade War Any Time Soon (Bloomberg) The Trump administration’s trade war with China is following an increasingly predictable pattern and that should cause a rethink for anybody hoping for a rapid resolution. The day after financial markets around the world cheered the apparent good news that Treasury Secretary Steven Mnuchin was inviting his Chinese counterparts to sit down for further high-level negotiations, President Donald Trump undermined that very idea.

Russia Surprises With First Rate Hike Since 2014, Boosting Ruble (Bloomberg) Russia’s central bank unexpectedly raised interest rates for the first time since 2014, following its counterparts across emerging economies as inflation risks mount with a slumping currency and threats of U.S. sanctions. Policy makers signaled more rate hikes are possible after raising their benchmark to 7.5 percent, a level last seen in March, from 7.25 percent, according to a statement on Friday. Only two of 42 economists surveyed by Bloomberg predicted an increase. The ruble flipped to gains after the decision, rallying for the best performance in emerging markets.

Pompeo Hits Iran Leader for Silence on China’s Detained Muslims (Bloomberg) U.S. Secretary of State Michael Pompeo blasted Iran’s top leader for failing to speak out over China’s reported detention of large contingents of its Muslim minority population. Iranian Supreme Leader Ayatollah Ali Khamenei “fancies himself the leader of the Islamic world, but his regime has been totally silent as China — the top buyer of #Iran’s oil — has persecuted and detained hundreds of thousands of its Muslim citizens,” Pompeo wrote on Twitter.

Stocks Rise as Busy Week Ends; Dollar Extends Drop: Markets Wrap (Bloomberg) Stocks in Europe gained along with U.S. equity-index futures as prospects for U.S.-China trade talks and action by Turkey and Russia to support their currencies fostered a positive mood. The dollar deepened its decline. Miners and carmakers led the advance in the Stoxx Europe 600 Index, following a rally in most Asian benchmarks as they extended their rebound from the worst run of losses in 16 years. As appetite for risk returns, the greenback headed for its biggest weekly loss since February, while Treasury yields nudged toward 3 percent. The pound was set for a six-week high and gilts declined after Bank of England Governor Mark Carney was said to have told lawmakers that a no-deal Brexit would see interest rates rise rather than fall. Oil was poised for a weekly gain as traders keep watch on Hurricane Florence.

Canada PM says he wants a good NAFTA deal soon, hazy on deadline (Reuters) Canadian Prime Minister Justin Trudeau said on Thursday he wanted a good NAFTA deal as soon as possible, but did not answer directly when asked if he agreed with Washington that the end of September was the final deadline for talks. Canada and the United States are struggling to settle differences over access to the Canadian dairy market and how to resolve trade disputes. The United States has already struck a side deal with Mexico, the third member of the North American Free Trade Agreement. U.S. President Donald Trump says he will ditch Canada unless it quickly makes concessions.

Tim Hortons says it has reached agreement with franchisee whose restaurants it seized (BNN) The parent company of Tim Hortons says it has reached an agreement with the head of an unsanctioned franchisee group who had his four restaurants seized after he allegedly leaked sensitive corporate news to the media. « Both parties have agreed that Mr. (David) Hughes has left the Tim Hortons business and an agreement was reached that is satisfactory to both parties, » said Restaurant Brands International Inc. spokeswoman Jane Almeida. She declined to provide financial details, citing a confidentiality agreement.

AltaGas plans Canadian IPO in shift to U.S. after WGL deal (BNN) AltaGas Ltd. () is intensifying its shift toward the U.S., following up its US$4.6 billion takeover of Washington utility WGL Holdings Inc. with a plan to spin off its Canadian assets through an initial public offering. The IPO and a debt repayment from the new company would deliver $1 billion in cash proceeds to AltaGas, which plans to use the money to repay a loan it took on to fund the WGL acquisition, according to a statement Thursday. The transaction would leave AltaGas focused on natural gas and U.S. utilities, while AltaGas Canada Inc. would own Canadian gas distribution and wind power assets. 

Overnight markets

Overview: US 10yr note futures are down -0.144% at 119-08, S&P 500 futures are up 0.16% at 2915, Crude oil futures are up 0.32% at $68.81, Gold futures are up 0.14% at $1209.9, DXY is up 0.04% at 94.557, CAD/USD is up 0.08% at 0.7687.

US Economic Data

Canadian Economic Data

There is no Canadian economic data for today.

Market Update US tsys trading higher after CPI rose 0.2%, core 0.1% (0.3%, 0.2% exp). ECB left rates unch as exp, repeating the pledge to leave rates unch “at least through the summer of 2019”.  Draghi confident that policy stance is appropriate given the ‘uncertainty around the inflation outlook is receding’ The BOE also left rates unchanged yet raised its estimate for Q3 growth.  European equities maintaining gains after ECB, EUR currency higher. GOCS higher, 10Y 2.3255 (-1.5bps) in line with tsys after Can House Prices rose 0.1% as exp for July. 

News headlines

Who Has Leverage at the Nafta Table? It Might Not Just Be Trump (Bloomberg) From day one, President Donald Trump has imposed his will on talks to overhaul the North American Free Trade Agreement. But as his administration tries to seal the deal, it’s not clear he holds all the cards. Trump’s repeated threats to pull out of the pact have kept Mexico and Canada on their heels. The president may still brandish the threat of withdrawal to push a deal through Congress.

Turkey Central Bank Raises Benchmark Rate to 24%; Lira Rallies (Bloomberg) Turkey’s central bank raised its benchmark interest rate by the most since Recep Tayyip Erdogan came to power 15 years ago, countering the president’s call for lower borrowing costs just two hours before the decision was announced. The currency rallied. The Monetary Policy Committee led by Governor Murat Cetinkaya on Thursday increased the one-week repo rate by 625 basis points to 24 percent, more than the median estimate in a Bloomberg survey that called for a hike of 325 basis points.

Pompeo Fills State Department Gaps as He Vows Trump-Like Swagger (Bloomberg) Secretary of State Michael Pompeo isn’t one to dawdle: On his most recent trip abroad he spent just three hours in Pakistan and 24 in India before heading home. Now he’s applying the same impatience to staffing up a State Department hobbled by vacancies and shattered morale. As he rushes to fill key openings, the former CIA director is trying to rebrand his department with an image more to his liking — and more likely to appeal to his boss, President Donald Trump. Instead of overseeing a corps of cautious and cerebral diplomats, Pompeo boasts on social media that he’s leading the “Department of Swagger.”

U.S. Equity Futures Climb; Turkey Hike Boosts Lira: Markets Wrap (Bloomberg) An Asian stock rebound helped spur global equity gains as the prospect for fresh trade talks between the U.S. and China grew. Central banks dominated the rest of the agenda, with Turkey’s lira jumping after a rate hike while the Bank of England and ECB offered little to move the pound or euro. Contracts on the Dow, S&P 500 and Nasdaq all pointed to a firmer open after the U.S. government proposed another round of talks with Beijing, while automakers — among companies most-exposed to trade — led the gains as the Stoxx Europe 600 Index rose a second day. The MSCI Asia Pacific Index climbed for the first time in 11 sessions, with equities rallying in Shanghai and Hong Kong. Treasuries edged lower.

Canada’s Freeland won’t hold NAFTA talks, says more work needed (Reuters) Canadian Foreign Minister Chrystia Freeland on Wednesday said officials needed to do more work before she could hold fresh talks with the United States on renewing NAFTA as time runs out to reach a deal. A well-placed source had earlier told Reuters that Freeland planned to return to Washington for more talks on Thursday with U.S. Trade Representative Robert Lighthizer, adding that plenty of work remained.

China welcomes U.S. invite for trade talks, Asian markets relieved (Reuters) China said on Thursday that it welcomed an invitation by the United States to hold a new round of trade talks, as Washington prepares to further escalate the U.S.-China trade war with tariffs on $200 billion worth of Chinese goods. The Trump administration had invited Chinese officials to restart trade talks, the White House’s top economic adviser said on Wednesday, news that gave a lift to Asian stocks, including Chinese shares and the yuan currency.

Apple unveils new iPhones, with cheapest model starting at $1,029 (BNN) Apple Inc. took the wraps off a renewed iPhone strategy on Wednesday, debuting a trio of phones that aim to spread the company’s latest technology to a broader audience. The iPhone Xs succeeds last year’s flagship model with a faster A12 processor and updated cameras. The iPhone Xs Max is a higher-end version with a 6.5-inch OLED screen, making it one of the biggest on the market. There are 512 GB storage options for the first time. The Xs will be available in Canada starting at $1,379 and the Xs Max will start at $1,519, according to an Apple press release.

ECB still sees bond-buying phased out as rates stay on hold (BNN) The European Central Bank confirmed it will cut bond-buying in half next month and anticipates that new purchases will be halted by the end of the year. The Frankfurt-based institution said it will buy 15 billion euros (US$17 billion) of assets a month from October to December, and that a decision to halt the program after that continues to be contingent on incoming economic data. Policy makers reiterated that interest rates will remain at their present record lows “at least through the summer” of 2019. Attention now turns to President Mario Draghi’s press conference at 2:30 p.m. in Frankfurt, where he’ll present updated projections for growth and inflation and an assessment of the risks to the outlook.

Overnight markets

Overview: US 10yr note futures are down -0.118% at 119-10, S&P 500 futures are up 0.26% at 2901, Crude oil futures are down -1.34% at $69.43, Gold futures are up 0.02% at $1211.2, DXY is up 0.09% at 94.882, CAD/USD is up 0.04% at 0.769.

US Economic Data

Canadian Economic Data

Market Update Tsys trading higher after August PPI fell 0.1% vs +0.2% exp, 10Y 2.963% (-1.5bp), curve 1bp flatter. Equity futures slightly lower – S&P -1.75, Asian equities lower, Hang Seng at one-year lows, Euro stocks holding on to slight gains. Core EGBs higher led by 10Y bund @ 0.41% , just off recent highs. GOCs higher, in line with tsys – NAFTA in the headlines, yesterday afternoon positive news on talks impacting GOCs and the CAD -which continues to rall – 1.3062 (-50pps). The BOC auctions $400mln in reopened 2050 RRBs at noon with long breakevens at the lower end of ther range this yr -170bps. 

News headlines

China Bank Lending Slowed in August as Bond Issuance Surges (Bloomberg) China’s broadest measure of new credit expanded as companies issued more debt, though the expansion in new bank loans slowed, showing that banks are still cautious about extending credit and taking on risk. China’s credit growth has been sluggish for months as a multi-year campaign to slow debt growth squeezed shadow banking and hurt people’s appetite for risk. As the trade conflict with the U.S. intensifies, policy makers have loosened monetary policy and eased regulatory requirements on banks to encourage lending.

There’s Never Been a President This Unpopular With an Economy This Good (Bloomberg) President Donald Trump’s unpopularity is unprecedented given the strength of the economy. That’s according to a Bloomberg analysis of polling data. It shows that Trump is the first U.S. leader dating back to at least Ronald Reagan whose approval rating is consistently low and lagging consumers’ favorable assessment of the economy.

Trump Tariffs Spark Industry Campaign to De-Escalate Trade War (Bloomberg) Trade associations representing farmers, retailers and manufacturers are joining forces in a new multi-million-dollar campaign to oppose President Donald Trump’s tariffs, in the latest attempt by U.S. business to stop an escalating trade war. Groups lobbying for months to persuade the president that tariffs are the wrong approach have been largely ignored, as Trump slapped duties on billions of dollars of imports from steel to Chinese products. But a new coalition called Americans for Free Trade is joining Farmers for Free Trade to change the direction in Washington by highlighting stories of businesses, consumers and farmers in the heartland negatively affected by the duties.

Europe Stocks Rise, Asia Extends Drop; Euro Slips: Markets Wrap (Bloomberg) European stocks advanced on Wednesday and Asian shares extended a losing streak as traders turned their focus to the outlook for monetary policy amid lingering worries for global trade. Treasury yields edged lower after climbing a day earlier. Energy companies and miners were among the biggest winners in Europe as Bloomberg’s commodity index rose. Futures on the Dow, S&P 500 and Nasdaq advanced even as America’s East Coast battened down for Hurricane Florence. The MSCI Asia Pacific Index was on course for a 10th consecutive decline, the longest losing streak since 2002. Two-year Treasury yields held near a decade high and the dollar edged lower. The euro slipped after a report that the European Central Bank is set to lower its economic growth forecasts, while the pound fluctuated as Britain attempts to foster an amicable split from the EU.

Canada ready to allow U.S. dairy access in NAFTA talks (Reuters) Canada is ready to offer the United States limited access to the Canadian dairy market as a concession in negotiations to rework the North American Free Trade Agreement, two Canadian sources with direct knowledge of Ottawa’s negotiating strategy said on Tuesday. U.S. President Donald Trump said at the White House that trade talks with Canada were going well and that Ottawa wants to make a deal. Chrystia Freeland, Canada’s foreign minister, returned to Washington on Tuesday for talks with U.S. Trade Representative Robert Lighthizer.

Trump says NAFTA deal with Canada ‘coming along very well’ (BNN) The U.S. and Canada continued to look for ways to bridge their differences as talks resumed to update the North American Free Trade Agreement, with Ottawa insisting it won’t sign a bad deal. “We had a very productive, constructive conversation. The atmosphere continues to be cordial. There continues to be goodwill on both sides,” Foreign Affairs Minister Chrystia Freeland said Tuesday after meeting U.S. Trade Representative Robert Lighthizer in Washington. “It is a truism of trade negotiations that nothing is done until everything is done.”

Loblaw beats Canadian banks in credit card survey (BNN) Canada’s biggest grocery chain is beating the banks at their own game. Loblaw Cos.’s President’s Choice Financial credit cards rank No. 1 for customer satisfaction, beating out cards issued by the country’s biggest banks, according to a study published Monday by J.D. Power. Despite being Canada’s biggest credit-card issuer, Toronto-Dominion Bank trails the pack. PC Financial scored 788 on a 1,000 point scale making the cards “among the best,” according to the survey. American Express Co.’s cards ranked second, with 780 points, followed by Canadian Tire with 774 points, and Capital One at 764. Each of the three rated “better than most. »

Overnight markets

Overview: US 10yr note futures are up 0.079% at 119-14, S&P 500 futures are down -0.06% at 2888, Crude oil futures are up 1% at $69.94, Gold futures are down -0.27% at $1198.9, DXY is down -0.03% at 95.218, CAD/USD is up 0.07% at 0.7648.

US Economic Data

Canadian Economic Data