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Market Update

-US tsys lower, US 10Y 1.77% (+5bps) , amid higher crude prices and move lower in core EU bond prices.  Yesterday tsy futures sold off on news Russia had agreed to cut oil production along with Saudi Arabia. GOC yields higher, yet 2-3bps narrower vs tsys, outperforming in the selloff even as Cda Housing Starts came in above exp for Sep 220k vs 190k exp. Provis spds not reacting to higher GOC yields, could be positioning for upcoming supply. FOMC minutes tommorrow expected to shed light on why meeting was a close call with three dissents.The US also auctions 3, 10 & 30 yr bonds starting tommorrow and Thursday for $56bln, not easy in backdrop of rising EU & tsy yields.

News headlines                                                                                                         

–Dollar Climbs as Treasuries Decline on Fed Wagers; Rand Sinks (Bloomberg) The dollar rose to its strongest level in 11 weeks and U.S. bonds declined as investors boosted wagers that the Federal Reserve will raise interest rates this year. South Africa’s rand tumbled after prosecutors said they will charge the nation’s finance minister with fraud.

–Oil price falls back from one-year highs, hit by OPEC deal concerns (Reuters) Oil fell back from one-year highs on Tuesday, knocked by concerns that a production cut by the world’s largest exporters might not be enough to erode a two-year old global surplus of unwanted crude oil.

–German investor morale brightens more than expected in October (Reuters) The mood among German analysts and investors improved more than expected in October, a survey showed on Tuesday, suggesting traders are more upbeat about the growth prospects of Europe’s biggest economy. Mannheim-based ZEW said its monthly survey showed a rise in its economic sentiment index to 6.2 points in October after an unchanged reading of 0.5 points the previous month. This was better than the Reuters consensus forecast for a reading of 4.3.

–No recovery in sight for Canada’s 100,000 unemployed oil workers (Financial Post) The recent rise in oil prices and the accelerating political dance to approve a pipeline by imposing a hefty national carbon price are fueling some optimism in the Canadian oil scene – but not for the estimated 100,000 oil workers out of a job, the majority highly educated professionals based in Calgary.

–China banks may need $1.7 trillion injection as credit quality worsens: S&P (Reuters) Rising debt levels will worsen the credit profiles of China’s top 200 companies this year, requiring the country’s banks to raise as much as $1.7 trillion in capital to cover a likely surge in bad loans, S&P Global said in reports on Tuesday.

–Bank of Japan seen holding off more stimulus for now unless yen rises sharply: Reuters poll (Reuters) The Bank of Japan is expected to wait until next year before easing policy further unless any sharp spikes in the yen undermine the economy significantly in the meantime, a Reuters poll found. Last month the central bank switched the focus of its stimulus program to targeting market interest rates after years of massive asset buying failed to push up inflation.                                   

Overnight markets

– Overview: US 10yr note futures are down -0.012% at 129-25, S&P 500 futures are down -0.29% at 2152.75, Crude oil futures are down -0.41% at $51.14, Gold futures are down -0.29% at $1256.8, DXY is up 0.43% at 97.345.

US Economic Data 

-10:00 AM: Labor Market Conditions Index, Sep, est.1.5 (prior -0.7)

Canadian Economic Data

-8:15 AM: Housing Starts, Sep, 220.6k, est. 190.0k (prior 182.7k)

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

– Tsys moving lower, US 10Y 1.752% (1.3bps) despite Sept payrolls coming in weaker 156k vs 170k and AHE up 0.2% vs 0.3% exp, thou the part rate did tick up to 62.9%. Tsys down o/n with UK gilts which sold off sharply again on nervousness over a ‘hard Brexit’.  Sterling lower after a ‘flash crash’ sent the ccy down 6.1% to 31-year lows before stabilizing. German 10Y bund yield back above zero, better than exp German IP also seen weighing along with gilt weakness.  GOC yields higher after Cdn empl rose 67k in Sep – the one monthlargest gain since Apr 2012vs  and the unemp rate ??. USDCAD higher on lower crude , stronger USD. Four Fed speakers scheduled today . BOC Deputy Wilkins in speech in Trois Rivieres said inflation risks are still tilted to the downside despite the recovery in oil prices, as material slack and uncertainty exist, thou expected fiscal stimulus in Cda/US will certainly support the recovery. Provis closed tighter yest, opening.

News headlines                                                                                         

–Dollar Gains as Stocks Fall Before Payrolls; Pound in Meltdown (Bloomberg) The dollar climbed to 10-week high and equities retreated before American payrolls data that may bolster the case for the Federal Reserve to raise interest rates this year. The pound tumbled as much as 6.1 percent. The Bloomberg Dollar Spot Index strengthened for a fifth day as better-than-estimated economic data this week fueled bets for rate increases. Stocks fell with bonds and gold headed for its worst week in almost two years. The pound failed to recover all of of its losses after the biggest intraday slide since the Brexit referendum. Oil held above $50 a barrel.

–China Sept forex reserves fall more than expected to $3.166 trln (Reuters) China’s foreign exchange reserves fell to $3.166 trillion at the end of September, the central bank said on Friday, below forecasts. Economists had expected reserves to ease to $3.18 trillion from $3.19 trillion in August. China’s gold reserves rose to $78.169 billion at the end of September, from $77.18 billion the previous month, the People’s Bank of China said on its website.

–Flash Crash of the Pound Baffles Traders With Algorithms Being Blamed (Bloomberg) During two chaotic minutes of Asian trading, the pound plunged the most since the Brexit referendum in June, with traders saying computer-initiated sell orders exacerbated the slump. The 6.1 percent drop drove sterling to a 31-year low of $1.1841, according to composite prices compiled by Bloomberg of contributions from dealers. Traders speculated the crash might have been sparked by human error, or a so-called “fat finger,” with algorithms adding to selling pressure at a time of day when liquidity is relatively low.

–U.S. nonfarm payroll job growth seen pushing case for Fed hikes (Reuters) U.S. employment growth likely picked up in September, putting pressure on the Federal Reserve to raise interest rates and signaling that steam could be building in the economy ahead of America’s presidential election. Nonfarm payrolls are expected to have risen by 175,000 last month from 151,000 in August, according to a Reuters survey of economists.

–Bank of Canada backs Ottawa’s bid to cool housing market (TheGlobeAndMail) Bank of Canada officials are giving a thumbs-up to the Trudeau government’s efforts to cool the country’s debt-fuelled housing market. “Over time, the measures announced by the federal government … will help mitigate risks to the financial system posed by household imbalances,” senior deputy governor Carolyn Wilkins said Thursday in Trois-Rivières, Que. But Ms. Wilkins appeared to play down suggestions from some economists that a federal mortgage insurance crackdown gives the central bank flexibility to cut interest rates again if the economy falters.`

–Thomson Reuters launches new technology centre in Toronto, says it will create 400 jobs (Financial Post) Thomson Reuters Corp. announced Friday its intention to open a new technology centre in downtown Toronto, which it says will create some 400 jobs in the tech sector in the next two years. To be christened the Toronto Technology Centre, the opening will increase the media conglomerate’s 1,200-strong workforce in Canada by a third. The company said it has plans to add 1,500 jobs over an unspecified period of time, and will begin recruiting in the local market immediately.

Overnight markets

-Overview: US 10yr note futures are up 0.0962% at 130-3, S&P 500 futures are up 0.06% at 2157.75, Crude oil futures are down -0.14% at $50.37, Gold futures are up 0.72% at $1262, DXY is up 0.06% at 96.819.

US Economic Data

-8:30 AM: Change in Nonfarm Payrolls, Sep, 156k , est. 172k (prior 151k)

Change in Manufacturing Payrolls, Sep, -13k , est. -4k (prior -14k)

Unemployment Rate, Sep, 5.0%, est. 4.9%  (prior 4.9%)

Labor Force Participation, Sep, est. 62.9% (prior 62.8%)

Average Hourly Earnings, m/m, Sep, 0.2%, est. 0.3% (prior 0.1%)

Average Hourly Earnings, y/y, Sep, 2.6%, est. 2.6% (prior 2.4%)

-10:00 AM: Wholesale Inventories, m/m, Aug F, est. -0.1% (prior -0.1%)

Wholesale Trade Sales, m/m, Aug, est. 0.1% (prior -0.4%)

-15:00 AM: Consumer Credit, Aug, est. 16.5b (prior 17.713b)

Canadian Economic Data

-8:30 AM: Unemployment Rate, Sep, 7.0%, est. 7.0% (prior 7.0%)

Net Change in Employment, Sep, 67.2k, est. 7.5k (prior 26.2k)

Participation Rate, Sep, 65.7% , est. 65.5% (prior 65.5%)

-10:00 AM: Ivey Purchasing Managers Index, Sep, est. 53.1 (prior 52.3)

-10:30 AM: BoC Senior Loan Officer Survey, 3Q, (prior 5.00)

Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230