Comments
21/12/2018
Market Update
US tsys higher, yields 1.5-3bps lower with the curve flatter, 10Y 2.78%(-2.2bps), no reaction to weaker Q3 GDP & Nov durable goods low volume in TY futures (287k), equities falling further in Europe, Stoxx at two year low, S&P futures +5 after being down 5pts before 8:30 data. Core EGBs also pearing losses, 10Y gilt +3.5bps, 10Y bund +1.5bps @ 0.24%, Italian BTPs outperforming since deficit agreement reached with EU. GOCs higher, 1bp wider vs tsys, 10Y 2.0% , after volatile session yest saw 10s hit 1.94% mid morning before equities turned higher and 10s ended unch @ 2.0%.
News headlines
Details of Ex-Canada Diplomat’s Detention in China Revealed (Bloomberg) The ex-Canadian diplomat detained in China this month as Beijing fumed over the arrest of a Huawei Technologies Co. executive is being denied a lawyer and limited to one consular visit a month, according to a person familiar with the situation. The conditions are among the first details of Michael Kovrig’s detention since the International Crisis Group senior adviser was taken into custody by China’s spy agency on Dec. 10. The case — along with that of another Canadian citizen detained on the same day — have plunged Canada’s ties with its second-largest trading partner into crisis.
China Pledges More Stimulus in 2019 as Economy Seeks Bottom (Bloomberg) China’s top policy makers confirmed that more monetary and fiscal support will be rolled out in 2019, as the world’s second-largest economy grapples with a slowdown that’s yet to show signs of ending. “Significant” cuts to taxes and fees will be enacted in 2019 and while monetary policy will remain “prudent,” officials will strike an “appropriate” balance between tightening and loosening, according to a statement published after the annual Economic Work Conference that concluded in Beijing Friday.
Shutdown Nears With Congress at Impasse Over Trump’s Border Wall (Bloomberg) The U.S. government is just hours away from a partial shutdown with Congress at an impasse over funding President Donald Trump’s border wall. Republicans in the House on Thursday night sought to meet Trump’s demands, adding $5 billion for border wall construction to the Senate’s version of a stopgap spending measure.
Stocks Drop as Miserable Week Nears End; Dollar Up: Markets Wrap (Bloomberg) The pain across equity markets continued on Friday, with European stocks following Asian shares lower and U.S. futures pointing to yet more declines at the open. The dollar reversed a drop as Chinese policy makers moved to shore up growth, and bonds retreated across Europe. The Stoxx Europe 600 Index slipped for a second day as most sectors fell, though it pared some of the drop. Futures for the S&P 500, Dow Jones and Nasdaq indexes all slid. The MSCI Asia Pacific Index dropped for the fourth session in six as benchmarks declined in most countries. West Texas crude extended losses toward $45 per barrel.
Canada adds jobs in November on widespread gains: ADP (Reuters) Canada added 39,100 jobs in November, with broad-based gains across industries led by a pick-up in hiring in the trade, transportation and utilities sector, according to a report from ADP released on Thursday. The report, which is jointly developed with Moody’s Analytics, is derived from ADP’s payrolls data of about 40,000 companies. The October data was revised to show jobs rose 1,800 rather than a 23,000 decline.
TSX futures little changed ahead of GDP data (Reuters) Stock futures for Canada’s main stock were almost flat on Friday, as investors awaited the gross domestic product and retail sales numbers for October, scheduled to be released later in the day. December futures on the S&P/TSX index SXFc1 were up 0.05 percent at 7:00 a.m. ET. Canada’s economy is likely to have expanded by 0.2 percent in October, against a marginal contraction of 0.1 percent in the previous month. The GDP and retail sales data is due at 8:30 a.m. ET.
Enerjet relaunching as new ultra-low-cost airline in 2019 (BNN) Calgary-based charter airline Enerjet announced Thursday that it will relaunch as a new ultra-low-cost carrier in 2019, backed by “significant financial commitments” from a group of prominent investors. The carrier said in a release that by this time next year it will offer “a simple, ultra-low-cost fare structure” and fly to an “extensive” network of Canadian and U.S. destinations, but did not specify which cities.
Overnight markets
Overview: US 10yr note futures are down -0.013% at 121-02, S&P 500 futures are down -0.31% at 2478.5, Crude oil futures are down -1.22% at $45.32, Gold futures are down -0.36% at $1263.3, DXY is up 0.4% at 96.663, CAD/USD is up 0.28% at 0.7383.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.93% | 2 Year | 2.658% |
| 5 Year | 1.943% | 5 Year | 2.65% |
| 10 Year | 2.002% | 10 Year | 2.788% |
| 30 Year | 2.154% | 30 Year | 3.016% |
US Economic Data
| 8:30 AM | GDP Annualized QoQ, 3Q est 3.5% (3.5% prior) |
| Personal Consumption, 3Q est 3.6% (3.6% prior) | |
| GDP Price Index, 3Q est 1.7% (1.7% prior) | |
| Core PCE QoQ, 3Q est 1.5% (1.5% prior) | |
| Durable Goods Orders, Nov est 1.6% (-4.3% prior) | |
| Durable Goods Ex Transportation, Nov est 0.3% (0.2% prior) | |
| 10:00 AM | Personal Income, Nov est 0.3% (0.5% prior) |
| Personal Spending, Nov est 0.3% (0.6% prior) | |
| U. Of Mich. Sentiment, Dec est 97.4 (97.5 prior) | |
| U. Of Mich. Current Conditions, Dec (115.2 prior) | |
| U. Of Mich. Expectations, Dec (86.1 prior) | |
| U. Of Mich. 1 Yr Inflation, Dec (2.7% prior) | |
| U. Of Mich. 5-10 Yr Inflation, Dec (2.4% prior) | |
| 11:00 AM | Kansas City Fed Manf. Activity, Dec est 13 (15 prior) |
Canadian Economic Data
| 8:30 AM | Retail Sales MoM, Oct est 0.5% (0.2% prior) |
| Retail Sales Ex Auto MoM, est 0.2% (0.1% prior) | |
| GDP MoM, Oct est 0.2% (-0.1% prior) | |
| GDP YoY, Oct est 2.2% (2.1% prior) |
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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230
20/12/2018
Market Update
US tsys lower , US 10Y 2.77% (+1bp), prices off the highs of the o/n session which saw the 10Y dip below 2.75%, curve flatter with longs outperforming. Equity futures higher (S&P +4) after yesterday’s post FOMC plunge brought US indices to the lowest levels since Sep 2017 – markets were clearly expecting a more dovish tilt to the stmt & press conf. Weekly claims and Phili Fed today with Q3 GDP tomorrow. GOCs slightly lower, 10Y 1.96%, curve 0.5bps steeper. The GOC curve 3bps flatter on the week led by 5s, a weak CPI yest benefitting 5s on the curve , with the mkt trading sideways until the FOMC , after which GOCs spiked higher, outpeforming tsys 1-2bps in the rally. Today the BOC auctions $2.0bln of 0.5% March 2022 ($15bln outstanding) with the yield having fallen to 1.90% yest, the lowest since June. The Mar 22/Nov 20 roll @ 3bps has traded cheaper over the past two weeks (~2bps), and Mar 22s look cheap in the context of a flat 2s5s curve.
News headlines
Fed Raises Rates, Turns More Cautious on Outlook for 2019 Hikes (Bloomberg) The Federal Reserve raised borrowing costs for the fourth time this year, looking through a stock-market selloff and defying pressure to hold off from President Donald Trump, while dialing back projections for interest rates and economic growth in 2019. By trimming the number of rate hikes they foresee in 2019, to two from three, policy makers signaled they may soon pause their monetary tightening campaign. Officials had a median projection of one move in 2020.
Mueller to Save Trump for Later as Prosecutor Readies Next Steps (Bloomberg) Special Counsel Robert Mueller will be cautious about implicating President Donald Trump– or even a thinly disguised “Individual-1” — directly in criminal activity in legal filings he’s expected to issue in the next few months, according to people familiar with his investigation. Mueller is planning to continue building out his case brick-by-brick in a set of legal filings, as he offers his most detailed narrative yet of Russia’s election interference. That will include identifying any Americans who may have conspired with Russia to affect the 2016 election and what Russians hoped to get in return, the people said. Mueller is also looking into whether the president sought to obstruct justice.
BOE Keeps Interest Rate on Hold as Brexit Uncertainty Rises (Bloomberg) The Bank of England said the uncertainty around Britain’s divorce from the European Union was intensifying as it kept interest rates unchanged. The Monetary Policy Committee, led by Governor Mark Carney, voted 9-0 to hold the benchmark at 0.75 percent. All but one of the 61 economists in a Bloomberg survey correctly predicted Thursday’s decision.
U.S. Futures Advance as Europe, Asia Stocks Fall: Markets Wrap (Bloomberg) U.S. equity futures reversed an earlier decline on Thursday while stocks in Europe and Asia came off their lows as markets showed signs of steadying in the wake of the Federal Reserve decision a day earlier. The dollar slumped and the yen rallied. Contracts on the S&P 500, Dow and Nasdaq all turned green after underlying gauges slumped on Wednesday when Fed Chairman Jerome Powell committed to keep reversing quantitative easing and downplayed of the implications of market volatility. The Stoxx Europe 600 recovered some losses but remained broadly lower, while Japanese shares slid into a bear market.
Canada expands steel, aluminum tariff exemptions (Reuters) Canada said on Wednesday it will exclude some imported steel and aluminum from its newest import tariffs and quotas following a request from the construction industry in British Columbia, which depends on imported metal. The government also said it would give additional relief to some companies that have contractual obligations. In Canada, automakers frequently buy U.S. steel under contract, import and distribute it to their Canadian suppliers as well as their own plants, but it was not immediately clear which companies would be affected.
Markets suffer worst year since global financial crisis (Reuters) Traders will be glad to see the back of 2018. Nearly $7 trillion has been wiped off world stocks, emerging markets have been trampled flat by a charging dollar and even gold and U.S. government bonds have lost money. A grisly combination of U.S.-China trade tensions, central banks turning off the money taps and cooling growth in former hot spots has wiped 10 percent off MSCI’s 47-country world stocks index .MIWD00000PUS — its first double-digit loss in any year since the 2008 global financial crisis.
Politics won’t be a factor in Huawei 5G decision: Trudeau (BNN) Canada’s decision on whether to allow Huawei Technologies Co. access to its next-generation wireless network won’t be a political one, Justin Trudeau said. The prime minister’s comments, made Wednesday at a year-end news conference in Ottawa, come amid heightened tensions with Beijing. Three Canadians have been detained in China since the arrest of a top Huawei executive in Vancouver on a U.S. extradition request earlier this month. The firm is racing to develop 5G technology, the fifth-generation mobile network that could be 100 times faster than existing standards. Australia and New Zealand have effectively banned Huawei from their grids, while the U.K and Germany are being pressed to follow suit over concerns the gear could be exploited by China’s spy agencies.
Aleafia to buy Emblem in $173M all-stock deal as pot M&A activity warms up (BNN) Aleafia Health Inc. (ALEF.V) is acquiring Emblem Corp. (EMC.V) in an all-stock deal worth $173 million, a deal that marks the first significant cannabis industry takeover since Canada legalized recreational pot in October. The deal will combine two mid-tier cannabis producers into a significant player in the medical marijuana space while providing Aleafia with an entry into the nascent recreational cannabis market that Emblem already operates in.
Overnight markets
Overview: US 10yr note futures are down -0.026% at 121-05, S&P 500 futures are up 0.15% at 2508.25, Crude oil futures are down -3.49% at $46.49, Gold futures are up 0.27% at $1259.8, DXY is down -0.63% at 96.428, CAD/USD is down -0.16% at 0.743.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.882% | 2 Year | 2.656% |
| 5 Year | 1.893% | 5 Year | 2.639% |
| 10 Year | 1.963% | 10 Year | 2.767% |
| 30 Year | 2.12% | 30 Year | 2.982% |
US Economic Data
| 8:30 AM | Philadelphia Fed Business Outlook, Dec est 15.0 (12.9% prior) |
| Initial Jobless Claims, Dec 15th est 215k (206k prior) | |
| Continuing Claims, Dec 8th est 1663k (1661k prior) | |
| 9:45 AM | Bloomberg Consumer Comfort, Dec 16th (59.4 prior) |
| Bloomberg Economic Expectations, Dec (56.0 prior) | |
| 10:00 AM | Leading Index, Nov est 0.0% (0.1% prior) |
Canadian Economic Data
| 8:30 AM | Wholesale Trade Sales MoM, Oct est 0.4% (-0.5% prior) |
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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230
19/12/2018
Market Update
US tsys mixed, curve flatter, 10Y 2.81%(-0.5bps), avg volume in TY futures (330k), FOMC and Powell press conf key event this aft. Core EGBs higher, gilts 1bp lower after UK inflation slowed to 2.3% in Nov as exp. GOCs slightly higher before Nov CPI (-0.4% exp), 10Y 2.0%, a one-year low. BOC Poloz, in an interview with the CTV, said the pace of rate hikes could be interrupted due to trade and lower crude prices while the housing market continues to look soft in the face of rising household debt levels. Odds of a rate hike in January have fallen to ~4.0% over the past week. The BOC auctions $2.0bln of reopened 0.5% March 2022s tommorrow with the March 22/Nov 20 (2Y) 3.5/3.4
News headlines
Third Canadian Citizen Detained in China, Report Says (Bloomberg) Canada’s foreign service confirmed that a third national was being held in China, the National Post newspaper reported, citing a statement from Global Affairs Canada. An agency spokesperson provided no further details, and drew no link between the case and those of two other Canadians detained last week in China, the National Post said. The Canadian Embassy in Beijing referred questions of the third case to public relations staff in Ottawa, who didn’t immediately respond to a request for comment on Wednesday.
Italy Banks Get Some Relief as EU Budget Deal Lifts Shares (Bloomberg) Italian banks, the most exposed to their own country’s debt in Europe, finally caught a break as a budget agreement that averted European sanctions against Italy boosted both shares and bonds. The accord over Italy’s 2019 spending plans sparked a sovereign bond rally that may improve the balance sheets of the lenders. The European Commission decided against recommending a disciplinary procedure after the country’s populist government promised to rein in its spending, officials said on Wednesday.
China and U.S. Talk on Trade Ahead of January Negotiations (Bloomberg) China and the U.S. held vice-ministerial level talks on Wednesday to discuss the ongoing trade dispute as they move closer to meeting in January. The two sides spoke by phone according to China’s Ministry of Commerce, and have held several rounds of talks in recent weeks, Treasury Secretary Steven Mnuchin told Bloomberg on Tuesday in Washington. They plan to hold a formal, face-to-face meeting in January to negotiate a broader truce in their trade wars but are unlikely to meet in person before then, Mnuchin said.
Stocks Rise Before Fed Decision; Treasuries Steady: Markets Wrap (Bloomberg) Stocks climbed and most sovereign bonds held steady as investors awaited Wednesday’s Federal Reserve policy decision. Oil’s selloff continued to reverberate around markets. The Stoxx Europe 600 Index advanced after four days of declines, with carmakers rising on hopes of a breakthrough on trade. Futures on the S&P 500 Index erased losses made in late trading on Tuesday after earnings from FedEx. Asian shares were mixed following a disappointing market debut for SoftBank Group’s Japanese telecom business. Crude oil held on to most losses after the biggest three-day slump since 2016.
Canada gives struggling oil sector C$1.6 billion boost (Reuters) The Canadian government said on Tuesday that it would spend C$1.6 billion ($1.19 billion), mostly through loans, to assist the country’s oil and gas industry, which has struggled to move energy to U.S. markets due to full pipelines. Natural Resources Minister Amarjeet Sohi said in Edmonton, Alberta, that the aid package would include C$1 billion for energy exporters to invest in new technologies, boost working capital or find new markets.
Facebook says preferential data access was with user permission (Reuters) Facebook Inc (FB.O) said it did not give some companies access to people’s data without their permission, after the New York Times reported on Tuesday that the social network allowed some large technology companies greater access to user data. The paper reported that Facebook allowed Microsoft’s Bing search engine to see the names of virtually all Facebook users’ friends without their consent, citing documents from 2017.
Hostile Husky takeover bid for MEG Energy now expected to succeed as proposed (BNN) A CIBC oil and gas analyst says the recent deterioration in crude oil prices makes it unlikely that a better offer will emerge to force Husky Energy Inc. to sweeten its hostile takeover bid for an oilsands rival. Husky reported Tuesday that it had received all necessary regulatory approvals for the takeover of MEG Energy Corp. and is now waiting for shareholders’ response to its offer which expires in mid-January.
Overnight markets
Overview: US 10yr note futures are up 0.052% at 120-30, S&P 500 futures are up 0.65% at 2554.5, Crude oil futures are up 0.3% at $46.38, Gold futures are down -0.17% at $1251.5, DXY is down -0.29% at 96.823, CAD/USD is down -0.17% at 0.7438.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.919% | 2 Year | 2.65% |
| 5 Year | 1.927% | 5 Year | 2.649% |
| 10 Year | 2.007% | 10 Year | 2.816% |
| 30 Year | 2.176% | 30 Year | 3.067% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Dec 14th -5.8% (1.6% prior) |
| 8:30 AM | Current Account Balance, 3Q est -125.0b (-101.5b prior) |
| 10:00 AM | Existing Home Sales, Nov est 5.20m (5.22m prior) |
| Existing Home Sales MoM, Nov est -0.4% (1.4% prior) | |
| 14:00 PM | FOMC Rate Decision (Upper Bound), Dec 19th est 2.50% (2.25% prior) |
| FOMC Rate Decision (Lower Bound), Dec 19th est 2.25% (2.00% prior) |
Canadian Economic Data
| 8:30 AM | CPI NSA MoM, Nov est -0.4% (0.3% prior) |
| CPI YoY, Nov est 1.8% (2.4% prior) | |
| Consumer Price Index, Nov est 134.0 (134.1 prior) | |
| CPI Core- Common YoY%, Nov est 1.9% (1.9% prior) | |
| CPI Core- Median YoY%, Nov (2.0% prior) | |
| CPI Core- Trim YoY%, Nov (2.1% prior) |
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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230