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Market Update

US tsys trading higher, yields 2-3bps lower with the 10Y 2.83% (-3bps), a four-month low, on above avg volume in TY futures (400k). US equity futures higher (S&P + 17) after yesterday’s 2% drop brought the S&P to new lows for the year. Asian stocks lower on headlines that the Chinese president failed to offer any new concessions on trade in an o/n speech. Crude down for a third day, -2.3% @ 48.76 a one-year low. GOCs higher, 1bp wider vs tsys, the 10Y 2.04% (-1bp) after yesterday’s 5bps rally. Provis 2.5-3bps wider yest, spds at the wides, 10Y Ont 83.5  +20bps since mid Nov.

News headlines

$3.5 Trillion Cash Injection Changes Little for Ordinary Japanese (Bloomberg) It’s been the most radical cash injection in history — a staggering $3.5 trillion, pumped into Japan’s economy over more than five years to slay deflation and kick growth into higher gear. That’s still not enough to save Tomoaki Nagai’s metal parts factory near Osaka and it’s a similar story throughout the world’s third-largest economy.

Trump Opposes Short-Term Funding to Avoid Shutdown, Source Says (Bloomberg) President Donald Trump isn’t inclined to support a one- or two-week stopgap spending measure that would avert a partial government shutdown over the holidays, according to a person familiar with White House planning. The hardening of the White House position increases the difficulty lawmakers face in finding a solution before government funding expires on Friday night for nine government departments and various independent agencies.

Trump Offers Flynn Luck Ahead of Sentencing for Lying to FBI (Bloomberg) President Donald Trump offered public well wishes to Michael Flynn, hours before his former national security adviser is set to be sentenced for lying to investigators about his contacts during the 2016 campaign with the Russian ambassador. “Good luck today in court to General Michael Flynn,” Trump said Tuesday on Twitter. “Will be interesting to see what he has to say, despite tremendous pressure being put on him, about Russian Collusion in our great and, obviously, highly successful political campaign. There was no Collusion!”

U.S. Equity Futures Gain, Europe Shares Pare Drop: Markets Wrap (Bloomberg) U.S. equity futures stabilized on Tuesday while shares in Europe pared a drop as investor nerves steadied after yet another rout in American stocks a day earlier. Treasuries, gold and the Japanese yen advanced amid a cautious mood. To the disappointment of many investors, Chinese President Xi Jinping offered no fresh commitments to open or stimulate the world’s second-biggest economy in a keynote speech. That compounded the gloom surrounding riskier assets, and the MSCI Asia Pacific and MSCI Emerging Market indexes both retreated. The Stoxx Europe 600 Index initially followed suit, but recovered much of its loss as the session progressed. S&P 500 Index futures showed a small rebound after the underlying gauge plunged to the lowest in 14 months on Monday.

General Dynamics warns Canada: Canceling Saudi deal would cost billions (Reuters) General Dynamics Corp (GD.N) on Monday put pressure on Ottawa over the sale of armored vehicles to Saudi Arabia, warning that the federal government would incur “billions of dollars of liability” by unilaterally scrapping the deal. The remarks by the Canadian unit of General Dynamics – which one defense expert called unusual – reflect increasing tensions over a $13 billion agreement that is becoming politically awkward for the Liberal government.

Go West: Pacific Coast LNG plans get fresh look as market shifts (Reuters) The scramble for new projects to export liquefied natural gas (LNG) is shifting to the Pacific Northwest, where longstanding proposals are getting a renewed look as rising shipping rates make the region’s easy access to Asia more appealing, with gas price shifts sweetening the deal. In October, Royal Dutch Shell and its Asian partners approved construction of a $30 billion export terminal in British Columbia, surprising investors by saying the plant would deliver the super-cooled fuel to Asia at a more competitive price than new U.S. Gulf Coast projects.

Vancouver home prices fall most since 2008, extending declines (BNN) Home prices in Vancouver fell 1.9 per cent in November from a month earlier, the most in a decade, extending a recent run of declines for Canada’s most expensive real estate market. The figures suggest momentum earlier this year may have been just a blip, as consumers adjust to tougher federal mortgage qualification rules. After rebounding to a record in May, prices nationwide have dropped for six straight months, the Canadian Real Estate Association reported Monday, and are hovering at levels little changed from mid-2017, when interest rates started to rise. “The decline in home ownership affordability caused by this year’s new mortgage stress-test remains very much in evidence,” said Gregory Klump, CREA’s Chief Economist. “While national home sales were anticipated to recover in the wake of a large drop in activity earlier this year due to the introduction of the stress-test, the rebound appears to have run its course.”

Trump says it’s ‘incredible’ U.S. Fed ‘even considering’ raising rates (BNN) U.S. President Donald Trump slammed the Federal Reserve on the eve of a pivotal policy meeting for “even considering” another interest-rate increase, and suggested the central bank has no reason to move because inflation is low and the U.S. currency is strong. “It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike,” Trump said in a tweet on Monday. “Take the Victory!”

Overnight markets

Overview: US 10yr note futures are up 0.142% at 120-27, S&P 500 futures are up 0.67% at 2572.75, Crude oil futures are down -2.45% at $48.66, Gold futures are down -0.08% at $1250.8, DXY is down -0.26% at 96.852, CAD/USD is down -0.01% at 0.746.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.953%	2 Year	2.667%
5 Year	1.97%	5 Year	2.663%
10 Year	2.035%	10 Year	2.828%
30 Year	2.205%	30 Year	3.086%

US Economic Data

8:30 AM	Housing Starts, Nov est 1228k (1228k prior)
	Housing Starts MoM, Nov est 0.0% (1.5% prior)
	Building Permits, Nov est 1260k (1263k prior)
	Building Permits MoM, Nov est -0.4% (-0.6% prior)

Canadian Economic Data

8:30 AM

Manufacturing Sales MoM, Oct est 0.4% (0.2% 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

Market Update

US tsys trading higher, yields ~1bp lower across the curve, 10Y 2.88%(-1bp), light volume in TY futures, US equity futures lower since early NA hrs, S&P -6.  Core EGBs lower led by  gilts with the 10Y gilt +4bps @ 1.28%  -volumes in bund & gilt futures ~50% of 10-day avg as year end approaches and  in front of FOMC decision Wed. Implied prob  of fed rate hike slightly lower since last week , still at 74% – thou the outlook for 2019 is less certain, the CITI US  Macro Surprise Index has fallen to the lowest levels since Sep., while the Fed’s 5Y forward inflation breakeven measure is down sharply just since October, below 2.0% for the first time in a year.  GOCs trading higher, in line with tsys – CPI highlight for the week on Wednesday.

News headlines

Stocks Struggle as Dollar Slips to Start Fed Week: Markets Wrap (Bloomberg) U.S. equity futures edged lower and stocks fell in Europe after a mixed session in Asia as markets looked to the Federal Reserve for hints on how a volatile year may end. Benchmark Treasury yields steadied at around 2.88 percent. Contracts on the Dow, S&P and Nasdaq all fluctuated before nudging down. Retailers led declines in the Stoxx Europe 600 Index as Asos Plc plunged after warning that its Christmas shopping season got off to a disastrous start. Treasuries held Friday’s gain and the yen was steady after a bout of risk aversion hammered global equities in recent sessions. The dollar fell after a strong week. Malaysia turned up the heat on Goldman Sachs Group Inc., filing criminal charges against the U.S. bank.

U.S. Student Loan Debt Sets Record, Doubling Since Recession (Bloomberg) U.S. student loan debt outstanding reached a record $1.465 trillion last month and one particular set of borrowers is having a hard time paying back their loans, according to a Bloomberg analysis of student loan securitization data. This debt is raising fiscal risks. “Over 90% of student loans are guaranteed by the U.S. Department of Education, meaning that if a recession causes a rise in youth unemployment and triggers mass defaults, this contingent liability could prove burdensome for the U.S. government budget,” said Paul Della Guardia, economist at the Institute of International Finance in emailed comments.

Trudeau Says Canada Wants Out of Saudi Vehicle Export Deal (Bloomberg) Canada was looking for a way out of a $13 billion deal to export armored vehicles to Saudi Arabia, Prime Minister Justin Trudeau said in a televised interview Sunday. “We are engaged with the export permits to try and see if there is a way of no longer exporting these vehicles to Saudi Arabia,” Trudeau told CTV on Sunday, without elaborating.

Google to Invest More Than $1 Billion to Establish NYC Campus (Bloomberg) Google will invest more than $1 billion to expand its New York City presence, the search giant said in a blog post Monday. The Alphabet Inc. division said it had reached lease agreements at 315 and 345 Hudson Street and signed a letter of intent at 550 Washington Street to make up the new 1.7 million square-foot campus, called Google Hudson Square.

Canada gets consular access to second man detained in China (Reuters) Canadian diplomats gained consular access on Sunday to the second of two men detained by China over the past week, Canada’s foreign ministry said in a statement that gave few details, as China said it was ensuring their rights were protected. John McCallum, Canada’s ambassador to Beijing, met Michael Spavor, the Canadian ministry said. Spavor and Michael Kovrig were both picked up after Canada arrested a senior Chinese executive on a U.S. extradition request.

Boeing increases value for Embraer’s commercial business to $5.26 billion (Reuters) Brazil’s Embraer (EMBR3.SA) said on Monday it had finalised the terms of a proposed deal to sell 80 percent of its commercial aviation business to Boeing, (BA.N) now valuing the division at $5.26 billion. As originally announced in July, the deal valued Embraer’s commercial division at $4.75 billion. Embraer now expects it will receive $3 billion from the deal, after accounting for closing costs. It is unclear whether any part of this difference relates to debt.

May attacks second Brexit referendum plan as a breach of trust (BNN) U.K. Prime Minister Theresa May will attack supporters of a second Brexit referendum on Monday as she explains to Parliament why European Union leaders rebuffed her attempt to make her divorce deal more attractive to lawmakers. May, who accused former Prime Minister Tony Blair of “undermining” her negotiations by pushing for a second vote, will say it would be a catastrophic breach of trust. David Lidington, May’s effective deputy, and Chief-of-Staff Gavin Barwell denied supporting another plebiscite on Sunday after newspaper reports that they’d had talks on the issue.

Risk of 2019 recession ‘higher than a lot of people think’: Rosenberg (BNN) High Canadian debt levels will make it more difficult for Canada to deal with a looming global recession in 2019, according to Gluskin Sheff + Associates chief economist and strategist David Rosenberg. “Nothing is inevitable, but the risks of recession for Canada for next year are higher than a lot of people think,” Rosenberg said in an interview with BNN Bloomberg’s Andrew McCreath. Canadians currently owe about $2.2.-trillion in total debt, up by nearly a trillion dollars in just the last decade, Rosenberg said. As interest rates rise, Rosenberg warned that higher debt servicing costs could shave as much as 75 basis points off Canadian 2019 GDP growth.

Overnight markets

Overview: US 10yr note futures are up 0.065% at 120-15, S&P 500 futures are down -0.28% at 2598.25, Crude oil futures are up 0.92% at $51.67, Gold futures are up 0.19% at $1243.8, DXY is down -0.25% at 97.202, CAD/USD is up 0.07% at 0.7467.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	2.014%	2 Year	2.725%
5 Year	2.028%	5 Year	2.72%
10 Year	2.087%	10 Year	2.88%
30 Year	2.263%	30 Year	3.137%

US Economic Data

8:30 AM	Empire Manufacturing, Dec est 20.0 (23.3 prior)
10:00 AM	NAHB Housing Market Index, Dec est 61 (60 prior)
16:00 US	Total Net TIC Flows, Oct (-29.1b prior)
	Net Long-term TIC Flows, Oct (30.8b prior)

Canadian Economic Data

8:30 AM	Int’l Securities Transactions, Oct (7.70b prior)
	Existing Home Sales MoM, Nov (-1.6% prior)
	Bloomberg Nanos Confidence, Dec 14th (53.8 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

Market Update

Tsys higher overnite on moderate volume (375k TY), 10Y 2.885% (-3bps), equities lower in Europe and Asia after weak European PMIs as well as China retail sales.  Positive news on trade after China will temporarily remove a 25% tariff on US autos.  GOCs higher, in line with tsys after seeing underperformance across the curve yest, particularly in longs which are 6bps wider vs tsys wk/wk vs 1-2bps 2s-10s. Late yest Moody’s downgraded Ontario’s credit rating to Aa3 from Aa2, citing its fall economic stmt which forecast a $14.5bln deificit for FY 2019, more than double previous projections. Ontario spds opening 1bp wider this morn

News headlines

China to Cut Tax on U.S. Vehicles to Ease Trade Tensions (Bloomberg) China will remove the retaliatory duty on automobiles imported from the U.S. for three months in an effort to defuse trade tensions with the world’s biggest economy. The 25 percent tariff it imposed in a tit-for-tat measure will be scrapped starting Jan. 1, the finance ministry said Friday. Earlier this week, Bloomberg News reported that China was considering cutting the duties.

Trump Ordered Payments to Women Knowing It Was Wrong, Cohen Says (Bloomberg) President Donald Trump directed Michael Cohen to make hush payments to women alleging affairs with him out of concern about “how this would affect the election,” the attorney said in an interview with ABC News. The interview marked Cohen’s first since being sentenced to three years in prison after pleading guilty to breaking campaign-finance laws by arranging the payments, as well as lying to Congress and banks.

GOP Hurtles Toward Shutdown With No Plan to Avoid It (Bloomberg) House Republican leaders sent their members home for a six-day break Thursday without revealing any plan to avoid a looming government shutdown. In Paul Ryan’s waning days as House speaker, leaders are wavering about whether to try to pass a spending bill with the $5 billion President Donald Trump is demanding for his wall at the Mexican border. Senate Republicans also haven’t announced any plan to fund the government.

Global Stock Sell-Off Resumes as Growth Signs Flag: Markets Wrap (Bloomberg) U.S. equity futures and European stocks dropped, tracking a slump across Asia as worries over global growth brought a downbeat end to a rocky week. Treasuries and the dollar jumped. The Stoxx Europe 600 Index headed for a weekly loss, led lower by carmakers after regional sales slumped in November for the third month in a row. S&P 500 futures also pointed to a drop at the open, though both declines were tempered somewhat on news that China will temporarily remove a retaliatory duty on U.S.-imported automobiles. Earlier equities had slumped across Asia, with shares in Hong Kong and Japan leading the retreat after a slew of Chinese data reinforced concern about a slowdown in the world’s second-largest economy.

Ahead of China anniversary, trade war fans calls for faster market reforms (Reuters) China’s trade war with the United States is spurring some Chinese entrepreneurs, government advisers and think-tanks to call for faster reforms in the world’s second-largest economy and the freeing of a private sector stifled by state controls. The calls for change have become louder as China approaches a key anniversary later this month, although there are no signs that the government is planning to shift any key policies.

Bombardier CEO blasts ‘incomprehensible’ Siemens contract win with Via Rail (BNN) Bombardier Inc.’s () top executive says he can’t figure out how Canada’s government-owned passenger train operator could pick a foreign rival without demanding a minimum amount of local production. “It’s incomprehensible,’’ Bombardier Chief Executive Officer Alain Bellemare told reporters Thursday in Montreal. “We work in many countries around the world, and all countries require significant local content. We see it in the U.S. It’s difficult to understand that here, we can’t find ways of protecting innovation, technology and jobs that are similar to all the other countries in the world.’’

Moody’s downgrades Ontario’s credit rating (BNN) Bond rating agency Moody’s has downgraded the province of Ontario’s credit rating. The agency announced the downgrade from Aa3 to Aa2 today, citing the province’s $14.5-billion deficit in 2018-2019 and projections that it will continue to post deficits in the coming years. Moody’s says the combination of increased debt and slow revenue growth will result in a faster than previously anticipated increase of the province’s debt burden.

Overnight markets

Overview: US 10yr note futures are up 0.195% at 120-15, S&P 500 futures are down -0.82% at 2627.75, Crude oil futures are down -0.44% at $52.35, Gold futures are down -0.46% at $1241.7, DXY is up 0.54% at 97.588, CAD/USD is up 0.17% at 0.7475.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	2.043%	2 Year	2.731%
5 Year	2.055%	5 Year	2.72%
10 Year	2.12%	10 Year	2.882%
30 Year	2.291%	30 Year	3.143%

US Economic Data

8:30 AM	Retail Sales Advance MoM, Nov est 0.1% (0.8% prior)
	Retail Sales Ex Auto MoM, Nov est 0.2% (0.7% prior)
	Retail Sales Ex Auto and Gas, Nov est 0.4% (0.3% prior)
9:15 AM	Industrial Production MoM, Nov est 0.3% (0.1% prior)
	Capacity Utilization, Nov est 78.6% (78.4% prior)
9:45 AM	Markit US Composite PMI, Dec (54.7 prior)
	Markit US Manufacturing PMI, Dec est 55.0 (55.3 prior)
	Markit US Services PMI, Dec est 54.6 (54.7 prior)
10:00 AM	Business Invetories, Oct est 0.6% (0.3% prior)

Canadian Economic Data

There is no Canadian economic data for today.

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