Commentaires

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

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

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