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Market Update

US tsys slightly lower, US 10Y 2.86%, yield curve flatter, paring gains as equities rebound from losses – S&P futures +2.75 (were down 20 early). Core Euro bonds mixed – UK gilts higher, yields 3-5bps lower with  the GBP at 18 month lows ad it appears PM May will delay tomorrow’s crucial Brexit vote for fear of defeat. German bunds sold off at the open as equities moved higher, despite muted EGB issuance this week. Focus in the US on Wed CPI & Friday retail sales. In Canada, GOCs slightly higher, outperforming tsys by 1bp with GOC curve flatter after Friday’s huge Nov Payrolls which saw the largest one month gain on record at 94k vs 10k exp, with odds of a Jan hike rising to 17% from 8% prior to the report.

News headlines

China Says Canada Violated Bilateral Agreement in Huawei Arrest (Bloomberg) China accused Canada of violating a bilateral agreement by failing to speedily inform its consulate of the arrest of Huawei Technologies Co. Chief Financial Officer Meng Wanzhou, as tensions between the nations continue to escalate. “According to the China-Canada consular agreement, if a Chinese citizen is arrested by the Canadian government, the Canadian government should immediately notify the Chinese embassy,” Chinese Foreign Ministry spokesman Lu Kang told reporters in Beijing on Monday. “But the Canadian government didn’t do that.”

U.K. Economy Loses Steam as Battle Over Brexit Rages (Bloomberg) The U.K. economy lost momentum in the three months through October, a further sign of the toll being taken by Brexit uncertainty. Growth slowed to 0.4 percent from 0.6 percent in the third quarter, the Office for National Statistics said Monday. In October alone, growth was just 0.1 percent, with the economy being spared a third month of stagnation by a rebound in the dominant services industry.

ECB Heads for Crunch Time After Weeks of Holding Its Nerve (Bloomberg) European Central Bank officials have gone silent on monetary policy after weeks of holding their nerve in the face of waning confidence, slowing growth and mounting economic risks. The Governing Council is just days out from its Dec. 13 meeting, when it will probably call time on one of its major crisis tools. The buildup to the end of net asset purchases after spending 2.6 trillion euros ($3 trillion) has been anything but smooth, with multiple indicators falling and two of the euro area’s biggest economies – Germany and Italy – contracting.

Stocks Drop as Trade Concerns Fester; Pound Falls: Markets Wrap (Bloomberg) U.S. equity futures declined and European stocks followed Asian shares lower as traders fret over the outlook for global growth and a potential escalation of tensions between Washington and Beijing. The pound weakened as Theresa May was said to delay a crucial parliamentary vote on Brexit. Chemical companies led the retreat in the Stoxx Europe 600 Index as contracts on the Dow Jones, Nasdaq and S&P 500 indexes all languished in the red. The glum mood follows weak economic data out of China and news the country’s vice foreign minister summoned the U.S. ambassador to protest the arrest of Huawei Technologies Co.’s CFO. The euro strengthened on upbeat German trade data, while the dollar drifted. Treasuries and European sovereign bonds were mixed.

China urges Canada to free Huawei CFO or face consequences (Reuters) China warned Canada on Saturday that there would be severe consequences if it did not immediately release Huawei Technologies Co Ltd’s [HWT.UL] chief financial officer, calling the case “extremely nasty”. Meng Wanzhou, Huawei’s global chief financial officer, was arrested in Canada on Dec. 1 and faces extradition to the United States, which alleges that she covered up her company’s links to a firm that tried to sell equipment to Iran despite sanctions.

Shoppers Drug Mart granted licence to sell medical marijuana online (BNN) Shoppers Drug Mart has been granted a licence to sell medical marijuana online. Health Canada’s list of authorized cannabis sellers and producers has been updated to reflect that the pharmacy can sell dried and fresh cannabis, as well as plants, seeds and oil. A website has been set up by the company, which says that patients “with a valid medical document will soon be able to purchase a wide selection of medical cannabis products” from Shoppers. A spokeswoman for Shoppers’ parent company Loblaw Companies Ltd. says it’s too soon to say when people will be able to start making orders.

Consumer insolvencies climb 9% in Canada amid higher rates (BNN) Insolvencies filed by Canadian consumers jumped by the most in two years amid signs recent interest rate increases are filtering through to the economy. Insolvencies climbed to 11,641 in October, an increase of 9.2 per cent from a year earlier, according to a report from the Office of the Superintendent of Bankruptcy Canada. Insolvencies surged 16 per cent from September, and are 1.5 per cent higher than 2017 on a year-to-date basis. The Bank of Canada has raised borrowing costs five times since July 2017, and Governor Stephen Poloz reiterated Thursday rates will need to rise “into a neutral range” somewhere around 2.5 per cent to 3.5 per cent, from the current 1.75 per cent, as the economy operates near capacity. That view was reinforced by data Friday that show the country posted a record employment gain in November.

Overnight markets

Overview: US 10yr note futures are down -0.039% at 120-22, S&P 500 futures are up 0.01% at 2636.25, Crude oil futures are down -1.39% at $51.88, Gold futures are down -0.01% at $1252.5, DXY is up 0.14% at 96.649, CAD/USD is down -0.12% at 0.7515.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	2.006%	2 Year	2.719%
5 Year	2.008%	5 Year	2.701%
10 Year	2.074%	10 Year	2.854%
30 Year	2.235%	30 Year	3.134%

US Economic Data

10:00 AM

JOLTS Job Opening, Oct est 7100 (7009 prior)

Canadian Economic Data

8:15 AM	Housing Starts, Nov est 198.0k (205.9k prior)
8:30 AM	Building Permits MoM, Oct est -0.3% (0.4% prior)
10:00 AM	Bloomberg Nanos Confidence, Dec 7th (53.6 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, short end slightly lower, long end higher before payrolls, 10Y 2.90% (unch), close to the lows of August having rallied 10bps this week alone. Nov Payrolls expected at 198k with the unemployment rate unch at 3.7% and AHE 3.1%.  Equity futures lower, off the lows, S&P -8.5 while crude is up 1.2% as OPEC appears close to deal to cut prod, thou Iran has not agreed as yet.  Core EGBs have reversed lower, bunds fading since equities pared losses. GOC slightly higher before Cdn employment data, 10Y 2.06% – big move in Can/US driven by BOC , spreads 10-15bps tighter out to 10yrs, with long cdas lagging as the 10s30s curve has widened 6bps over the week.

News headlines

U.S. Stock Futures Buck Rebound in Europe and Asia: Markets Wrap (Bloomberg) European stocks rebounded from the worst day in more than two years and Asian shares posted modest gains as investors sought to end a bruising week on a more upbeat note. Signs of stress remained, however, as U.S. equity futures declined and Treasuries rose. The Stoxx Europe 600 Index, which on Thursday dropped the most since the U.K. voted to leave the EU in 2016, jumped as every sector rallied. S&P 500 futures came off their lows as the European session wore on, but remained in the red for a second day. Japanese equities outperformed as most Asian gauges nudged higher. Italian debt climbed as European bonds largely drifted. The dollar edged up and the pound was steady as U.K. Prime Minister Theresa May was said to be weighing a plan to postpone the vote on her Brexit deal.

Huawei Arrest Tests China-Canada Ties as Trudeau Weighs Risk (Bloomberg) The arrest of a Huawei executive on Canadian soil represents another setback to Justin Trudeau’s push for stronger ties with Beijing, which are already strained by differences over trade and investments. Canada arrested Huawei Technologies Co. Chief Financial Officer Wanzhou Meng on Saturday in Vancouver as she was switching flights in the Pacific coast city. The arrest was made at the request of U.S. authorities, who want to extradite her. The arrest comes amid a probe of suspected violations of Iran trade sanctions.

What Economists Are Saying Before the November U.S. Jobs Report (Bloomberg) U.S. employers probably kept up a robust pace of hiring in November that was closer to the 2018 trend rate after hurricanes distorted data for the prior two months. Nonfarm payrolls rose 198,000, according to the median of estimates in Bloomberg’s survey of economists before the Labor Department releases its monthly employment report Friday at 8:30 a.m. in Washington. While that’s well below the 250,000 increase in October, it’s close to the 210,000 average over the past 12 months.

U.K. Tells Supermarkets to Maximize Stockpiles Before Brexit (Bloomberg) Theresa May’s government has told supermarkets to keep as much stock as possible in warehouses around the country in case the U.K. crashes out of the European Union without a Brexit deal, a senior official said. The request is being made because in the worst-case scenario, a no-deal Brexit would cut the capacity of the country’s main EU trading route from the French port of Calais to Dover in southeast England to just 13 percent of the current level due to additional border checks, according to the person.

OPEC talks stall as Saudis refuse to exempt Iran from oil cut (Reuters) OPEC talks on oil production cuts reached deadlock on Friday as the group’s leader Saudi Arabia refused to grant sanctions-hit Iran exemptions from planned reductions, OPEC sources said. Saudi Energy Minister Khalid al-Falih, asked on Friday whether he was confident the day’s meetings would produce a deal, said: “No.”

Tobacco giant Altria enters pot business with $2.4B Cronos stake (BNN) Altria Group Inc., the maker of Marlboro cigarettes for the U.S. market, is pushing into the Canadian cannabis industry, marking the major tobacco company’s first foray into the nascent sector. Altria agreed to acquire 146.2 million newly issued shares for $16.25 each — a 16 per cent premium from yesterday’s close. That would give Altria a 45 per cent stake in the Canadian cannabis producer. Altria will also get warrants that will give the option to increase its stake to 55 per cent.

CPP’s biggest enhancements in more than a decade to begin rolling out in 2019 (BNN) The biggest change to the country’s pension plans in more than a decade will take place in the new year, but the effects will be felt differently depending on which generation you belong to. Beginning in early 2019, the Canada Pension Plan and Quebec Pension Plan will phase in enhanced benefits over the next seven years to provide more financial support for Canadians after they retire. However, while pension contributions will gradually increase for all employees and employers, the younger generations will see the lion’s share of enhanced benefits as the improvements slowly make their way through the system.

Overnight markets

Overview: US 10yr note futures are down -0.078% at 120-10, S&P 500 futures are down -0.29% at 2683.25, Crude oil futures are up 1.34% at $52.18, Gold futures are up 0.18% at $1245.8, DXY is up 0.07% at 96.88, CAD/USD is up 0.01% at 0.7471.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	1.979%	2 Year	2.768%
5 Year	1.991%	5 Year	2.756%
10 Year	2.066%	10 Year	2.888%
30 Year	2.218%	30 Year	3.149%

US Economic Data

8:30 AM	Change in Nonfarm Payrolls, Nov est 198k (250k prior)
	Change in Private Payrolls, Nov est 198k (246k prior)
	Change in Manufact. Payrolls, Nov est 18k (32k prior)
	Unemployment Rate, Nov est 3.7% (3.7% prior)
	Average Hourly Earnings MoM, Nov est 0.3% (0.2% prior)
	Average Hourly Earnings YoY, Nov est 3.1% (3.1% prior)
10:00 AM	Wholesale Inventories MoM, Oct est 0.7% (0.7% prior)
	Wholesale Trade Sales MoM, Oct (0.2% prior)
	U. of Mich. Sentiment, Dec est 97.0 (97.5 prior)
	U. of Mich. Current Conditions, Dec (112.3 prior)
	U. of Mich. Expectations, Dec (88.1 prior)
	U. of Mich. 1 Yr Inflation, Dec (2.8% prior)
	U. of Mich. 5-10 Yr Inflation, Dec (2.6% prior)
15:00 PM	Consumer Credit, Oct est 15.000b (10.92b prior)

Canadian Economic Data

8:30 AM	Net Change in Employment, Nov est 10.0k (11.2k prior)
	Unemployment Rate, Nov est 5.8% (5.8% prior)
	Hourly Wage Rate Permanent Employees, Nov est 1.8% (1.9% prior)
	Full Time Employment Change, Nov (32k prior)
	Part Time Employment Change, Nov (-22.6k 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 higher, yields 2-3bps lower across the curve, on heavy volume in TY futures (645k), equity futures sharply lower : S&P -38 (-1.4%), Nasdaq -116 (-1.7%).  Risk off tone on renewed tensions between the US & China after Huwai’s CFO arrested in Vancouver. No reaction to weaker Nov ADP (179k vs 195k exp). Crude -3.5% below 51 – OPEC has yet to decide on size of production cut, proposed 1mln bbls/d not seen as adequate enough to stem oversupply in the mkt.  GOCs higher, outperforming tsys in the belly out to 10yrs 1.5-2bps, the 10Y below 2.10%, longs lagging since dovish BOC yest.

News headlines

Stocks Slump, Treasuries Gain as Sell-Off Resumes: Markets Wrap (Bloomberg) U.S. equity futures tumbled alongside stocks in Europe and Asia as concern resurfaced that trade tensions between the world’s two largest economies are far from resolved. Oil slid as OPEC ministers met in Vienna. Contracts on the Dow Jones Industrial Average sank more than 450 points, while S&P 500 futures signaled the underlying index will resume its slide after one of the biggest routs of the year. Trade tensions reignited after the arrest of the chief financial officer of tech giant Huawei Technologies Co. — dousing hope China and the U.S. would make immediate progress on a deal. The yuan dropped the most since October. The start of the futures session was marred by a sudden and unexpected plunge that sent a shock wave across equity markets.

China Says It’s Implementing Deals Done With U.S. on Trade (Bloomberg) China and the U.S. have reached agreement in the sectors of agriculture, autos, and energy, and China will immediately start implementing that consensus, a government spokesman said. “China will start from agricultural products, autos and energy to immediately implement specific items that China and the U.S. have agreed upon,” Ministry of Commerce Spokesman Gao Feng told reporters in Beijing. “In the next 90 days we will work in accordance with the clear timetable and road map to negotiate in areas where both sides have an interest and there are mutual benefits, such as intellectual property rights protection, technology cooperation, market access, and the trade balance.”

German Orders Rise for Third Month, Underpinning Recovery Hopes (Bloomberg) German factory orders unexpectedly rose for a third month, underpinning growth momentum after Europe’s largest economy contracted in the third quarter. Orders gained 0.3 percent in October from the previous month, compared with the median estimate in a Bloomberg survey for a 0.4 percent drop. It’s the longest streak of monthly increases in a year. Orders dropped 2.7 percent on the year.

‘Shocking’ Huawei Arrest Threatens to Upend Trump-Xi Trade Truce (Bloomberg) On the same day Donald Trump and Xi Jinping struck a trade war truce in Argentina, some 7,000 miles away Canadian authorities made an arrest that now threatens to make the U.S.-China conflict much worse. The U.S. is seeking the extradition of Wanzhou Meng, chief financial officer of Huawei Technologies Co., after convincing Canada to arrest her on Dec. 1. Canada confirmed she was in custody shortly after the Globe and Mail reported she had been arrested in connection with violating sanctions against Iran.

Bank of Canada more cautious on pace of hikes, Canadian dollar hits 18-month low (Reuters) The Bank of Canada kept interest rates on hold on Wednesday as expected and suggested the pace of future hikes could be more gradual, pushing the Canadian dollar down to an 18-month low and slashing market expectations of another increase next month. The central bank, which has lifted rates five times since July 2017 as the economy strengthens and reaches capacity, repeated that more monetary tightening would be needed to help meet its 2.0 percent inflation target.

Trump urges against oil production cut ahead of OPEC meeting (BNN) President Donald Trump urged OPEC nations not to cut oil production ahead of a meeting of the cartel to consider a reduction in output. The Organization of the Petroleum Exporting Countries and its allies continued to haggle over the size of potential crude-production cuts in Vienna on Wednesday. Their summit begins Thursday. Most producers made clear they agree on the need for a cut in oil production.

Roots plunges as retailer pulls back on expansion plans after weak Q3 (BNN) Barely a year after a rocky initial public offering, Roots Corp. () is slamming the brakes on its expansion, sending shares of the purveyor of quintessential Canadiana tumbling. The company, known for its leather goods and casual wear imprinted with beavers and maple leafs, cut sales forecasts after reporting third-quarter financial results that fell “well-below” its own expectations. It also vowed to pare store openings in the U.S. next year and slow down its entry in new markets.

Overnight markets

Overview: US 10yr note futures are up 0.182% at 120-08, S&P 500 futures are down -1.38% at 2664.5, Crude oil futures are down -3.06% at $51.27, Gold futures are up 0.05% at $1243.2, DXY is down -0.11% at 96.967, CAD/USD is up 0.43% at 0.7455.

Cda Benchmarks	Yield	Tsy Benchmarks	Yield
2 Year	2.037%	2 Year	2.768%
5 Year	2.047%	5 Year	2.765%
10 Year	2.094%	10 Year	2.897%
30 Year	2.246%	30 Year	3.153%

US Economic Data

7:30 AM	Challenger Job Cuts YoY, Nov 51.5% (153.6% prior)
8:15 AM	ADP Employment Change, Nov est 195k (227k prior)
8:30 AM	Trade Balance, Oct est -55.0b (-54.0b prior)
	Nonfarm Productivity, 3Q est 2.3% (2.2% prior)
	Unit Labor Costs, 3Q est 1.0% (1.2% prior)
	Initial Jobless Claims, Dec 1st est 225k (234k prior)
	Continuing Claims, Nov 24th est 1690k (1710k prior)
9:45 AM	Bloomberg Consumer Comfort, Dec 2nd (60.6 prior)
	Markit US Services PMI, Nov est 54.4 (54.4 prior)
	Markit US Composite PMI, Nov (54.4 prior)
10:00 AM	ISM Non-Manufacturing Index, Nov est 59.0 (60.3 prior)
	Factory Orders, Oct est -2.0% (0.7% prior)
	Factory Orders Ex Trans, Oct (0.4% prior)
	Durable Goods Orders, Oct est -2.4% (-4.4% prior)
	Durable Ex Transportation, Oct est 0.1% (0.1% prior)
	Cap Goods Orders Nondef Ex Air, Oct (0.0% prior)
	Cap Goods Ship Nondef Ex Air, Oct (0.3% prior)
12:00 AM	Household Change in Net Worth, 3Q (2191b prior)

Canadian Economic Data

8:30 AM	Int’l Merchandise Trade, Oct est -0.73b (0.42b prior)
10:00 AM	Ivey Purchasing Managers Index SA, Nov (61.8 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