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Market Update

Tsys trading higher, flatter with the 10Y 3.01% (-1.8bps), TY futures 5 ticks higher @ 119-15 on light volume (281k), current contract is Mar19. Highlights for the day include Chicago PMI, Fed Williams and any news from G20 meeting.  Core EGBs higher, Eurozone inflation came in below exp @ 1.0%y/y in Nov vs 1.1% exp. GOCs continuing to grind higher, 10Y 2.285%, low since Sep 10th. the 2s10s30s butterfly now at the richest levels since last Dec. Q3 GDP at 8:30, growth expected to have slowed to 2.0% from 2.9% in Q2. Loblaws priced 2 tranche deal yest – $400mln 5.5y @ 165 and $400mln 10Y @ 217.6, said to be ~4x oversubscribed and leading to some widening in the retail space.

News headlines

The Best Case Scenario: What the Trump-Xi Dinner Could Yield (Bloomberg) Whatever happens in Buenos Aires when President Donald Trump and China’s Xi Jinping dine on Saturday night, the trade wars are set to be with us well into 2019 and possibly beyond. There’s a good reason talk swirls about the world slipping into a new Cold War. Power politics are alive and well. And the issues between the world’s two largest economies are too complex and longstanding to be solved in a few hours. 

Euro-Area Inflation Eases as ECB Nears End of Bond Buying (Bloomberg) Euro-area inflation eased off a six-year high and core inflation slipped just as the European Central Bank gets ready to pare back monetary stimulus. The data add to signs that the 19-nation economy is facing a more protracted slowdown after growth halved in the third quarter. While analysts have questioned whether the weaker momentum could force a policy rethink, ECB President Mario Draghi and his peers have stuck to their plans to cap quantitative easing at 2.6 trillion euros ($3 trillion) at the end of the year.

Trump Defends Pursuit of Russia Business During 2016 Campaign (Bloomberg) President Donald Trump defended his company’s pursuit of business in Russia during his 2016 White House bid, saying that his dealings there were legal and that they ultimately ended without a project. In an early morning tweet from Argentina, where he’s taking part in the Group of 20 summit, Trump assailed the scrutiny of his business, calling it a “Witch Hunt.”

Stocks Decline Before G-20; Treasuries Edge Higher: Markets Wrap (Bloomberg) U.S. equity futures dropped with European stocks as investors count down to a meeting between the American and Chinese presidents that could decide the course of the trade war. Benchmark Treasury yields fell and the dollar gained. Carmakers and banks led a retreat in the Stoxx Europe 600 Index, while futures for all three major U.S. indexes slid amid lingering doubts over the prospects for a thaw in relations between Presidents Donald Trump and Xi Jinping. Shares gained in Tokyo, slipped in Seoul and fell in Sydney, with Shanghai and Hong Kong stocks rising even after data showed that China’s economy remains in a weak patch. WTI crude dropped below $51 a barrel, on track for the biggest monthly slump in a decade. The euro weakened after data showed inflation in the common-currency region easing.

Canada signs USMCA on sidelines of high-stakes G20 summit (BNN) After much anticipation, Canada signed the revamped NAFTA in Buenos Aires today on the sidelines of the high-profile G20 summit. Prime Minister Justin Trudeau joined U.S. President Donald Trump and outgoing Mexican President Enrique Pena Nieto at a hotel to formally sign the trade agreement. U.S. tariffs on steel and aluminum remain in place, but a Canadian official says an advantage to signing onto the agreement now is an auto side letter exempting Canada of potential tariffs on exports of up to 2.6 million vehicles — well above current levels. Today marks an important deadline for the trade pact.

Italian economy contracted in third quarter, complicating populists’ growth plans (BNN) Italy’s economy contracted in the third quarter, in a revision that will complicate the populist government’s growth plans. Statistics agency Istat’s final reading showed the economy shrank 0.1 per cent in the three months through September, after a preliminary reading on Oct. 30 showed no change. It was the first contraction since the second quarter of 2014. Istat said Friday that lower domestic demand and a fall in investments slowed the economy in the third quarter, while exports kept up their pace.

Trump’s threats to close the border add thousands to shipping costs (BNN) The traffic is moving again at San Ysidro, one of the busiest border crossings in the world. That doesn’t mean businesses here in Tijuana are resting easy. They’re plotting alternate routes and speeding up shipments from factories that produce everything from semiconductors to pacemakers to seat belts. After the U.S. shocked locals by closing San Ysidro for more than four hours on Sunday, President Donald Trump’s recent Twitter-threat about sealing off the entire border between Mexico and the U.S. didn’t seem so absurd anymore. 

Overnight markets

Overview: US 10yr note futures are up 0.131% at 119-15, S&P 500 futures are down -0.42% at 2732.75, Crude oil futures are down -1.44% at $50.71, Gold futures are down -0.3% at $1226.7, DXY is up 0.18% at 96.954, CAD/USD is up 0.12% at 0.752.

US Economic Data

Canadian Economic Data

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 1.5-4.5bps lower led by the 10Y @3.01% (-4.7bps), the lowest since Sep 17th. Crude rebounding after falling below $50, Russia to cut oil production along with OPEC, WTI @50.82 (+0.48). US equity futures lower, S&P -7, European stocks giving up most of earlier gains, Stoxx +0.20%.  UK gilts rallying, GBP lower after PM May warned the UK should be ready for no deal on Brexit. In Canada, GOCs are higher led by the 10Y trading below 2.30% for the first time since Sep 10th, longs lagging in a big way, 10s30s approaching 10bps the steepest since May, +5bps this week alone with yest long provi supply & RRB auction weighing on the long end. Provis opening up 0.5-1bps wider, Ont 28s 72/71.5, the Ont 48/28 box has come in ~2.5bps offsetting some of the widening in the GOC curve since Oct.

News headlines

ECB Singles Out Italy as Financial Stability Challenges Rise (Bloomberg) The European Central Bank singled out Italy as an example of how quickly investors lose confidence in a government if they’re confronted with policy uncertainty, as it said the risks to financial stability in the bloc have become “more challenging.” In its twice-yearly Financial Stability Review, the ECB said concerns relating to debt-sustainability and liquidity at investment funds have both risen since the previous report. Two other key risks — disorderly adjustments in financial markets, and the ability of banks to provide credit — were largely unchanged.

Powell Put Spurs Record $1 Billion Inflow to Emerging-Market ETF (Bloomberg) The second-largest exchange-traded fund for emerging-market equities received a record one-day inflow of more than $1 billion Wednesday, as investors pared back U.S. interest-rate bets for next year. The iShares Core MSCI EM ETF, ticker IEMG, saw its market capitalization climb back above the $50 billion mark for the first time since June, as dovish comments from Federal Reserve chair Jerome Powell revived global demand for riskier assets.

Trump Renews Auto Tariff Threat as Trade Czar Aims at China (Bloomberg) President Donald Trump raised the prospect of slapping a 25 percent tariff on imported cars and ordered a review of China’s retaliatory auto tariffs against the U.S. as his administration continued to scramble to respond to General Motors Co.’s announcement of plant closures this week.

Treasury Yields Touch 3% as U.S. Stock Futures Dip: Markets Wrap (Bloomberg) Benchmark Treasury yields briefly fell below 3 percent for the first time since September in the wake of the Fed’s dovish tilt, but a stock rally faded as U.S. equity futures dropped and gains in Europe were muted. The dollar fluctuated. The 10-year Treasury yield extended its decline after Fed Chairman Jerome Powell fueled speculation the central bank may pause interest rate increases next year, while the greenback drifted in a tight range following Wednesday’s drop. European bonds rose, including Italian notes despite demand for five-year debt at an auction falling to the lowest since June. The euro pared an earlier advance after a raft of weak economic data and the pound came under pressure as Prime Minister Theresa May raised the prospect of a “no deal” Brexit.

Canada’s Alberta province to buy rail cars to reduce oil glut (Reuters) Canada’s Alberta province is in talks to buy rail cars to transport 120,000 barrels per day of crude oil and expects a deal to be concluded within weeks, Premier Rachel Notley said on Wednesday, as the oil-rich province tries to move oil stuck in the region because of a lack of pipeline capacity.

Canada’s Toronto-Dominion Bank quarterly earnings up 20 percent (Reuters) Canada’s Toronto-Dominion Bank (TD.TO) reported on Thursday a 20 percent rise in fourth-quarter earnings, marginally ahead of analysts’ expectations, helped by strong growth at its U.S. retail business. TD said earnings per share, excluding one-off items, rose to C$1.63 in the quarter ended Oct. 31, compared with C$1.36 a year ago. Analysts had, on average, forecast earnings of C$1.62, according to IBES data from Refinitiv.

Oil drops below US$50 on concern OPEC won’t cut output decisively (BNN) Oil dropped below US$50 a barrel in New York for the first time in more than a year as traders fretted that OPEC won’t act decisively to clear a resurgent surplus in the global crude market. All eyes are on this weekend’s G20 summit in Argentina, where Russia’s Vladimir Putin and Saudi Arabia’s Mohammed bin Salman are likely to discuss how to coordinate oil policy, but both leaders have reasons for caution. Shielded by a budget surplus and a weak ruble, Putin said yesterday current prices suit Russia fine. The crown prince, under pressure after the killing of Jamal Khashoggi, can’t afford to alienate President Donald Trump. 

Overnight markets

Overview: US 10yr note futures are up 0.183% at 119-20, S&P 500 futures are down -0.32% at 2732.75, Crude oil futures are up 1.19% at $50.89, Gold futures are up 0.18% at $1232, DXY is down -0.01% at 96.772, CAD/USD is down 0% at 0.7533.

US Economic Data

Canadian Economic Data

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 mildly lower, curve flatter, heavy volume in TY futures due to roll but off Tuesday’s pace (625k), 10Y 3.063%.  Equity futures are higher – S&P +11.5, crude slightly lower 51.53. Key events today – US Q3 GDP at 8:30(0.4% exp & core PCE 1.6%), Fed chair Powell speaks at 12:00ET, the US auctions $32bln 7Y notes at 1:00ET.  In Canada, GOCs are higher, outperforming tsys by 1-1.5bps, 10Y 2.33% (-1.2bps), with the CAD trading above 1.3320 a five-month low, the latest leg lower yest on news of GM closing its Oshawa plant. RRB auction at noon – $700mln reopening of the Dec 2050 issue with the RRB 2050/47 roll 0.5/0.0, and 30Y breakevens (2047/C48) ~163bps – the lowest in a year. TIPs breakevens have narrowed vs RRBs lately which seems counterintuitive, detracting somewhat from attractiveness of today’s auction, though $840mln RRB coupon is supportive.

News headlines

Mnuchin Asked About Fed Option That Could Avoid Rate Hikes (Bloomberg) Treasury Secretary Steven Mnuchin privately asked bond dealers and investors in October whether they want the Federal Reserve to tighten monetary policy by raising interest rates or through faster cuts in its securities portfolio, six people familiar with the matter said. Mnuchin’s question could be seen as suggesting a way for the central bank to accomplish its goal of preventing a strong economy from overheating without triggering the ire of President Donald Trump, who has blasted Fed Chairman Jerome Powell for raising rates. For his part, Mnuchin has refrained from commenting on monetary policy, citing the importance of the Fed’s independence.

U.K. GDP Would Suffer 10.7% Hit in Worst Case No-Deal Brexit (Bloomberg) The U.K. will suffer a major economic hit if Parliament rejects Theresa May’s Brexit deal and the country crashes out of the European Union with no new trade arrangements in place, according to official analysis. A government report on Wednesday said GDP will be as much as 10.7 percent lower over 15 years if there’s no orderly exit and the supply of workers from the bloc dries up. The U.K. will be poorer under all exit options modeled in the study.

Trump Brings a Rare Commodity to His Summit With Xi—Allies (Bloomberg) President Donald Trump is heading to a trade showdown with China’s Xi Jinping with something that a few months ago would have seemed improbable: allies. Investors and businesses around the world are hoping that when Trump sits down with his Chinese counterpart on the sidelines of the Group of 20 summit in Argentina on Saturday the two may be able to negotiate a ceasefire in their tit-for-tat tariff war. Such a truce would at least delay an escalation to the trade conflict between the world’s two largest economies, a major risk hanging over the global economy going into 2019.

Stocks Push Higher; Dollar Steadies Before Powell: Markets Wrap (Bloomberg) Stocks in Europe rose alongside U.S. futures, tracking gains in Asia as investors rekindled their risk appetite before a speech by the chair of the Federal Reserve. The dollar and Treasuries were steady. Retailers and miners were the best performers as the Stoxx Europe 600 Index erased Tuesday’s drop. Contracts on the Dow, S&P and Nasdaq were all also in the green as the 10-year Treasury yield drifted ahead of Jerome Powell’s speech. The pound jumped as U.K. Prime Minister Theresa May appeared to back down in a key Brexit battle with Parliament. European bonds nudged higher and the single currency was range bound. Brent crude handed back earlier gains to trade little changed.

Royal Bank of Canada quarterly earnings beat market forecasts (Reuters) Royal Bank of Canada (RY.TO) on Wednesday reported a forecast-beating 17 percent jump in fourth-quarter earnings, helped by growth in its retail banking and wealth management divisions. Canada’s biggest lender by market value posted earnings per share of C$2.20 in the three months to Oct. 31, ahead of a consensus analyst forecast of C$2.12, according to IBES data from Refinitiv.

Trump threatens to cut GM subsidies in retaliation for U.S. job cuts (Reuters) U.S. President Donald Trump threatened on Tuesday to eliminate subsidies for General Motors Co in retaliation for the automaker cutting U.S. jobs and plants, and the automaker also took fire from Canadian political and labor leaders for cutbacks there.

Quebec angry as Ottawa signals Via Rail is free to pick Siemens over Bombardier (BNN) Quebec Premier Francois Legault said Tuesday “it makes no sense” for the federal government to let Via Rail award a major contract without ensuring any jobs are created in Canada. Reacting to a report that the German firm Siemens AG has beaten out Bombardier Transportation for a $1-billion contract to build new Via Rail trains, Legault said Ottawa should have included a 25 per cent local content requirement – at a minimum. “I can’t get over seeing (Marc) Garneau throw in the towel,” Legault told reporters in Quebec City, referring to the federal transport minister.

Canadian crude is starting to rebound from historic lows (BNN) The Canadian energy industry may not be popping champagne just yet, but a rebound in local crude prices may offer some reasons for hope. With producers like Cenovus Energy Inc. () shipping more oil by rail and U.S. refineries starting back up after a heavy maintenance season, Canadian crude has recovered some of its historic losses. Since hitting a record low on Nov. 15, the spot price of heavy Western Canada Select has risen 35 per cent, or US$4.65 a barrel. “It’s not that our constraints have gone away, but they are pretty stable,” Joan Pinto, an energy specialist at Canadian Imperial Bank of Commerce, said in an interview.

Overnight markets

Overview: US 10yr note futures are down -0.066% at 119-06, S&P 500 futures are up 0.42% at 2694.75, Crude oil futures are down -0.14% at $51.49, Gold futures are down -0.07% at $1219, DXY is down 0% at 97.365, CAD/USD is up 0.24% at 0.7504.

US Economic Data

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