Commentaires

Market Update

US tsys mixed, short end yields slightly higher, 30Y 2bps lower in continuation of flattening move with 2s10s ~14bps the narrowest since July 2007, with inversion at the short end (2s5s, 3s5s). GOC curve also flattening led by longs – large relative move in 10s30s -1bp @ 10.2bps, 2s5s under 3bps, several economists now questioning timing of next BOC rate hike in view of latest weak Q3 GDP and Alberta oil production cuts. Also of note yesterday’s 9.4% decline in Cdn auto sales, down for the ninth month in a row.  Yesterday was volatile GOCs erasing early losses spurred by the ‘risk on’ rally in equities and crude to reach new highs in the afternoon in bull flattening move led by the long end, with 4 block trades in CGBs after 2:30 -all buyers, as well as short covering. The 10Y traded below 2.25% for the first time since Sep 7th while the 10s30s curve narrowed 0.8bps to close @ 11.7.  Quebec/Ontario tighter (after latest Quebec economic update –  $1.7bln surplus projected for 2018/19 vs $1.3bn prev. on higher than exp growth (2.5% vs 2.1%), additional $8bln being used to pay down debt over 2 yrs.

News headlines

Trump’s Advisers Struggle to Explain Deal He Says He Cut With Xi (Bloomberg) President Donald Trump left his top advisers scrambling on Monday to explain a trade deal he claimed he’d struck with China to reduce tariffs on U.S. cars exported to the country — an agreement that doesn’t exist on paper and hasn’t been confirmed in Beijing. In the day after Trump announced the deal in a two-sentence Twitter post, the White House provided no additional information. At a briefing in Beijing, a spokesman for the foreign ministry declined to comment on any changes to car tariffs.

Here Are Some Signs U.S. Inflation Is Drifting Below Fed’s Goal (Bloomberg) Just when you thought U.S. inflation was stabilizing around the Federal Reserve’s 2 percent goal, it’s getting pulled back down again. In contrast to the resounding success on their maximum-employment target, policy makers may have to wait a while before declaring victory on inflation as recent reports show price pressures are cooling off instead. The slowdown — covering the Fed’s preferred price gauge, surveys of consumers and a poll of manufacturers — is hard to ignore at a time central bank officials emphasize that their decisions will be increasingly data dependent. The path of 2019 interest-rate hikes looks less certain beyond a widely-expected move in December, which would be the fourth this year.

Traders Bet Bank of Canada Rate-Hike Pause May Come Even Sooner Than Fed’s (Bloomberg) Money-market traders, already having written off a hike at Wednesday’s Bank of Canada meeting, are beginning to doubt that policy makers will pull the trigger next month either. While the Federal Reserve is widely expected to proceed with another quarter-point interest-rate increase in two weeks, overnight index swaps are pricing in just 16 basis points of tightening by the BOC’s Jan. 9 meeting, down from 27 basis points less than a month ago.

Stocks Drop as Trade Hopes Fizzle; Treasuries Rise: Markets Wrap (Bloomberg) U.S. equity futures dropped and European shares tracked declines in Asia as investors reined in their optimism over any breakthrough in the trade war. Treasuries gained and the dollar retreated. Contracts on the S&P 500, Dow Jones and Nasdaq indexes all pointed to U.S. shares giving up a chunk of Monday’s gains at the New York open, while the Stoxx Europe 600 Index slipped led by automakers. Stocks tumbled in Japan and dropped in Australia and South Korea after media appearances from Trump administration officials shed little light on the specifics of any Sino-American trade agreement. Shares in Shanghai and Hong Kong fared better, fluctuating before ending higher as the yuan climbed.

Quebec projects C$1.7 billion surplus, accelerates debt repayment in 2018-2019 (Reuters) Quebec’s new center-right government is projecting a C$1.7 billion ($1.3 billion) surplus in 2018-19 on higher revenues, compared with a balanced budget expected by the previous Liberal government in March, a fiscal update on Monday showed. The Coalition Avenir Quebec government said it would also spend C$10 billion over two years to pay down the Canadian province’s debt, instead of over five years under the previous government.

Canada’s construction steel buyers face tariff ‘roulette’ (Reuters) Canadian steel buyers are racing to get construction steel into the country to claim first-come, first-serve exemptions from tariffs that were meant to stabilize the country’s market in the wake of U.S. President Donald Trump’s metals tariffs. With steel prices already high, the companies that fabricate steel structures used in major building projects say the import controls, which cover at least 600,000 tonnes of steel, are making it even more difficult to operate because they cannot predict the price of basic materials.

Bank of Montreal raises dividend as profit surges in Q4 (BNN) Bank of Montreal hiked its dividend as it reported a fourth-quarter profit that jumped 38 per cent compared with a year ago and beat analyst estimates. The bank says it will now pay a quarterly dividend of $1 per share, up four cents from its previous payment. The increase in payment to shareholders came as BMO reported its net income for the three months ended Oct. 31 rose to $1.7 billion or $2.57 per diluted share, up from to $1.23 billion or $1.81 in 2017.

Light vehicle sales down 9.4% in November for ninth month of declines (BNN) DesRosiers Automotive Consultants Inc. says light vehicle sales fell 9.4 per cent in November compared with last year for a ninth straight month of declines. The consultancy says a total of 143,668 vehicles were sold in the month, compared with 158,653 a year ago, as passenger car sales fell 11.4 per cent and light truck sales were down 8.7 per cent. DesRosiers says that with the light vehicle market down by about 44,000 units so far compared with last year, it’s almost certain that this year will be the first since 2009 that there won’t be year-over-year growth in the market. 

Overnight markets

Overview: US 10yr note futures are up 0.157% at 119-25, S&P 500 futures are down -0.33% at 2781.5, Crude oil futures are up 1.95% at $53.98, Gold futures are up 0.43% at $1244.9, DXY is down -0.57% at 96.489, CAD/USD is down -0.13% at 0.7588.

US Economic Data

There is no US economic data for today. 

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 trading weaker, ‘risk-on’ after Trump decision to delay tariffs on China , China move to reduce US auto tariffs, yields 4-5bps higher across the curve, 10Y 3.04% (+5bps). US equity futures surging after deal – S&P +41 (+1.4%), Nasdaq + 155 (+2.23%). Crude higher on production cuts from OPEC and Alberta, crude 52.90 (+4%) USDCAD down the most in two months -0.7% 1.3176.  US event calendar includes Oct Const spending & US Man ISM at 10:00ET, as well as various Fed speakers. In Canada, GOCs are lower , outperforming tsys by 1.5-2bps, 10Y 2.28%.

News headlines

Canada Joins Oil Cut Drive as Alberta Seeks to Ease Glut Crisis (Bloomberg) Canada’s largest oil producing province ordered an unprecedented output cut, an effort to ease a crisis in the nation’s energy industry and adding to global actions to combat a recent price crash. The plan announced Sunday will reduce production of raw crude and bitumen from Alberta by 325,000 barrels a day, or 8.7 percent, from January until excess oil in storage is drawn down. The reduction would then drop to 95,000 barrels a day until the end of next year at the latest. 

Trump and Xi’s Truce Risks Extending, Not Ending the Trade War (Bloomberg) President Donald Trump framed his weekend trade truce with China’s Xi Jinping as an “incredible deal,” yet the leaders’ Buenos Aires steak dinner risks extending rather than ending the trade war. The postponing of a planned U.S. tariff hike on Chinese goods for three months was greeted by analysts and business groups as a welcome détente, avoiding for now a worsening of relations between the world’s largest economies. Early trading in currency markets on Monday also suggested upbeat investors.

Le Maire Says Eurozone Budget Gaining Traction: Brussels Update (Bloomberg) Euro-area finance ministers gather in Brussels on Monday for their final meeting on buttressing the currency bloc before passing the baton to their leaders, who are expected to strike a deal later this month.

Stocks Rally, Bonds Dip on Trade Truce; Oil Gains: Markets Wrap (Bloomberg) Stocks jumped on Monday after the U.S. and China declared a truce in their trade war, while Treasuries and the dollar fell. Oil surged on optimism producers will cut output. Futures on the Dow, Nasdaq and S&P all pointed to a firmer open, as European and Asian shares advanced following agreement by the leaders of the two countries to hold off on new tariffs and intensify trade talks. Automakers were among the biggest winners in the Stoxx Europe 600 Index after President Donald Trump said in a late-night tweet that China agreed to “reduce and remove” tariffs on imported American-made cars. Ten-year Treasury yields rose back above 3 percent while the euro pared a gain after data showed manufacturing activity slowed.

Canada economic growth slows in third-quarter, December rate hike seen off cards (Reuters) Canada’s economic growth slowed in the third quarter on declines in motor vehicle purchases and housing investment, underpinning market expectations that the Bank of Canada will not hike interest rates next week. Statistics Canada said on Friday that annualized growth between July and September was 2.0 percent, down from 2.9 percent in the second quarter. The pace of growth matched expectations of analysts in a Reuters poll.

Qatar to leave OPEC and focus on gas as it takes swipe at Riyadh (Reuters) Qatar said on Monday it was quitting OPEC from January to focus on its gas ambitions, taking a swipe at the group’s de facto leader Saudi Arabia and marring efforts to show unity before this week’s meeting of exporters to tackle an oil price slide.

Time to relax mortgage regulations, Canada home builders urge (BNN) Canada’s home builders are urging the federal government to loosen mortgage-lending restrictions that have helped cool housing markets this year. Executives at Mattamy Homes Ltd., North America’s largest closely held home builder, said the rules have brought about the desired soft landing and aren’t needed as much now that interest rates are rising. The Canadian Home Builders’ Association said the rules are hitting millennials and struggling markets like Calgary particularly hard. The rules, put in place in January, require even those with a 20 per cent down payment, who don’t need mortgage insurance, to prove that they can make payments at 2 percentage points above the contracted rate. The so-called B-20 stress tests already existed for insured mortgages. By April, the average home price in Toronto had tumbled 12 per cent from the same month the prior year, though has since stabilized.

Overnight markets

Overview: US 10yr note futures are down -0.183% at 119-08, S&P 500 futures are up 1.49% at 2799.25, Crude oil futures are up 3.75% at $52.84, Gold futures are up 0.73% at $1234.9, DXY is down -0.2% at 97.082, CAD/USD is down -0.9% at 0.7591.

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 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