Commentaires

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

Market Update Tsys trading slightly lower, near top of overnite range on heavy volume in TY futures (900k) due to ongoing Dec/Mar rolling. Consumer confidence for Nov at 10:00, while the US auctions $40bln 5Y notes at 1:00PM. Core EGBs higher led by 10Y gilts reversing earlier losses on trade news as Trump is considering new tariffs on China. US stock futures are lower, S&P -12, European equities -0.50%. GOCs are higher, in line with tsys, 10Y 2.34%, quiet in terms of data until Friday Q3 GDP. Provis starting 0.5bps wider on expectations of supply.

News headlines

Trump signals he’ll boost China tariffs to 25% (BNN) President Donald Trump said he’ll likely push forward with plans to increase tariffs on $200 billion of Chinese goods, indicating he would also slap duties on all remaining imports from the Asian nation if negotiations with China’s leader Xi Jinping fail to produce a trade deal. Trump, in an interview with the Wall Street Journal published Monday, said he’s prepared to impose tariffs on a final batch of US$267 billion of Chinese shipments if he can’t make a deal with Xi when they meet at the Group of 20 meeting in Argentina, which starts Nov. 30. The rate could be either 10 per cent or 25 per cent, Trump said. 

Another Warning Sign That the U.S. Economy Will Slow Next Year (Bloomberg) Juiced by President Donald Trump’s tax cuts, business investment helped deliver a robust U.S. economy in the first half of 2018, but signs have multiplied that the growth driver is faltering. Companies face tariff-related uncertainty, cooling global demand and rising borrowing costs, while plunging oil prices are menacing the energy sector. Meanwhile, the U.S. and China are settling in for a protracted trade war, the boost from lower taxes is projected to fade next year and a politically divided Congress will probably shirk from additional stimulus.

Deep in the Data, China’s Bank Funding Squeeze Is Easing Off (Bloomberg) China’s beleaguered private companies may be on the cusp of better times, with signs emerging that a government push to boost bank lending is working. The private sector, which makes up about 80 percent of employment in the world’s second-biggest economy, has been struggling with a credit squeeze triggered by a campaign to shrink China’s shadow-banking industry. With corporate defaults hitting a record this year, policy makers acted to restart the credit flow, notably by verbally directing banks to provide more loans.

EU Is Said to Discuss Russia Sanctions After Ukraine Naval Clash (Bloomberg) European Union governments are discussing sanctions on Russia in the wake of its latest confrontation with Ukraine, though no action is likely until the facts are fully established, a German official said. The balancing act is a sign of Europe’s constraints in getting tough with President Vladimir Putin after imposing a series of sanctions, championed by German Chancellor Angela Merkel, to punish Russia’s annexation of Crimea and meddling in Ukraine. Merkel called for de-escalation in a phone call with Putin late Monday, according to the chancellery in Berlin.

Stocks Drop as Trade Talk Weighs; Copper Declines: Markets Wrap (Bloomberg) U.S. stock futures and European shares fell on Tuesday while gains in Asian equities were limited after President Donald Trump said he’d likely increase tariffs again on Chinese imports, just days before meeting with his counterpart Xi Jinping. Commodities retreated, led by copper. Contracts on the Dow, S&P and Nasdaq all pointed to a drop at the opening, while Treasuries and the dollar held steady before the Federal Reserve’s top two officials speak in the coming two days. Equity benchmarks rose in Japan, but were steady in Hong Kong and China, in the wake of signals from Trump that he’s prepared to enact higher tariffs. While China’s foreign ministry urged the U.S. to work toward a positive outcome for the meeting planned at the Group of 20 summit this week, Apple’s shares fell in premarket trading.

Scotiabank to exit nine countries in Caribbean shake-up (Reuters) Bank of Nova Scotia (BNS.TO) on Tuesday reported fourth-quarter earnings which were marginally below expectations and said it planned to exit nine countries in the Caribbean as part of a shake-up of that business. The bank, which has operated in the Caribbean since 1889, said that it would refocus its business in the region by selling its insurance operations in Jamaica and Trinidad & Tobago to Sagicor Financial Corporation, with whom it will partner to sell insurance products in those countries.

Air Canada says TD, CIBC and Visa to continue as Aeroplan partners (BNN) Air Canada has signed a definitive agreement to buy the Aeroplan loyalty program from Aimia Inc. for $450 million in cash, adding that it has committed to TD Bank, CIBC and Visa as loyalty card partners. Under the deal, Air Canada will also assume $1.9 billion of Aeroplan miles liability. The definitive agreement with Aimia follows an announcement in August of a tentative sale.

Overnight markets

Overview: US 10yr note futures are up 0.079% at 119-08, S&P 500 futures are down -0.41% at 2659, Crude oil futures are down -0.35% at $51.45, Gold futures are up 0.1% at $1229.9, DXY is up 0.04% at 97.116, CAD/USD is up 0.01% at 0.7545.

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