Commentaires

Market Update US tsys higher on heavy volume (over 1mln TY contracts), prices just off the highs after midterm results came in as expected – a split Congress. US 10Y 3.20% (-2.5bps). US tsy curve flatter 2s30s -5bps @46bps. USD index lower, US equity futures higher (S&P +16, Nasdaq+60), VIX -2.36 to 17.55 a three-week low as event risk subsides, Fed not expected to raise rates tomm & no press conf. In Canada, GOCs basically unch, 10Y 2.53%, yields grinding higher over the last two weeks. Two year auction at noon – $3.0bln new Feb 21s with the WI/2Y roll 1.9/1.8. All in 2Y yields are little changed from last auction Oct 10th ~2.35%. At ~1.9bps the WI/2Y roll looks attractive based on straight interpolation – the Sep21/2Y roll is ~3.2bps so a Feb 21 should be closer to 1 bp over 2s. Keep in mind Nov 20 issue has $12bln outstanding so the Feb 21s are likley to be reopened an additional 3 times in an environment of rising rates.

News headlines

Trump Constrained as Democrats Take Back Control of U.S. House (Bloomberg) Donald Trump, who spent the past two years wielding the powers of the presidency unbound by party or political convention, is now constrained. The Democratic takeover of the House of Representatives cripples his conservative agenda and opens the way for unfettered investigations into his scandal-plagued administration, his presidential campaign and his family’s business empire.

Democrats’ Biggest Gain Is Subpoena Power to Question Trump Aides (Bloomberg) President Donald Trump will soon be on the receiving end of something he didn’t see much from a Republican-led Congress: orders, backed up by subpoenas, for officials to answer questions on controversial policies like the dispatch of thousands of troops to the U.S.-Mexico border. Now that Democrats have won control of the U.S. House of Representatives, they will be able to force administration officials to testify and provide documents. That will subject Trump’s decision-making — as well as his personal finances and potential conflicts of interest — to deeper public and private examination by key committees, as the national focus shifts to the 2020 presidential election.

Iran Sanctions May Not Cause Oil Shortage, Nigeria Minister Says (Bloomberg) U.S. sanctions on Iran won’t necessarily translate into a global shortage of oil, according to Nigerian Petroleum Minister Emmanuel Ibe Kachikwu. “Everybody assumes that once they put the sanctions on Iran, you’re going to lose that production,” Kachikwu said in Cape Town, appealing for patience until there’s more clarity on the impact of the penalties. Iran, OPEC’s third-largest producer, has seen exports slide almost 40 percent since April — the month before Washington announced the curbs.

Stocks Climb as Investors Cheer On U.S. Gridlock: Markets Wrap (Bloomberg) U.S. equity futures jumped, the dollar dropped and Treasuries climbed as investors seemed to cheer on an outlook for political gridlock in the wake of the American midterm elections. Risky assets were in favor after results showed Democrats winning control of the House of Representatives and Republicans holding on to the Senate. The outcome dims chances for any more tax cuts or other major fiscal initiatives from the administration that might have pushed yields higher. Overall, investors are betting that the election results won’t do much to disrupt an economy growing at a healthy 3 percent clip.

Kraft to sell Canada natural cheese business to Parmalat (Reuters) Kraft Heinz Co (KHC.O) has agreed to sell its Canadian natural cheese business to Parmalat SpA (PLT.MI) in a C$1.62 billion ($1.23 billion) deal that will help Kraft trim its debt and extend the North American footprint of Parmalat owner Lactalis. The deal comes a month after the new United States-Mexico-Canada Agreement (USMCA) was signed, under which Canada partially opened its protected domestic market to the United States. The cheese business being sold by Kraft, which includes brands like Cracker Barrel, P’tit Quebec and aMOOza, generated about C$560 million in net sales in 2017, Kraft and Parmalat said in statements on Tuesday.

Cohn sees no ‘instant cure’ on U.S.-China trade after midterms (BNN) Ex-White House economic adviser Gary Cohn said he didn’t expect Democratic election gains to speed the end of President Donald Trump’s China trade war, even as some in Beijing held out hope he might warm to talks. “I don’t think there’s an instant cure for the trade issue,” Cohn told Bloomberg’s New Economy Forum in Singapore as assembled business and political leaders digested the results Wednesday. “I wish that I could sit here and say, after the midterm elections, the White House and the administration understand they’ve gotta solve trade issues.” While the Democrats’ success in gaining control of the U.S. House of Representatives might frustrate Trump with investigations and make it harder for him to push through legislation, it might mean little for his trade policy. Trump can wield many of his preferred weapons, from tariffs to criminal probes, without congressional approval, and the opposition party has traditionally been more protectionist on trade.

Imperial Oil approves $2.6-billion oil sands project (BNN) Imperial Oil Ltd has approved a final investment decision to proceed with its $2.6-billion Aspen oil sands project in Alberta. Construction will begin in the fourth quarter of this year; Imperial says Aspen will eventually produce 75,000 barrels of bitumen per day, with first output anticipated in 2022. Imperial touted technology that will be used at the project, saying in a release an « advanced solvent-assisted, steam-assisted gravity drainage » system will slash emissions intensity and Aspen’s water usage by as much as 25 per cent. 

Overnight markets

Overview: US 10yr note futures are up 0.093% at 118-04, S&P 500 futures are up 0.59% at 2775.25, Crude oil futures are up 0.87% at $62.75, Gold futures are up 0.54% at $1232.9, DXY is down -0.56% at 95.779, CAD/USD is down -0.35% at 0.7647.

US Economic Data

Canadian Economic Data

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 TY futures overnite as midterm election voting begins, equity futures slightly negative (S&P -6.25), USD index unch – midterms also expected to dampen IG issuance. Gilts underperforming, 10Y +2.4bps @1.53%, prices giving back earlier gains after spiking on comments from Northern Ireland DUP member saying no-deal Brexit likely, yet a more positive outcome was signaled from Brexit secretary Raab at today’s cabinet meeting. Quiet day in terms of data with only Redbook sales, the US tsy auctions $27bln in 10Y notes at 1:00ET. GOCs unch, 10Y 2.51%. Provi spds continue to grind inward on lack of issuance and higher GOC yields, 10Y Ont 63.5/63 close to the Oct lows @62bps.

News headlines

Poloz Says Markets Showing ‘Welcome Symptoms’ of Normalization (Bloomberg) Recent developments in global financial markets — particularly rising long-term bond yields and volatile stock markets — are a reflection of strong global economic fundamentals, not weak ones, according to Bank of Canada Governor Stephen Poloz. In a speech on how to read recent signals from financial markets, Poloz played down recent movements — such as a flattening yield curve — as evidence of deterioration. Instead, the focus should be on a recent increase in yields signaling the market expects monetary policy normalization to continue in response to a world economy running close to capacity.

Canadian Consumers Shake Off Months of Nafta-Negotiation Anxiety (Bloomberg) Those summertime trade blues are over for Canada’s consumer. Polling by Nanos Research for Bloomberg News shows household sentiment gauges have fully recovered from a four-month lull that coincided with often testy negotiations to update the North American Free Trade Agreement. Prime Minister Justin Trudeau and President Donald Trump agreed to terms on a new deal in late September.

Carney Says BOE Not Bluffing on No-Deal Brexit Rate Hike Warning (Bloomberg) The Bank of England wasn’t kidding when it warned of possible interest rate increases if the U.K. crashes out of the European Union without a deal, Governor Mark Carney said on Friday. Carney said on Thursday that a no-deal, no-transition Brexit could trigger a supply side shock of a rare, once-in-a-generation magnitude, pushing up inflation and prompting tighter monetary policy. His comments were received with skepticism, with economists saying the chaos of a no-deal Brexit would make raising interest rates near impossible.

U.S. Futures Slip With European Stocks; Oil Drops: Markets Wrap (Bloomberg) It was a mixed picture across global stock markets on Tuesday, with investors showing some caution as they await the U.S. midterm elections. European equities turned lower alongside American futures while Asian shares advanced. Treasury yields edged up and the dollar was steady. The Stoxx Europe 600 Index quickly erased a positive start and technology, retail and construction were among the sectors leading the gauge down. Contracts on the S&P 500, Dow Jones and Nasdaq also all retreated. The mood in Asia was more upbeat and equities climbed in Japan, Australia, South Korea and Hong Kong, but underperformed in China even as the country’s vice president said Beijing remained ready to discuss a trade solution with Washington. European government bonds were mixed and range-bound. The euro recovered from disappointing manufacturing data to eke out a gain.

Boeing, Airbus fret over trade war as China displays aviation ambitions (Reuters) The world’s two largest planemakers signaled on Tuesday that they were keen to see an end to a bruising trade war between Washington and Beijing, as China opened its largest airshow with a display that showcased its aviation ambitions. Boeing (BA.N) and Airbus (AIR.PA) made their comments on the opening day of the biennial Airshow China, being held in the coastal city of Zhuhai from Nov. 6-11, that is traditionally an event for Beijing to parade its growing aviation prowess.

EU states divided over digital tax, fear U.S. retaliation (Reuters) EU governments are divided over a plan to tax big internet firms like Google and Facebook on their turnover, fearing retaliation from the United States, and could delay its application until a global deal is reached, top officials said on Tuesday. Under a proposal from the EU’s executive Commission in March, EU states would charge a 3 percent levy on the digital revenues of large firms that are accused of averting tax by routing their profits to the bloc’s low-tax states.

Thomson Reuters Q3 profit down from year ago; revenue edges higher (BNN) Thomson Reuters Corp. reported its third-quarter profit fell compared with a year ago, as its revenue edged higher. The news and information company, which keeps its books in U.S. dollars, earned a profit attributable to shareholders of US$261 million or 37 cents per share for the quarter ended Sept. 30. The result compared with a profit attributable to shareholders of $330 million or 46 cents per share in the same quarter last year.

Atlantic Canada trade mission hopes to bolster region’s trade links to China (BNN) A federal-provincial trade mission is heading to China this week with hopes of bolstering Atlantic Canada’s presence in one of the world’s largest consumer markets. Federal Agriculture Minister Lawrence McAulay, Treasury Board president Scott Brison, and the premiers of Nova Scotia, Prince Edward Island and Newfoundland and Labrador, will join more than 70 businesses, universities, and organizations participating in trade shows and business-to-business meetings. The aim is to promote Atlantic Canada’s food, education, clean growth, and tourism sectors.

Overnight markets

Overview: US 10yr note futures are up 0.026% at 118-06, S&P 500 futures are down -0.15% at 2735.5, Crude oil futures are down -0.32% at $62.9, Gold futures are up 0.34% at $1236.5, DXY is down -0.03% at 96.253, CAD/USD is up 0.08% at 0.7621.

US Economic Data

Canadian Economic Data

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 opening slightly higher, 10Y 3.21% on decent volume in TY futures (~445k), narrow 4 tick range, with mkt focus on US/China trade and midterms tomorrow. Core Euro bonds lower & wider vs tsys, 10Y bund/tsys spd 2bps wider while UK gilts underperform on indications the UK cabinet will meet to discuss a possible no-deal Brexit scenario. GOCs higher, in line with tsys, 10Y 2.525% (-1bp). CGBs fell to three week lows Friday in the wake of a mixed employment report – 33.9k rise in full time jobs, decline in unemp rate to 5.8% from 5.9% yet continued slowing in rate of wage increases, 1.9% the lowest since Aug 2017.

News headlines

Trump-Xi Trade Deal Likely to Begin Rather Than End at G-20 (Bloomberg) President Donald Trump often seems to be caught between his ideological desire to rewrite America’s trade relationship with China and a businessman’s instinct to cut a deal. And with midterm elections looming and financial markets coming off a rough October, the deal-maker appears to have the upper hand. “We’ll make a deal with China, and I think it will be a very fair deal for everybody,” Trump told reporters on Friday after asking aides the day before to begin drafting ideas for an agreement to take to his planned meeting with Chinese President Xi Jinping at the Group of 20 summit in Argentina Nov. 30 to Dec. 1. The two sides are “getting much closer to doing something,” he said.

U.S. Payrolls Rise More Than Forecast as Wage Gains Hit 3.1% (Bloomberg) American workers enjoyed the biggest leap in pay since 2009 as job gains topped forecasts and the unemployment rate held at a 48-year low, a boost for President Donald Trump ahead of next week’s midterm elections and reason for the Federal Reserve to keep raising interest rates. Nonfarm payrolls rose 250,000 after a downwardly revised 118,000 gain, a Labor Department report showed Friday. The median estimate in a Bloomberg survey called for an increase of 200,000 jobs. Average hourly earnings for private workers advanced 3.1 percent from a year earlier and the unemployment rate was unchanged from September at 3.7 percent, both matching projections.

Hong Kong Housing May Be Headed for a Correction (Bloomberg) Signs of a housing market downturn in Hong Kong are spreading after the city’s first interest-rate increases in 12 years and an escalation in trade tensions between China and the U.S. “We’re now in a correction like the one we had during 2015 to 2016,” said Cusson Leung, JPMorgan Chase & Co.’s head of property and conglomerates research in Asia, citing buyers’ fears for the outlook of both the Hong Kong and Chinese economies.

Stocks Edge Up Before U.S. Midterms; Pound Rises: Markets Wrap (Bloomberg) U.S. equity futures reversed a drop and European stocks rose as investors looked ahead to the American elections this week, with a trade deal between the world’s biggest economies seemingly off the table for now. Treasuries edged higher, while the pound strengthened amid signs the U.K. and European Union are closer to breaking the Brexit deadlock. Futures on the Dow, S&P 500 and Nasdaq all eventually turned higher, while telecom and healthcare companies were among the biggest advancers as the Stoxx Europe 600 Index climbed in relatively thin trading. Shares in Asia slid following Friday’s rally and after White House economic adviser Larry Kudlow downplayed the potential for a quick deal between the U.S. and China. The pound gained for the third day in four on news of further progress in Brexit negotiations, and the dollar climbed against most of its other major peers.

Canada adds jobs on a surge in full-time hiring, rates seen rising (Reuters) The Canadian economy added jobs in October with a surge in full-time hiring, and the unemployment rate dipped to a 40-year low, underpinning expectations that the Bank of Canada would keep raising interest rates. Statistics Canada said on Friday that 11,200 jobs were created and the unemployment rate fell to 5.8 percent for the first time since July. Analysts in a Reuters poll had forecast a gain of 10,000 positions and for the jobless rate to remain at 5.9 percent.

Barrick in talks with Newmont to combine Nevada gold operations (Reuters) Barrick Gold Corp, which is being formed by Barrick’s (ABX.TO) $6.1 billion takeover of Randgold Resources (RRS.L), is in talks with Newmont Mining (NEM.N) to combine their Nevada gold mining operations, sources told Reuters. Last month’s tie-up between Barrick and Africa-focused Randgold Resources revived speculation about a joint venture between Newmont and Barrick in Nevada, something the two mining firms had explored in 2014 without reaching a deal.

Lowe’s to close 27 stores in Canada by February (BNN) Lowe’s Cos. announced it will close 51 underperforming store locations by Feb. 1, 2019 in Canada and the U.S., as part of the hardware store chain’s ongoing reassessment of its business strategy. The North Carolina-based retailer said it will close 27 stores, two plants and two corporate locations in Canada. Twenty stores will be shuttered in the U.S. « While decisions that impact our associates are never easy, the store closures are a necessary step in our strategic reassessment as we focus on building a stronger business, » said Marvin R. Ellison, Lowe’s president and CEO, in a release.

Oil trades near six-month low as fears of a shortage subside (BNN) Oil traded near a six-month low as the prospects of a tight global market at the end of year further receded after the U.S. softened the restart of sanctions against Iran. Crude in New York slipped 0.4 per cent, falling for a sixth day. Sanctions against Iran snapped back on Monday, though eight countries were allowed to continue buying some crude from the country, according to U.S. Secretary of State Michael Pompeo. Hedge funds reduced bullish bets for an eighth week as extra supplies from OPEC and the U.S. assuaged concerns of a potential shortfall. “The U.S. has done a U-turn as compared with its previous announcements” on Iran, said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “It thus comes as no surprise that speculators are squaring their net long positions in crude oil, which is likewise weighing on prices.”

Overnight markets

Overview: US 10yr note futures are up 0.093% at 118-05, S&P 500 futures are down -0.06% at 2722.5, Crude oil futures are down -0.02% at $63.13, Gold futures are down -0.25% at $1230.2, DXY is up 0.07% at 96.614, CAD/USD is down -0.09% at 0.7636.

US Economic Data

Canadian Economic Data

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