Commentaires

Market Update Tsys lower on potential for China/US trade deal and before key Oct Payrolls, (200k exp), yields 1.5-2bps higher with the 10Y 3.15%. Tsys off the lows as equities pare gains, S&P futures now +16 from +28 at 8:00ET. Exxon beat Q3 est ($1.46 vs $1.23), with production also beating est after 10 qtrs of misses. Core Euro bond yields also tracking higher with stocks. GOCs lower, in line with tsys, 10Y 2.50%.  Cdn employment expected at 15k for Oct from 63k in Sep, with the unemp rate unch @ 5.9%.

News headlines

Trump Asks Cabinet to Draft Possible Trade Deal With China (Bloomberg) President Donald Trump wants to reach an agreement on trade with Chinese President Xi Jinping at the Group of 20 nations summit in Argentina later this month and has asked key U.S. officials to begin drafting potential terms, according to four people familiar with the matter. The push for a possible deal with China was prompted by the president’s telephone call with Xi on Thursday, the people said, requesting anonymity to discuss internal deliberations. Afterward, Trump described the conversation as “long and very good” and said in a tweet that their discussions on trade were “moving along nicely.” 

Economist Sees Trump’s China Trade Draft as ‘Midterm Posturing’ (Bloomberg)  Markets rallied after U.S. President Donald Trump was said to have asked key officials to begin drafting potential terms for a trade deal with China, but at least one political observer is questioning the sincerity of Trump’s intentions. George Magnus, an associate at the University of Oxford China Centre in U.K. and former chief economist at UBS, in a series of tweets said markets shouldn’t expect much result from Chinese President Xi Jinping and Trump’s planned meeting at the Group of 20 nations summit in Argentina at the end of this month.

Mahathir Pushes Malaysia Budget Gap to Highest Since 2013 (Bloomberg) Malaysia’s government will push its budget deficit to the highest in five years and will hike taxes and draw more income from the state oil company to help plug the shortfall. In the first budget since Prime Minister Mahathir Mohamad took office in May, the government is widening its deficit target for this year to 3.7 percent of gross domestic product from a 2.8 percent target under the previous government. The median estimate in a Bloomberg survey of nine economists was 3.2 percent.

Global Stocks Rebound Gathers Pace on Trade Hopes: Markets Wrap (Bloomberg) Stocks extended gains globally, Treasuries dropped and the dollar fell on Friday as a buoyant mood swept markets on the back of fresh hopes for trade between the world’s two biggest economies. U.S. equity-index futures advanced even as shares of Apple Inc. dropped in pre-market trading after underwhelming sales forecasts. The Stoxx Europe 600 Index headed for its best week in two years, with carmakers and basic resources leading the charge. Stocks from Hong Kong to Tokyo surged, taking gains on the MSCI Asia Pacific Index to 5 percent for the week. Emerging-market equities jumped the most since March 2016, while currencies from South Korea to Australia joined the rally. The euro gained even as a drop in Italian manufacturing dragged the region’s PMI to a two-year low. Italy’s bonds climbed.

TransCanada eyes joint ventures, sales to fund Keystone XL (Reuters) Canadian pipeline operator TransCanada Corp said on Thursday it is eyeing joint ventures and asset sales, among other options, to finance the construction of its $8 billion Keystone XL crude oil pipeline. The Calgary-based company also said it has had substantial interest from potential partners for its Coastal Gaslink pipeline, which will carry natural gas to the LNG Canada export terminal in British Columbia.

Canada manufacturing growth slows to 21-month low in October (Reuters) Canada’s manufacturing sector expanded in October at the slowest pace in nearly two years as production and new business growth lost further momentum, while input costs and factory gate prices climbed at a faster clip, data showed on Thursday. The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI), a measure of manufacturing business conditions, fell to a seasonally adjusted 53.9 last month, its lowest since January 2017, from 54.8 in September.

Enbridge reports third-quarter loss on charges (Reuters) Enbridge Inc, Canada’s largest pipeline operator, reported a third-quarter loss on Friday as it recorded several charges. The company said net loss attributable to common shareholders was C$90 million, or 5 Canadian cents per share, in the quarter ended Sept. 30 compared with a profit of C$765 million, or 47 Canadian cents per share, a year ago. Earlier in the day, the company said it is suspending its dividend reinvestment and share purchase plan immediately until further notice.

Throne speech vote could topple New Brunswick’s Liberal government today (BNN) It would appear New Brunswick’s Liberal minority government is on the verge of defeat today after both the Tory and Peoples’s Alliance parties said they’ll vote against the government’s throne speech. That would leave Premier Brian Gallant’s Liberals without enough support to survive the confidence vote. The Liberals won just 21 seats in the September election — one fewer than the Tories — while the Greens and People’s Alliance each won three seats.

Debt-service costs headed for record in Canada (BNN) Debt service costs for Canadian households will climb to a record over the next two years, creating a drag on spending that may limit further rate increases by the central bank, according to Toronto-Dominion Bank. 

Overnight markets

Overview: US 10yr note futures are down -0.105% at 118-15, S&P 500 futures are up 0.68% at 2756.75, Crude oil futures are down -0.25% at $63.53, Gold futures are down -0.26% at $1235.4, DXY is down -0.23% at 96.053, CAD/USD is down -0.12% at 0.7651.

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 Tsys trading lower & steeper, yields 0.5-2bps higher with 10Y 3.16% (+1.7bps). Risk-on tone with Euro stocks higher (Stoxx +0.60%), US equity futures pointing to a higher open, S&P fut +13. Gilts underperforming after the BOE left rates unch as expected, yet warned the economy could ‘run hot’ requiring faster rates increases. GOCs lower, in line with tsys, 10Y above 2.50%, 2.52% being the 62% retracement of the October rally. Yesterday’s August GDP came in better than exp, mostly due to oil&gas and utilities, BOC Poloz reiterating that rates have further to rise, but ‘it wont be a rapid process’. Long bond auction yest went well – reopening of the 2%/2051 with the roll unch from auction lvls (-0.2/-0.3). The Dec 2064 issue looks cheap, we will be forwarding our latest curve comment later this morning.

News headlines

BOE Waits for Brexit Clarity as Forecasts Hint at Faster Hikes (Bloomberg) The Bank of England hinted there may be a need for faster rate increases in the coming years in a report dominated by uncertainty over Brexit. The Monetary Policy Committee, led by Governor Mark Carney, said the economy may start running hot earlier than previously anticipated as wage growth improves and domestic costs build. It sees the inflation rate staying above its 2 percent goal for the next two years. Interest rates were left unchanged on Thursday. The slightly hawkish bias compared with August is tempered by the fact that the forecasts are based on an assumption for a smooth Brexit that may not come to pass. It said the exit deal with the EU remains the biggest factor when it comes to the economy and monetary policy. 

Asia’s Factories Are Flashing Amber as Trade War Starts to Bite (Bloomberg) Manufacturing gauges for some of Asia’s most export-driven economies slipped into negative territory in October, highlighting the spillover effect from the U.S.-China trade war. The contractions follow evidence of a broad-based slowdown in China that has prompted the government to promise new measures to stoke growth. In the latest sign that trade war pain is spreading, purchasing managers’ indexes for Taiwan, Thailand and Malaysia all fell into contractionary territory during October.

Trump Attacks ‘Birthright Citizenship’ in Bid to Keep Senate (Bloomberg) President Donald Trump doubled down on his vow to deny U.S. citizenship to children born of unauthorized immigrants as he kicked off an eleventh-hour effort to save Republican control of the Senate. « Under this policy, » Trump asserted at a rally in Estero, Florida, on Wednesday night, « anyone who breaks into our country and has a child, the very next moment that child would be made a citizen for life. Great. This policy has even created an entire industry of birth tourism. Big business, where pregnant mothers travel to America to make their children instant American citizens. »

U.S. Futures, European Stocks Advance; Dollar Dips: Markets Wrap (Bloomberg) Stocks added to gains Thursday as upbeat earnings helped investors turn the page on the worst month for global equities in more than six years. The dollar fell and the pound jumped. Futures on the S&P 500 climbed, with more than half of companies having reported earnings, and most Asian shares were in the green. The Stoxx Europe 600 Index also advanced with telecoms and travel companies leading the way. While strong results from the likes of ING Groep NV helped buoy sentiment, not all the news was positive, with Royal Dutch Shell Plc declining after profit fell short of expectations.

Canada economy grows for seventh month, no quick rate hike seen (Reuters) Canada’s economy grew for a seventh month in a row in August, its longest stretch of expansion for more than a year, but analysts said the Bank of Canada was under little pressure to raise interest rates again next month. Statistics Canada said on Wednesday that GDP in August edged up by 0.1 percent. Analysts in a Reuters poll had predicted no change from July.

Canada’s Encana to buy Newfield Exploration in $5.5 billion deal (Reuters) Canadian oil and gas producer Encana Corp said on Thursday it would buy Newfield Exploration Co for $5.5 billion, making it one of the biggest shale oil producers in North America. As part of the all-stock deal, Encana will get greater access to three of North America’s biggest oil patches, including the Permian Basin. Encana will also assume $2.2 billion of Newfield’s debt. EnCana said liquids production will contribute over half of the combined company’s production and help expand margins.

Canada Post workers in Hamilton, La Mauricie, Que., join rotating strikes (BNN) More than 1,800 Canada Post workers have walked off the job in Hamilton and La Mauricie, Que., as the union’s overtime ban becomes effective across the country. The Canadian Union of Postal Workers says the walkout in La Mauricie began Wednesday at 11:30 p.m. and in Hamilton just after midnight on Thursday. Those workers joined union locals in 12 other communities taking part in the rotating strikes. The Ontario communities of Arnprior-Renfrew and Ottawa are still on strike, as well as the British Columbia cities of Campbell River, Courtenay, Nanaimo and Port Alberni. In Quebec, six Canada Post locals are also off the job, including St-Jerome, Valleyfield and Sorel.

Vancouver sees world’s biggest drop in luxury home prices (BNN) Guess which city managed to top a luxury real-estate ranking despite a slew of cooling measures to tame its property market? Yes, the tiny island nation of Singapore, nudging out Hong Kong. Luxury home prices rose 13 per cent in the quarter ended Sept. 30 from a year earlier, according to Knight Frank LLP’s Prime Global Cities Index. Gains were driven in part by the limited availability of high-end properties. Hong Kong fell to 14th place with third quarter year-on-year price gains of just 5.5 per cent.

Overnight markets

Overview: US 10yr note futures are down 0% at 118-14, S&P 500 futures are up 0.37% at 2721, Crude oil futures are down -0.47% at $65, Gold futures are up 1.21% at $1229.7, DXY is down -0.7% at 96.449, CAD/USD is down -0.46% at 0.7635.

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 Tsys trading lower, curve steeper, yields 1.5-2.5bps higher with the 10Y 3.15 (+2.7bps), prices weakening further after ADP came in above exp (227k vs 187k). Risk-on with equities higher, S&P fut +25, Nasdaq +100. Core EGBS also lower, UK 10Y gilt 4bps higher @ 1.44% – S&P noting that a no deal Brexit would result in recession. GOCs 1-2bps wider vs tsys after Aug GDP rose 0.1% vs 0.0% exp, led by oil&gas and finance. Adding to GOC underperformance Poloz late day comments yest that mon policy is still stimulative and ratee have to rise further to neutral. Provis opening 1bp tighter, Ont 49s 82/81 Ont 28s 67/66.5

News headlines

China Signals More Support Needed Amid Pressure on Economy (Bloomberg) China’s leadership signaled that further stimulus measures are being planned, as economic data pointed to a broad slowdown taking hold. The nation’s economic situation is changing, downward pressure is increasing, and the government needs to take timely measures to counter this, according to a statement from a Politburo meeting Wednesday chaired by President Xi Jinping.

Euro-Area Inflation Accelerates Despite Economic Slowdown (Bloomberg) Euro-area inflation accelerated in October and underlying price pressures increased, complicating policy makers’ choices after the economy grew at its weakest pace since 2014. Consumer prices jumped 2.2 percent from a year earlier while a measure that strips out volatile components rose to 1.1 percent.

Wall Street Tries to Shape Democratic Victory by Backing Moderates (Bloomberg) Wall Street is opening its checkbook to soften the blow from a blue wave. For the first time in a decade, the securities and investment industries are spending more on Democrats than Republicans ahead of the Nov. 6 midterm elections. Bankers are also giving to Democrats.

Stocks Rally to End Turbulent Month; Bonds Decline: Markets Wrap (Bloomberg) European stocks jumped on Wednesday, tracking a rebound across Asia as U.S. futures extended gains on the last day of one of the worst months for global equities in years. The dollar edged higher alongside Treasury yields. Almost every sector on the Stoxx Europe 600 Index advanced, with miners and industrial companies leading the way as U.S. shares looked set to build on their rally from a day earlier. Italian bonds bucked a decline as core European debt followed Treasuries lower. The euro edged down as inflation accelerated in October and underlying price pressures increased, handing policy makers a headache after growth data disappointed.

Air Canada profit misses on higher fuel costs (Reuters) Air Canada, the country’s biggest airline operator, reported a lower-than-expected quarterly profit on Wednesday, hurt by higher fuel costs. The company’s fuel costs per liter rose 39.7 percent in the third quarter from a year earlier. Air Canada and other carriers are contending with rising fuel costs that is weighing on profits, even as demand for air travel is strong. To combat that higher cost, airlines have increased ticket prices and hiked baggage fees.

Spruce Point sees Dollarama stock price tumbling (Reuters) Spruce Point Capital Management, which focuses on in-depth research of companies’ vulnerabilities, sees room for Dollarama Inc’s (DOL.TO) stock price to tumble roughly 40 percent after the Canadian retailer raised prices and fewer customers are shopping at its stores.

Canadians should get used to idea of 3% interest rates: Poloz (BNN) Bank of Canada governor Stephen Poloz wants Canadians to get used to the idea of three per cent interest rates as the new normal, now that the era of rock-bottom borrowing costs is gradually fading away. Poloz raised the benchmark rate last week for the fifth time in just over a year to 1.75 per cent – its highest level in about a decade. He sent signals that future hikes could arrive sooner than previously expected, in large part due to the economy’s resilience and the removal of some business uncertainty following the recent agreement on an updated North American trade pact.

CN Rail buying trucking company TransX (BNN) Canadian National Railway Co. () has signed a deal to acquire the Winnipeg-based TransX Group of Companies. Financial terms of the deal for the privately owned trucking firm were not disclosed. CN chief executive JJ Ruest says the deal will help strengthen the company’s intermodal business, notably the refrigerated segment. 

Overnight markets

Overview: US 10yr note futures are down -0.21% at 118-17, S&P 500 futures are up 0.76% at 2705.75, Crude oil futures are up 0.39% at $66.44, Gold futures are down -0.43% at $1220, DXY is down -0.06% at 96.957, CAD/USD is up 0.16% at 0.7614.

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