Commentaires

Market Update US tsys trading lower, 10Y 3.125% (3.5bps), heavy volume (600k) TY futures, tracking equities as the latter rebounds from yesterday’s steep losses (S&P erasing gains for the yr). S&P futures +21.5, Nasdaq +93 (+1.4%). Core Euro bonds little changed, gilts paring gains as EU and UK are close to agreeing on Brexit deal according to EU Secretary Raab. The ECB left rates unch as expected, asset purchases to continue at E15bln per month until Dec 2018. Attention turns to Draghi press conf. GOCs lower, outperforming tsys ~2bps across the curve, 10Y 2.45%, curve maintain flattening bias after yesterday’s ‘hawkish’ BOC. OIS now pricing in ~60% odds of an additional hike to 2.0% by March 2019, with Poloz emphasizing that every meeting is ‘live’, and that rates will need to rise further.

 News headlines

Trudeau’s Human Stimulus Helps Canada Match Trump’s Tax Cuts (Bloomberg) The U.S. has its fiscal stimulus. The Canadian economy? Well, it has its human stimulus. The biggest population increase in six decades, driven by international migration, is one reason the Bank of Canada has been able to match the Federal Reserve hike-for-hike since June 2017 — making the two easily the most hawkish central banks in the Group of Seven. In its latest increase Wednesday, the Ottawa-based central bank highlighted how the surge has bolstered consumption and housing activity.

Bank of Canada Raises Rates, Says Stimulus No Longer Warranted (Bloomberg) The Bank of Canada pressed ahead with a fresh interest rate increase and acknowledged for the first time in more than a decade it expects to completely remove monetary stimulus from the economy. The Ottawa-based central bank raised its overnight benchmark rate by a quarter point to 1.75 percent Wednesday, the third hike this year and fifth since it began tightening in 2017. More importantly, it dropped references to taking a “gradual approach” and added language about the need to bring rates to levels that are “neutral,” or no longer expansionary.

ECB Sticks to Plan to Rein in Stimulus (Bloomberg) The European Central Bank still intends to cap its bond-buying by year-end and leave room for an interest-rate increase late next year, even amid mounting signs that the euro-area economy is wilting under global pressures. The Frankfurt-based institution said it will buy 15 billion euros ($17 billion) of bonds a month through December, with a final decision to end the program contingent on incoming information. Policy makers reiterated that interest rates will remain at their present record lows “at least through the summer” of 2019.

U.S. Stock Futures Climb; Euro Holds Gains on ECB: Markets Wrap (Bloomberg) An equities rout that wiped out the year’s gains in U.S. stocks took a breather Thursday, as futures advanced and European shares steadied, even as Asia gauges extended declines. The euro held on to earlier gains as the European Central Bank held its key rate unchanged. The single currency rose against the dollar as the ECB said it still intended to cap its bond-buying by year-end. Core continental government bonds held gains, while peripheral bonds climbed and Treasuries fell. The Stoxx Europe 600 Index was little changed and futures on the S&P 500 Index advanced, with positive results from Tesla Inc. brightening the mood. The sentiment was darker in Asia, where shares headed lower for a third day, with Japan’s Topix index falling to the lowest in more than a year. Oil advanced from a two-month low.

U.S. dairy farmers get little help from Canada trade deal (Reuters) The dairy industry was a sticking point in the contentious renegotiations of the free trade deal between the U.S., Canada and Mexico that concluded last month. U.S. President Donald Trump demanded concessions from the protected Canadian dairy industry and said on Twitter that Canada was hurting U.S. farmers with high tariffs. After Canada gave some ground, Trump claimed a big victory and said farmers would have more export options. But Canada opened less than 4 percent of its dairy market to U.S. farmers.

Tesla shares jump as Musk delivers quarterly profit, cash (Reuters) Tesla Inc (TSLA.O) reported a net profit, positive cash flow and wider-than-expected margins for the latest quarter on Wednesday, delivering on Chief Executive Elon Musk’s promise to turn the electric carmaker profitable as higher production volumes of its new Model 3 began to pay off.

Saudi, Turkey team finds Khashoggi killing premeditated (BNN) Saudi Arabia’s prosecutor has received information from Turkish investigators suggesting the killing of government critic Jamal Khashoggi was premeditated, adding new pressure on the kingdom just as its de facto ruler courts foreign investors. The Saudi prosecution is continuing its interrogations of the suspects in light of the information and the findings of its preliminary investigations, the official Saudi Press Agency reported. The announcement comes as Central Intelligence Agency Director Gina Haspel prepares to brief U.S. President Donald Trump following a quick trip to Turkey this week. The Washington Post reported that Haspel heard an audio tape allegedly made of Khashoggi’s interrogation and killing at the Saudi consulate in Istanbul on Oct. 2.

Maple Leaf’s Q3 profit, sales fall compared with a year ago (BNN) Maple Leaf Foods Inc. (MLF.TO) saw its third-quarter profit fall compared with a year ago as its sales also slipped lower. The company says it earned $26.6 million or 21 cents per diluted share for the quarter ended Sept. 30, compared with a profit of $37.6 million or 29 cents per diluted a year ago. Sales totalled $874.8 million, down from $908.4 million.

Overnight markets

Overview: US 10yr note futures are down -0.092% at 118-17, S&P 500 futures are up 0.84% at 2686.75, Crude oil futures are up 0.34% at $67.05, Gold futures are up 0.22% at $1233.8, DXY is down -0.13% at 96.311, CAD/USD is down -0.07% at 0.7664.

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 higher, yields ~2bps lower across the curve, 10Y 3.147%, heavy volume in TY futures (720k). Prices off the highs after 15k block trade in TY futures @6:50am. Equity futures slightly lower, well off mid morning lows (S&P -2.25 from -25). US tsy auctions $39bln in 5Y notes at 1:00ET. Fed Beige Book as well as several Fed speakers scheduled (Bostic, Brainard). Core EGBs higher despite rally in Italy BTPs – the EU flash PMI fell to a two-year low 52.7 this month. GOCs higher, lagging the rally in tsys, 10Y 1bp lower @ 2.44%.  BOC expected to raise rates 25bps this morning, focus will be on any growth revisions, as well as possible removal of ‘gradual’ language. At the Sept decision the BOC referred to uncertainty on trade as a reason for holding rates steady, this has cleared somewhat since the signing of the USMCA. Mkts are pricing in an additional three rate hikes by the end of 2019 to 2.50%.

News headlines

Trump directly attacks Fed Chairman Powell, saying ‘Obama had zero’ interest rates. (CNBC) President Donald Trump directly accused Federal Reserve Chairman Jerome Powell of endangering the U.S. economy by raising interest rates, according to The Wall Street Journal. Trump accused Powell of endangering the U.S. economy by raising interest rates. The U.S. president indicated that he sees the current performance of the economy as a competition between himself and President Barack Obama.

Saudi oil chief says OPEC is in ‘produce as much as you can’ mode. (BNN Bloomberg) Saudi Arabia gave the strongest indication yet that it’s trying to stop oil prices from rising further, saying that OPEC and allies are in a “produce as much as you can mode” to assure customers that they can meet demand and remove any uncertainties about looming shortages.

Inside S&P 500, most stocks in correction or bear market. (Reuters) According to Reuters, 353 S&P 500 stocks have fallen into a correction — down 10% from their peaks — and 179 of those are in a bear market — down at least 20% from their peak.

Deutsche Bank ‘on track’ for 1st full-year profit since 2014. (Financial Post) Deutsche Bank’s net profit fell 65 per cent in the third quarter but CEO Christian Sewing said the bank made progress cutting costs and would show its first full-year profit since 2014.

Ford hires new China chief to tackle daunting turnaround task. (Reuters) Ford Motor Co (F.N) has hired a new chief for its troubled China operations, ending a nine-month search after the previous head suddenly quit and tasking him with fixing a deep sales slump in the world’s biggest car market.

Saudi Arabia reassures boycotting banks, prince to address forum. (Reuters) Saudi Arabia said on Wednesday it would not penalize foreign banks boycotting an investment forum in a message of reassurance for a gathering overshadowed by a global outcry over slain journalist Jamal Khashoggi.

Worries on demand, profit outlook and trade dent global tech shares. (Reuters) Global tech stocks have lost about $1 trillion or 9 percent of market value this month, Refinitiv data showed, hurt by worries over slowing global demand, valuations and trade tensions between the United States and China. The losses were also exacerbated by a rise in U.S. yields, which shot up to a near 7-1/2 year high this month and prompted investors to leave risky sectors and move into higher yielding bonds. An analysis of 1,701 global technology firms – each with a market value of more than $100 million – showed that their combined market value was down to about $10.58 trillion on Oct. 23 from $11.64 trillion on Oct. 1.

Boeing raises guidance as plane sales swell. (Reuters) Boeing (BA.N) topped analysts’ forecasts for quarterly profit on Wednesday and raised its forecasts for annual profit as it continued to benefit from a boom in global air travel and demand for airplanes.

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 tsy yields 3-5bps lower in strong ‘risk off’ rally, with the US 10Y 3.145% (-5.5bps), heavy volume in TY futures more than 2x avg (752k). Huge declines in global equities overnight – Hang Send -3%, CSI 300 -2.66%. US equity futures extending losses with the DOW -380, S&P -40 after Caterpillar -6.8% reported lower full-year guidance despite beat on revenue & eps.  Core Euro bonds also higher, thou trailing the advance in tsys, 10Y bund/tsy spd 3bps tighter . GOCs higher, lagging the adance in tsys by ~2bps, 10Y 2.44% three-week low. BOC decision & MPR tommorrow consensus is for 25bp rate hike , focus on statement and whether BOC will drop the ‘gradual approach’ language since some degree of uncertainty was lifted after the Oct signing of the USMCA deal.

News headlines

Hot Economy Puts Onus on Bank of Canada Amid Trudeau’s Deficits (Bloomberg) For the first time in a decade, Canada’s policy makers are worrying the economy is running too hot instead of too cold. The federal government and Bank of Canada are set to release key reports that will paint a picture of an economy running at full steam, with the jobless rate at near-historic lows, consumer spending and housing holding up in the face of rising interest rates, and businesses starting to invest again. A booming U.S. economy, coupled with averting a trade war with Canada’s biggest trading partner, is only stoking growth.

U.S. GDP Report Expected to Give Trump a Win Ahead of Midterms (Bloomberg) The U.S. economy is poised for its best back-to-back quarters of growth since 2014, handing President Donald Trump a $20 trillion talking point just in time for the midterm congressional elections. The report due Friday, the last data before the Nov. 6 vote, will show gross domestic product expanded at a 3.4 percent annualized pace in the July-September period after a 4.2 percent gain in the prior quarter, according to the median estimate of economists surveyed by Bloomberg. Consumer spending and business investment probably drove growth, and inventory accumulation also contributed.

Italy May Force the EU Into an Unprecedented Budget Rebuke (Bloomberg) The European Commission will likely decide Tuesday on whether to formally demand a member state to take back, revise and resubmit its budget, a step it has never taken before. Vice President Valdis Dombrovskis and economic affairs chief Pierre Moscovici have already stated that Italy’s budget is in serious breach of European Union rules and asked the populist government to change tack. Italy, so far, has refused.

U.S. Futures Tumble as Caterpillar, 3M Disappoint: Markets Wrap (Bloomberg) U.S. futures extended losses, with contracts on the Dow Jones Industrial Average off more than 400 points, after results from Caterpillar and 3M added to concern that global growth is faltering. The yen, gold and Treasuries all rose on demand for haven assets. The sell-off in U.S. equities put the S&P 500 Index on track for its 12th loss in 14 days as investors grow concerned that the trade war and rising interest rates have put an end to runaway expansion of corporate profits. Caterpillar sank 6 percent in early trading after flagging concern over rising materials costs, while 3M dropped 5 percent after cutting its forecast.

Mexico to consider all actions in response to Canadian steel tariffs (Reuters) Mexico will consider all possible actions in response to Canadian steel tariffs, including the possibility of going to the World Trade Organization, Deputy Economy Minister Juan Carlos Baker said on Monday. Mexico’s government has rejected Canada’s move to impose new quotas and tariffs on imports of seven categories of steel from many countries, including Mexico.

Canada’s FSD Pharma to buy Israeli medical cannabis firm Therapix (Reuters) Canada’s FSD Pharma Inc signed a letter of intent to acquire Israel’s Therapix Biosciences Ltd for $48 million in stock, combining two complementary businesses focused on the research and development of cannabinoid treatments. Therapix shareholders will receive about 130 million class B subordinate shares of FSD Pharma, nearly 10 percent of the company, FSD said on Tuesday. The price per share of Therapix is $13.7, triple its close of $4.4 on Monday.

Trump giving Xi someone to blame for China’s slowing economy (BNN) U.S. President Donald Trump sought to pressure Beijing to open its markets by undermining its economy. Instead, he may be providing Chinese counterpart Xi Jinping with the perfect cover story if things get worse. China’s economy has shown signs of slowing in recent months, expanding in the third quarter at the weakest pace since the depths of the financial crisis in 2009. The slowdown — predicted by the ruling Communist Party and market observers long before Trump’s rise — has nonetheless fanned anxiety among a population that has grown accustomed to decades of breakneck growth.

Conservatives say Energy East would solve dependence on foreign oil (BNN) The federal Conservatives are invoking the risk of dependence on oil from countries like Saudi Arabia as an argument to revive the Energy East pipeline, even though the pipeline was intended to carry oil almost entirely for export. Pierre Paul-Hus, a Quebec MP, told reporters Monday that it is time to stop being « hypocritical » about energy supply. He said Conservative Leader Andrew Scheer’s proposal to sit down with TransCanada is aimed at making Canada self-sufficient in oil. Study of the project, which was opposed by many Quebec municipalities, revealed that it would have served almost exclusively to export Alberta oil to foreign markets. TransCanada abandoned the pipeline one year ago after the National Energy Board modified the environmental assessment process. In a speech Sunday aimed at beginning the countdown to the Oct. 21, 2019 federal election, Scheer said a Conservative government would seek to revive the project. The pipeline, opposed by environmentalists and Indigenous groups among others, was a key issue in the last federal campaign, especially in Quebec.

Overnight markets

Overview: US 10yr note futures are up 0.318% at 118-12, S&P 500 futures are down -1.34% at 2719.5, Crude oil futures are down -1.85% at $68.08, Gold futures are up 1.32% at $1240.8, DXY is down -0.16% at 95.857, CAD/USD is up 0.04% at 0.763. 

US Economic Data

Canadian Economic Data

There is no Canadian economic data for today.

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