Commentaires

Market Update US tsys slightly higher, upper-end of narrow range in TY futures on heavy volume (430k), US 10Y 3.19%. ‘Risk on’ rally in global equities after China moves to shore up economy (tax cut, verbal pledge to support non-state firms…). S&P futures moving steadily higher thru the morning, now +12, USD higher, crude unch at one-month lows (69.12).  UK gilts bid, with the 10Y yield at three-week low 1.55% (-3bps)- possible cabinet revolt against PM May over her Brexit plans. GOCs higher, outperforming tsys by 0.5bps in 10s, 10Y 2.48%. BOC decision this Wed – 25bp rate hike priced in, odds slightly lower after CPI (96%).  Quebec back in issuance mode with possible 10 or 30Y deal today. 

News headlines

Trump’s EU Trade Talks Quickly Become Contentious (Bloomberg) The European Union and U.S. are reviewing their trade ties, spurred by U.S. accusations that the bloc is duping American businesses. But don’t expect a complete overhaul of their more than $1 trillion commercial relationship anytime soon. Even though President Donald Trump notified Congress Oct. 16 that the U.S. intends to begin official trade talks with the 28-nation EU, formal negotiations are yet to get underway and quarreling between the two sides signals an arduous process lays ahead.

China Says U.S. Should `Think Twice’ About Leaving Missile Pact (Bloomberg) China called on the U.S. to reconsider pulling out of a three-decade-old arms control treaty with Russia, saying the move would generate “multiple negative effects.” President Donald Trump said Saturday he planned to pull out of the Intermediate-Range Nuclear Forces Treaty, known as INT, claiming that Moscow had breached the agreement on intermediate-range conventional and nuclear weapons. The New York Times reported the move was in part to enable the U.S. to counter a Chinese arms buildup in the Pacific.

European Union, Singapore Sign Free-Trade and Investment Pacts (Bloomberg) The European Union and Singapore signed free-trade and investment protection agreements in Brussels on Friday in a bid to improve bilateral business ties amid rising global trade conflicts. The EU and Singapore will remove tariffs, reduce technical barriers, and provide better opportunities in services and government procurement under the deals, the Singapore government said in a statement Friday.

Stocks Jump After China Rally; Italian Bonds Climb: Markets Wrap (Bloomberg) U.S. equity futures advanced alongside European stocks after Chinese officials pledged to support the world’s second-biggest economy, helping to kick start a rally in Asia. The dollar and Treasuries were steady, while Italian bonds climbed. Insurance and mining shares led gainers on the Stoxx Europe 600 Index as both the regional benchmark and S&P 500 futures contracts headed for the first increase in four sessions. In China, the Shanghai Composite Index surged more than 4 percent, the biggest increase since March 2016, in the wake of verbal interventions from authorities at the end of last week and plans to cut personal income taxes. Chinese President Xi Jinping vowed “unwavering” support for the country’s private sector.

Bombardier sues Mitsubishi jet program over trade secrets (Reuters) Canadian airplane maker Bombardier Inc (BBDb.TO) has sued the aircraft unit of Japan’s Mitsubishi Heavy Industries Ltd (7011.T), saying former Bombardier employees passed on trade secrets to help Mitsubishi’s oft-delayed regional jet project. Bombardier filed the lawsuit late Friday in a federal court in Seattle against Mitsubishi Aircraft Corporation, Seattle-based Aerospace Testing Engineering & Certification Inc (AeroTEC) and several former Bombardier employees.

Canadian airlines urge Ottawa to delay carbon tax rollout; warn fares could rise (BNN) Canadian airlines are urging Ottawa to exempt them from the Jan. 1 imposition of a federal carbon tax, which they warn will boost airfares and push passengers across the border to rival carriers and airports. The National Airlines Council of Canada sent a letter to three federal ministers Friday cautioning the government about the reduction the levy would cause to revenues as well as marginal domestic routes. « A carbon tax is probably the worst tool that you can envisage for aviation if you want to reduce emissions, » said lobby group president Massimo Bergamini in an interview.

Bank of Canada likely to raise rates despite soft data: Economists (BNN) There is little doubt the Bank of Canada will raise interest rates next week, despite a pair of soft economic reports Friday, as the overall economy remains strong and the weight of trade uncertainty has finally been lifted, according to some analysts and economists. “I don’t believe that this is going to materially change the Bank of Canada’s longer term perspective, that this is an economy operating at capacity and that normalization of interest rates is required,” Frances Donald, head of macroeconomic strategy at Manulife Asset Management, said in an interview with BNN Bloomberg’s Jon Erlichman after retail and inflation data was released Friday.

Overnight markets

Overview: US 10yr note futures are up 0.053% at 118-01, S&P 500 futures are up 0.42% at 2779.25, Crude oil futures are up 0.03% at $69.14, Gold futures are down -0.32% at $1224.8, DXY is up 0.11% at 95.816, CAD/USD is down -0.13% at 0.764. 

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 lower, close to lows of o/n session on heavy volume in TY futures (568k) as equities rebound – S&P futures +12.5 China shares rise ~3.0%. European stocks slightly positive now, recovering from earlier losses which saw the Stoxx fall back to Monday’s low.  Quiet on US data front only Sep Existing Home Sales at 10:00.  Large move in BTPs overnite, the Italian 2Y surging to 1.70% from 1.50%, now 1.58% – ongoing conflict between the EU and Italy has intensified, with Italy insisting on higher budget deficit target. In Canada, GOCs lower, 10Y 2.51% before key Aug Retail Sales and Sep CPI, with the latter expected to slow to 2.7% y/y from 2.8% in Aug mostly due to a lower cont from gasoline. Focus will be on the three core measures which rose to a high since 2012 2.1% in August.

News headlines

China’s Economy Slows Amid Darker Outlook at Home and Abroad (Bloomberg) China’s economic growth slowed more than expected in the third quarter, as weak industrial output data and what the government called the « severe international situation » challenged efforts to stabilize the economy and reach its growth targets. Gross domestic product increased 6.5 percent in the three months through September from a year earlier, compared to 6.6 percent in a Bloomberg survey and down from the 6.7 percent pace in the previous quarter. That’s the slowest since the aftermath of the global financial crisis in 2009.

Italy Faces Off With EU as Pressure Mounts Over Budget (Bloomberg) The gloves came off in Italy’s fight with the European Union, as several of the bloc’s leaders attacked the populist government in Rome and the EU’s executive warned that its budget draft won’t fly. Markets took fright at the prospect of more upheaval in the euro area’s most indebted nation after Greece, with the Five Star Movement-League coalition setting itself on a collision course with Brussels over its spending plans.

The ECB May End its Negative Interest-Rate Policy in 2020 (Bloomberg) The European Central Bank will end its negative interest-rate policy in January 2020 and start paying for deposits eight months after that, according to a Bloomberg survey of economists. Liftoff is predicted for September next year, and the deposit rate is seen climbing to 0.25 percent, from minus 0.4 percent currently, by the end of 2020. No change in monetary policy is predicted at the Governing Council’s meeting on Thursday.

U.S. Futures Gain as Europe Struggles; Dollar Dips: Markets Wrap (Bloomberg) U.S. equity futures rose, pointing to a stronger open in New York as European shares dropped and Asian peers were mixed. Treasuries were steady as the dollar edged lower. Futures on the Dow Jones, S&P 500 and Nasdaq advanced. The Stoxx Europe 600 index declined as warnings from tire manufacturer Michelin and toolmaker Atlas Copco AB clouded the outlook for corporate earnings. Shares in Shanghai and Hong Kong gained earlier as financial regulators vowed to keep risks under control, though the MSCI Asia Pacific Index slipped with benchmarks in Tokyo, Mumbai and Taiwan. Europe’s peripheral debt fell and Italian stocks sank to a 19-month low as EU nations warned Italy’s populist government its budget won’t fly.

Canada added 28,800 jobs in September: ADP (Reuters) Canada added 28,800 jobs in September, helped by a pickup in hiring in the trade, education and health care industries, according to a report from ADP released on Thursday. The number of jobs added in August was revised higher to 42,700 from 13,600, ADP said. The report, which is jointly developed with Moody’s Analytics, is derived from ADP’s payrolls data of about 40,000 companies.

OPEC, allies struggle to fully deliver pledged oil output boost (Reuters) OPEC is struggling to add barrels to the market after agreeing in June to increase output, an internal document seen by Reuters showed, as an increase in Saudi Arabia was offset by declines in Iran, Venezuela and Angola. The Organization of the Petroleum Exporting Countries and allies agreed in June to boost supply as U.S. President Donald Trump urged producers to offset losses caused by sanctions on Iran and to dampen rising prices.

Canada not sending anyone to Saudi business summit and never intended to (BNN) The federal government has no intention of sending anyone to a major investment conference in Saudi Arabia next week at a time when Riyadh is the target of global outrage – and one source insists Ottawa never had plans to dispatch a delegation. Cabinet ministers, federal officials and embassy staff will skip the Future Investment Initiative in Riyadh, which is sometimes referred to as “Davos in the Desert,” a senior government insider said Thursday. Last year, then-natural resources minister Jim Carr attended the inaugural edition of the summit.

Overnight markets

Overview: US 10yr note futures are down -0.079% at 118-02, S&P 500 futures are up 0.37% at 2782.5, Crude oil futures are up 0.9% at $69.27, Gold futures are up 0.1% at $1231.3, DXY is down -0.01% at 95.892, CAD/USD is down -0.39% at 0.7672. 

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 continuing lower from yesterday’s post FOMC minutes slide led by the front end, curve bear flattening with the 2Y 2.905 (+1.5bps), 10Y 3.20%. No reaction to stronger than exp Phili Fed index (22 Equities weaker as well, China CSI Comp fell -2.4% to the lowest since Dec 2014. Core EGBs lower, curves bear steepening in contrast to tsys. 10Y gilt (1.58% +1bp) rallying since mid morning – Retail sales were weaker than exp, Theresa May is said to be willing to extend the Brexit transition period. Italian BTPs under pressure after a larger than exp buyback operation. GOCs either side of unch, 10Y 2.51% – the J29/10Y roll 0.4bps tighter from yesterday’s pre auction levels, now 0.8/0.7 (1.2) 

News headlines

Trump Attacks the Weak Link Powell Can’t Ignore in Fed Rate Plan (Bloomberg) Donald Trump has attacked the soft underbelly of the Federal Reserve’s campaign to raise interest rates, exposing what Jerome Powell himself probably recognizes is a potential vulnerability. Amid his recent avalanche of criticism, the president has repeatedly lambasted the Fed chairman and his colleagues for hiking rates when inflation isn’t a problem.

What to Watch in China GDP Report: Trade, Autos, Manufacturing (Bloomberg) With China’s economic expansion expected to slow as trade wars heat up, a closer look at the data may offer a better look at what’s really happening in the world’s second-largest economy. Gross domestic product probably expanded 6.6 percent from a year earlier in the third quarter, according to a Bloomberg survey of economists ahead of the report, due Friday morning in Beijing. Forecasters also expect data on retail sales and fixed-asset investment to show growth held steady in September, while growth of industrial production probably ticked a notch lower.

Bank of Korea Holds Fire on Rates as Risks to Economy Grow (Bloomberg) The Bank of Korea left its key interest rate unchanged, citing an escalating U.S.-China trade war as among rising risks to Asia’s fourth-largest economy. It trimmed growth forecasts for this year and next. Governor Lee Ju-yeol made clear that for now price stability and caring for the economy — the BOK’s primary goals by law, he noted — would take priority over trying to curb financial imbalances such as record household debt and soaring house prices. Still, he said, those imbalances are a growing concern and the time to focus on them is coming near.

Fed Minutes Weigh on Stocks, Bonds; Yuan Slips: Markets Wrap (Bloomberg) U.S. equity futures fell and benchmark Treasury yields climbed back toward seven-year highs after minutes showing the Federal Reserve may favor more rate hikes next year. The dollar was steady. S&P 500 futures pointed to a softer open after a flat session on Wednesday, while stocks in Europe bucked earlier losses in Asia to climb on the back of positive earnings. The 10-year Treasury yield rose to 3.21 percent after minutes showed Fed officials appeared to favor an eventual move in rates above the level they see as neutral for the economy. The yuan weakened against the greenback as the U.S. Treasury refrained from naming China a currency manipulator, while at the same time escalating scrutiny of the country’s exchange-rate policy.

Blackstone concedes defeat to Canada’s Oxford in battle for Australia’s Investa (Reuters) Private equity giant Blackstone Group (BX.N) has quit a takeover battle for Australian office-block owner Investa Office Fund (IOF.AX) after it was gazumped by Canadian landlord Oxford Properties Group’s A$3.35 billion ($2.4 billion) bid. Blackstone told Investa it would not match the offer, Investa said on Thursday, all but handing the sought-after target to Oxford as office rents boom, especially in Sydney where Investa’s 20 towers are concentrated.

Futures lower as oil price drop weighs on energy shares (Reuters) Futures for Canada’s main stock index were marginally lower on Thursday, as a drop in oil prices led to losses in energy shares. Oil slipped below $80 a barrel as an increase in U.S. crude inventories suggested ample supply, while Saudi-U.S. tension and falling Iranian exports lent support. December futures on the S&P/TSX index were slightly down 0.08 percent at 7:10 a.m. ET. The Toronto Stock Exchange S&P/TSX composite index closed down 49.84 points, or 0.32 percent, at 15,529.90 on Wednesday.

U.S. spares China from yuan-manipulator label amid trade war (BNN) The Treasury Department stopped short of declaring China a currency manipulator in its semi-annual report on foreign-exchange rates, averting an escalation of a trade war while serving notice that the U.S. will closely watch the yuan after its recent slide. “Of particular concern are China’s lack of currency transparency and the recent weakness in its currency,” Treasury Secretary Steven Mnuchin said in a statement. “We will continue to monitor and review China’s currency practices, including through ongoing discussions with the People’s Bank of China.”

Overnight markets

Overview: US 10yr note futures are down -0.159% at 117-28, S&P 500 futures are down -0.49% at 2802.5, Crude oil futures are down -1.42% at $68.76, Gold futures are up 0.04% at $1227.9, DXY is up 0.02% at 95.594, CAD/USD is up 0.17% at 0.7666. 

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