Both China and the U.S. have agreed to postpone any new tariffs

Posted: Monday, December 3, 2018 - 09:10 EST

Over the weekend, at the G-20 meetings, both China and the U.S. have agreed to postpone any new tariffs on Chinese imported goods for the next 90 days.  The meetings between President Trump and Xi ended on a hopeful note after both countries have been unable to make any progress over the past few months.  China in return would look to purchase a greater sum of U.S. goods, while additionally announcing to reduce or remove some tariffs on U.S. vehicles into the China currently taxed at a rate of 40%.  The U.S. also plans to delay increasing tariffs on approximately $200 billion of Chinese imported goods that were slated to increase to 25% from 10% on January 1st.  There were very few additional details provided on negotiation talks moving forward.  Despite investor skepticism, equity markets are rallying this morning on the positive tone.

Oil remains topical this morning, with WTI crude moving higher by almost $2/barrel to just under $53.    Both Saudi Arabia and Russia have agreed to extend their oil production cuts until 2019, while Alberta will also reduce production by 325k barrels a day until their excess oil storages are drawn down.  After oil storage has met the province’s targets, the reduction will change to 95k barrels a day until at least the end of next year.

The tone in the Canadian corporate credit market was positive on Friday, similar to the improvement in equity markets.  However, flows remained light with many investors still digesting new issue supply over the past week.  BBB-rated spreads were repriced last week after Loblaws issued a two-tranche deal that came with new issue concession.  Cordelio Power, the renewable power subsidiary of the CPP, also priced an $871mil amortizing bonds split across two tranche late in the week.  Investors will continue to watch the big six bank earnings in Canada this week that include BMO reporting tomorrow and National Bank on Wednesday.  On Friday, spreads ended the day mostly unchanged.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,760.17 0.82% -4.94% 5.11% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

15,197.82

0.02%

-4.98%

-3.68%

-1.64% 3.68% 4.44% -4.52% 6.77% -0.56%

Rates:

 

Today

% Change

QTD change

YTD change

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Canada 5 Year

2.23%

-0.01% -0.12% 0.36% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.29% -0.02% -0.14% 0.24% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.41% -0.01% -0.02% 0.14% 2.15% 2.47% 2.27% 2.23% 2.21% 2.42%
30yr Generic Corporate A rated Spread 1.30% 0.02% 0.00% 0.02% 1.21% 1.24% 1.21% 1.24% 1.28% 1.30%
30yr All-in Corporate A rated Yield

3.71%

0.01% -0.02% 0.16% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 3.03% 0.05% -0.03% 0.63% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 73.347 -1.617                

The information contained herein is intended for advisors for general information only and is compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy. All opinions contained in the commentary and expressed by the portfolio manager are subject to change without notice and are provided in good faith without legal responsibility. All market data is sourced from Bloomberg.