Weak Chinese retail sales and industrial production pushed global markets lower

Posted: Friday, December 14, 2018 - 09:35 EST

Weak Chinese retail sales and industrial production pushed global markets lower this morning. In contrast, U.S. retail sales grew 0.2% in November. Both ex-autos and ex-food had strong growth at 0.2% and 0.3% respectively.  All key measures met market expectations and October figures were revised higher, suggesting U.S. consumers remain bullish and supportive of U.S. economic growth.  Markets have largely priced in another 25 bps hike from the Fed on December 19, 2018.  Implied probability is currently at 73.1%, compared with 67.4% from a week ago.

Moody's downgraded Ontario from Aa2 to Aa3 and revised the outlook from negative to stable. The downgrade reflects concerns about elevated provincial debt driven by higher spending and funding requirements of current deficit. The anticipated $14.5 billion deficit in 2018/19 will result in a deterioration of key financial metrics over the next 3-5 years. This rating action was well expected, given the province was on negative outlook. This move brings Moody's rating more in line with the AA- rating from both Fitch and DBRS.  Spreads widened by 0.5bps on the initial reaction and are opening up 1bp wider in the risk-off tone this morning.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,650.54 -0.02% -8.64% 1.01% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

14,750.35

-0.22%

-7.64%

-6.38%

-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

2.06%

-0.01% -0.28% 0.19% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.12% -0.01% -0.30% 0.08% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.30% 0.01% -0.13% 0.03% 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

3.60%

0.03% -0.13% -0.05% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 2.89% -0.03% -0.17% 0.48% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 77.441 0.621                

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.