Daily Bulletin November 6th

North American markets closed flat on Friday after the strong jobs report from both Canada and US. The movements in the Bond Market are worth mentioning as they saw bigger movements in the yield on Canadian and US 10 Y Treasuries advanced 6.6bps to 1.72% and 9.3bps to 2.33% respectively.

As the possibility of a December hike increases, corporations have begun to lock in financing and take advantage of the relatively low interest rates. US corporate debt deals currently stand at a record high of $815bn for this year, compared to $746bn over a 12 month period in 2014. The housing market bears were redeemed as the October Housing starts in Canada came in slightly below expectations at 198.1K versus an expected 200k.

The China story continued its disappointing phase as its trade numbers with the rest of the world fell in October due to the investment in China slowing down and global demand for Chinese products weakening. Chinese imports fell 18.8% YoY and exports declined 6.9% YoY in October. Low commodity prices as well as low demand, have caused China to miss their target of 6% growth in trade with total trade falling more than 8% compared to last year. Volume of Chinese imports fell by 2.6% for October, as China continued decreasing its reliance on importing commodities and of raw materials coupled with slower expansion in the real estate market and weak manufacturing growth. As for the Chinese exports, they are becoming less competitive as the yuan has appreciated in trade-weighted terms after the PBoC decided to effectively re-peg the currency against the dollar. Chinese exports to ASEAN and US have been growing compared to last year; while exports to EU, Japan and Hong Kong have been falling.

From the oil and gas sector, the news was that the Saudi officials have reiterated their decision to continue the current production levels. The decision has sparked domestic criticism as their policy to maintain production will continue to hurt the domestic economy, pushing their government into a fiscal crunch. The global oil glut has caused the Saudi government to delay infrastructure projects and reduce fiscal spending. The Saudi government had to dip into their financial reserves to fund this year’s budget deficit. Responding to the wide spread criticism, the Saudi officials said that that they will endure the pain as they wait for prices to recover in one or two years when global demand picks up.