UNITED STATES

The US equity indices slightly gained on Tuesday amongst investors’ optimism regarding the US-China trade talks as well as the strong sales growth at Walmart. Dow closed +0.03%, S&P advanced by 0.15%. During his speech President Trump said that the trade talks are “very complex” but “going very well”, he also urged the Chinese government to keep the Yuan stable as part of the negotiations.
The NY FED President Williams believes that the interest rates reached a lower neutral level. In an interview to Reuters he also added that the outlook for inflation or economic growth would have to change for the central bank to raise rates again. FED`s Loretta Mester added that the FOMC could end its balance sheet normalisation by the end of current year. Today investors will focus their attention to the January FOMC minutes, which may help to explain Powell`s dovish shift. The yield on 10Y USTs dropped by 2.7 bps on Tuesday to 2.6393% whilst the dollar index fell 0.4%.

ASIA

Asian stock markets are trading in the green zone this morning (Hang Seng +0.6%, CSI +0.2%) supported by trade negotiations between the US and China which continue in Washington and slower Japanese exports which signal further pressure from China’s slowing economy. The exports fell for the second month in a row; overall exports declined by 8.4%, shipments to China dropped by 17%.

UNITED KINDOM

British PM Theresa May is meeting Jean-Claude Juncker in Brussels today amid expectations that the talks will unlikely yield any breakthrough. “There isn’t enough movement for me to be able to expect this to be a discussion with a concrete outcome,” he said. Meanwhile, former PM John Major plans to call on parliament to show the “wisdom and the will to exert its democratic right” to not let a no-deal Brexit pass.

Germany’s ZEW survey of investor sentiment advanced from -15 in January to -13.4 in February but continues to remain negative. Uncertainty over trade relations with the US (especially on automobile imports) and the ongoing debate over Brexit are compounding a slowdown in Germany’s economy which did not show any gains in Q4 2018. Yesterday, Cyprus did a successful issue of EUR 1 bn 15Y bonds, in the grey market the bids reached +100 bps the same evening as the book was oversubscribed 8 times. The yield on 10Y DBR finished the day flat (at 0.115%) while it reached 0.086% in the mid-day, EUR advanced to 1.1341 level.

RUSSIA

Russian currency advanced by 0.8% on Tuesday in line with EM peers on the back of dollar weakening. At today`s OFZ auction the MinFin is going to offer two bullet OFZs (RFLB 7.95% 26 and RFLB 7.6% 22) without an upper placement limit like on the previous week and the RUB 5.2 bn of RFLBI 28. VTB Capital experts expect to see a solid local real money demand for the CPI-linked RFLBI 28 on the back of the upcoming increase of inflation carry. President Putin will have a state-of-the-nation speech today, analysts expect him to comment on international politics, oil market and the US-China trade tensions.
Russian Eurobonds were mostly bid on Tuesday, RUSSIA 47 advanced by 60 points to lower 98 level; within the corporates, ALFARU 6.95 PERP gained 40 bps, ALFARU 8 PERP, VTB 9 1/2 PERP, GAZPRU 2 ¾ 21 appreciated by 20-25 bps.

LATAM

In Latam, Argentina will release its budget balance for January after reporting a record deficit in December. The Argentine peso extended losses seen yesterday as traders continue to adjust positions after inflation proved more resilient than previously expected. Peso reached 39.2807 per USD on Tuesday, ARGENT 47 lost half a point since Monday.