US stocks cut back on their series of gains on Tuesday, Dow Jones lost 0.13%, S&P was down 0.08% and Nasdaq wrote off 0.07%. Chairman of the American FED, Jerome Powell went on record for a senate panel that the US economy is in tact and there are no inflation pressures but “faces some crosscurrents and conflicting signals”. President Trump has arrived in Hanoi ahead of a meeting with Kim Jong Un in Hanoi on Thursday. While there is a positive outlook on the meeting, it is unlikely there will be any changes to the US-imposed sanctions on North Korea, barring a deal. The yield on 10Y UST traded 3bps lower on Tuesday, at 2.63%
Asian stocks are trading up this morning, Nikkei gained 0.47%, Hang Seng and CSI300 are up 0.48% and 0.42% respectively. Hong Kong’s economic growth data announcement turned out as one of the worst in the past 3 years, being surpassed by the Shenzhen area for the first time.
Theresa May has signalled the possibility of a Brexit delay for the first time yesterday in the Parliament, following over 20 MPs’ threats to quit. The Prime Minister has given the Members of Parliament a binding opportunity to vote on March 12 whether to support May’s deal, to request an extension of article 50, or to leave the EU with no deal. The markets have reacted positively to the news as the Pound rallied, peaking at 1.3289 before finishing Tuesday at USD 1.3252 level. The yield on 10Y UKT increased from 1.1785% to 1.2048%.
UNITED KINGDOM & EUROPEAN UNION
There is a mixed reaction on the other side of Brexit negotiations to the possibility of extending Article 50 beyond March 29. While most European officials agree that the delay is the best course of action, the French economy minister Le Maire stated there needs to be a serious reason and show of progress, rather than just postponing the divorce deal. The EU is unlikely to make any concessions on Mrs. May’s deal until days before the March 12 vote. The Euro traded higher on Tuesday around USD 1.1389 after opening at 1.1358, the yield on 10Y DBR gained 2bps closing the day at 0.1172%
There was some upward yield pressure on long and medium-term bullet OFZ prior to the weekly auction. The Russia Ministry of Finance will auction RFLB 24 6.5 (YTM 8.19%) and RFLB 29 (YTM 8.44%) without upper placement limits. The Ruble depreciated 0.3% to 65.71 per USD on Tuesday, RUSSIA47 slipped 60bps to mid-98 level. Russian corporates traded mostly in the green, GMKNRM gained 10bps across the curve, VTB outperformed with a 50bps gain.