ASIA

Asian stocks are trading mixed this morning with Nikkei down 0.38%, Hang Seng and CSI300 up 0.23% and 0.14% respectively. Reports of Pakistan shooting down an Indian jet and capturing the pilot, following an Indian “pre-emptive strike” on a terror camp have caused major geopolitical unease given the history and nuclear weapon repertoire of both countries.

UNITED STATES

The US trade deficit widened to negative USD79.5bn. The economic data was greatly overshadowed by the testimony of President Trump’s former lawyer, Michael Cohen, and by the abrupt ending to the Trump-Kim summit. US stocks traded slightly down except the technological sector – Dow Jones and S&P wrote off 0.28% and 0.05%, Nasdaq gained 0.07%. The yield on 10Y UST peaked as high as 2.68% during the day but finished the day at 2.66%.

UNITED KINDOM

The Labour party has formally backed a second Brexit referendum. Following Jeremy Corbyn’s defeat in the Parliament he commented that “We will back a public vote in order to prevent a damaging Tory Brexit or a disastrous no-deal outcome”. Notably, over 100 MPs have refused to vote for an extension if Prime Minister May’s next deal gets rejected by the Parliament. The Pound continued to rally to a USD1.3309 rate, while the yield on 10Y UKT gained 7bps to 1.2719% level.

EUROPEAN UNION

French and German officials discussed the effects of Brexit on UK’s EU budget rebate which was granted in 1984 during Margaret Thatcher’s tenure. Disputes suggest UK’s €5bn annual discount from the EU could still be in place following a no-deal Brexit. The discussion held is regarding the impact on respective European economies, Germany could be forced to supply additional €728m, while France stands to potentially gain €460m. The Euro slipped slightly from 1.1389 to USD1.1370 rate, yield on 10Y DBR gained 3bps and finished Wednesday at 0.148%.

RUSSIA

The weekly auction of Russian Ministry of Finance was rather successful yesterday. A total of RUB57.6bn of placements has been made in RFLB 24 6.5 (YTM 8.25%) and RFLB 29 (YTM 8.47%). The OFZ yield closed up 3bps Tuesday and gained an additional 4bps on Wednesday. The Ruble depreciated slightly to 65.78 per USD rate, Russian corporates traded mixed with GAZPRU underperforming at the long-end of the curve down 40-50bps.

LATAM

Moody’s have cut Vale’s credit rating to a non-investment grade as the first of the three major rating companies. The change from Baa3 to Ba1 was justified by the social, environmental and corporate governance concerns, following the tragic dam event in January. The VALEBZ curve lost as much as 200bps at the long-end of the curve. Mexico’s central bank cut the economic growth forecast from 1.1-2.1% from the original 1.7-2.7% range. Banxico said dealing with corruption will become a priority, as it prevents further growth and makes Mexico a less attractive investment destination. Mexican and Argentinian sovereigns traded flat, BRAZIL47 price slipped by 45bps.

You can download the .pdf document here