UNITED STATES

President Donald Trump’s top trade negotiator Robert Lighthizer said the US will go ahead with raising tariffs on Chinese goods effective 12.01am on Friday, accusing Beijing of backtracking on commitments it made during negotiations. Sources privy to the negotiations said that during the Beijing talks last week Chinese officials told their U.S. counterparts they wouldn’t agree to a deal that required amendments to Chinese law despite having agreed to do so previously. The change has major repercussions for provisions of the deal targeted at ending a Chinese practice of requesting US companies seeking to do business in China to reveal proprietary technologies and other intellectual property. Nevertheless, the planned trade talks will continue with the Chinese delegation visiting Washington on Thursday and Friday. US stocks all closed in the red yesterday – the DOW 0.25% down, the NASDAQ 0.50% lower and the S&P shedding 0.45%. Yield on 10Y USTs fell 6bps to 2.47%.

ASIA

A statement on China’s Ministry of Commerce website confirmed that Vice Premier Liu He will be part of the Chinese delegation to the US for the next round of trade talks ending speculation on whether or not he was going to attend. Chinese media has however remained mum on Donald Trump’s tweets despite the tumult it caused on the yuan and their stocks with the tweets even getting censored on Chinese social media platforms Weibo and WeChat as well as search engine Baidu. Chinese stocks rebounded with the CSI up 1.1% in late-morning trading after tumbling nearly 6% yesterday. The Nikkei, back from a 10-day holiday, resumed 0.8% lower in the morning while the Hang Seng was up 0.6% having shed 2.8% on Monday.

UNITED KINGDOM

With the final round of Tory-labour Brexit talks set to begin today, some senior Labour figures are casting doubts on the prospect of a deal with shadow chancellor John McDonnell saying it’s like “trying to enter a contract with a company going into administration” in reference to the seeming end to Prime Minister May’s tenure. Potential successors to Theresa May have also threatened to do away with any deal further supporting the view of the senior Labour officials. The pound closed at $1.312 while yield on 10Y UKTs was at 1.2177%.

EUROPEAN UNION

German factory orders for March were up 0.6% rising for the first time in three months. The increase though, was only modest as it was less than half the 1.4% median estimate marking only a moderate recovery from a recent decline. It followed sharp declines in the two previous months that had fuelled fears that the manufacturing slump in eurozone’s biggest economy would continue, dragging down the wider economy. The euro was steady at $1.1211 while Germany’s 10-year yield fell 2bps to 0.01%.

TURKEY

The lira slumped, touching a seven-month low at 6.079 per dollar as at 11.40pm on Monday, after Turkey’s election board ordered a re-run of mayoral elections in Istanbul. President Erdogan had initially conceded defeat in the weeks after the election but gradually put pressure on the election board culminating in his most explicit call for a fresh vote this past weekend when he said election laws had clearly been violated because private-sector employees, not civil servants, had been enlisted as ballot officials. Istanbul’s chief prosecutor further stoked the flames, alleging that dozens of officials involved in overseeing the vote had links to US-based Islamic preacher Fethullah Gulen who is accused of masterminding a failed coup attempt against Erdogan almost three years ago. More losses for the lira could drive inflation even higher and in turn hurt the ability of Turkish companies to service foreign debt.

LATAM

The market is losing faith that policymakers in Argentina have a clear plan to tackle the wild volatility that has hit the country’s financial assets lately. This comes as the central bank announced a fourth change in six weeks last Monday to its currency intervention rules. The April 29 statement said the central bank had full discretion to tap into reserves to intervene in the currency market whenever it deems necessary reneging on a previous pledge to let the peso float within a designated band. The peso had rallied to 44.35 per dollar while yields on government debt had fallen below distressed levels in the wake of the announcement. Investors remain skeptical however especially after no clear explanation was given for the policy U-turn.