UNITED STATES

US stocks closed in the green as the market largely welcomed President Trump’s decision to give Japan and the EU 180 days to agree to a deal that would on limiting vehicle imports into the US. The NASDAQ again had the biggest gains up 1.13% while the DOW and the S&P rose 0.45% and 0.58% respectively. Retail sales declined 0.2% for April, a second time in three months, weighed down by weak vehicle and building materials sales. This follows yet another set of downbeat April data as factory production contracted 0.5%, a third time in four months, led by weakness in machinery and motor vehicle output. Yield on 10Y USTs again fell to 2.3424% as treasuries rallied.

UNITED KINGDOM

The pound slid to a three-month low on Wednesday closing at $1.2845 as the market is unconvinced Prime Minster Theresa May can get Brexit resolved. Members of the Conservative Party’s 1922 Committee will use a meeting with May in the morning to urge her to resign as soon as possible. May is still digging in her heels saying she will only leave office once Brexit has been delivered. The Prime Minister has now set the week of June 3 to bring a deal for voting but with Tory-Labour talks having yielded no results in weeks the market is bracing itself for a no-deal Brexit. Yield on 10Y UKTs fell 3bps to 1.067%.

EUROPEAN UNION

German GDP rose 0.4% QoQ up from 0% in the last quarter of 2018. This was largely on the back of a surge in construction spending which grew 3.9% in Q1. The increase was despite a slump in manufacturing which is likely to worsen in the face of escalating global trade tensions. Yield on 10Y DBRs was about flat at -0.993% while the euro, likewise, was little changed closing at $1.1201.

ASIA

Asian markets were mixed in afternoon trading in the aftermath of President Trump’s order to ban telecom equipment from countries considered “foreign adversaries” in a move that will curb fellow Chinese telecom giants Huawei and ZTE. The Nikkei was down 0.59% while the Hang Seng and the CSI were up 0.22% and 0.36% respectively. ZTE stock was down on the day having lost some 3% in the afternoon.

TURKEY

Turkey snubbed a US request to postpone the acquisition of a Russian missile-defense system in a move that could further strain ties between the NATO allies. Speaking to reporters on Wednesday, Foreign Minister Mevlut Cavusoglu said, “A delay or halt at this point is out of the question… Why should we talk about a delay? It’s a done deal.” The Trump administration is arguing that integration of the S-400 missile system with NATO’s second-largest army could allow Russia to gather intelligence on the next generation of F-35 fighter planes. The lira weakened 0.4% after Cavusoglu’s remarks finally closing at 5.9997 to the dollar while TURKEY 47s was in the mid 78s at close.

LATAM

Tens of thousands of demonstrators took to the streets in Brazil yesterday in the first major protest against the Bolsonaro administration. Students and teachers rallied across Brazil against a decision to suspend about $420 million from the 2019 education budget. The protests follow a sharp decline in the president’s approval ratings, rising opposition in Congress and signs of economic contraction in Q1. Uncertainty over the government’s capacity to pass an overhaul of Brazil’s overstretched pension system is agitating markets with the real having lost 3.9% to the dollar since April. BRAZIL 47s firmed to close at 99.151.

RUSSIA

Russian recorded yet another bond auction record as investors took little heed to US lawmakers’ plans to restart sanctions debate raising an equivalent $1.5 billion. The offering was boosted by the redemption of 250 billion rubles of bonds to confirm the strongest-ever demand for a government debt sale. The latest sale means the Finance Ministry has already hit its target of 600 billion rubles for the second quarter with Russian local debt among the top performers in the EM sphere in 2019. Russian Railways is also set to issue an 8-year green bond, the first from Russia, leveraging on investor appetite for Russian debt which has been on the up lately; initial price talk is at 2.5% The ruble gained to trade 64.6575 to the dollar while RUSSIA 47s rose to trade at 102.822.