UNITED STATES

With US markets closed, President Trump took time during his state visit to Japan to state that the US is not ready to make a trade deal with China while expressing that tariffs “could go up very, very substantially.” He was however optimistic that a trade deal will be reached sometime in the future as China cannot “continue to pay these, really, hundreds of billions of dollars in tariffs.”

UNITED KINGDOM

After slumping to a share of just 14% of the European Parliament vote, Labour Leader Jeremy Corbyn promised to give the public a vote on any Brexit deal before the UK leaves the European Union though highlighting that a general election would be preferable. His subdued comments will not appease members who are calling for an urgent shift to backing another referendum. Labour’s finance spokesman, John McDonnell, was less conservative with his words saying their best way of preventing a no-deal Brexit would be going for another referendum. With Tories having amassed a measly 9% of the European Parliament vote, Tories are bent on delivering Brexit and a no-deal is looking highly likely. The pound slid to 1.2679 against the dollar.

EUROPEAN UNION

The European Commission is considering a disciplinary procedure for Italy next week over its failure to rein in debt, which could pave the way for a 3.5 billion-euro penalty. The step would mark an escalation of Rome’s budget tussle with Brussels that shook markets at the end of 2018. Deputy Prime Minister Matteo Salvini’s comments did not help as he indicated he would resist EU demands when crafting his next budget. At 132% of GDP, Italy’s debt is more than twice the EU-recommended 60% level and is not falling fast enough according to the EU’s executive arm. The euro slid to $1.1194 while yield on 10Y DBRs slid more than 2bps to close at -0.1453%.

ASIA

Asian stocks were up in afternoon trading in the absence of major news on trade negotiations. The NIKKEI rose 0.40% backed by rises in stocks of Mitsubishi and Nissan as their alliance partner Renault announced plans for a merger with Fiat Chrysler. The HANG SENG and CSI edged up 0.65% and 0.76% respectively on increased hopes that there would be further stimulus from government after data showed a decline in profits for China Industrial firms in April.

TURKEY

President Erdogan said unidentified powers are using security as a ruse to undermine Turkey’s economy, in a thinly veiled reference to the US threat of sanctions over its planned purchase of Russian missiles. His Defence Minister, Hulusi Akar, echoed the same sentiments saying the Russian S-400 system might not be ready in June but it will be delivered in the coming months as it was a done deal. Originally set for delivery in July, Russia offered to bring forward the delivery by a month; no statement was issued for the postponement. The lira was up against the dollar closing at 6.0612 while TURKEY 47s also gained to 76.890.

LATAM

Brazilian banks are showing their resilience to the economic environment with profits surging even as the benchmark rate was held low and efforts are being made to lower banking spreads. The country’s four top publicly-traded banks – Itau Unibanco Holding SA, Banco Santander Brasil SA, Banco do Brasil SA and Banco Bradesco SA – had their best quarter since 2015 with profits between January and March up 17% from a year back. Brazil’s average lending spreads are second only to Madagascar’s in the world and have contributed to the industry’s detachment from the rest of the economy. The real closed slightly weaker to the dollar at 4.0422.

RUSSIA

Russian wages unexpectedly grew in March and April as inflation began to retreat from a spike. Adjusted for inflation, wages rose 1.6% in April while the revised figure for March was 2.3% having previously been flat. The median estimate according to a Bloomberg survey had put wage growth at 0.2% for April. Growth was 1.6% in April but expectations are that it will pick up in the second half of the year when government begins spending on investment projects. The ruble closed at 64.446 while RUSSIA 47s gained to 104.885.

MIDDLE EAST

According to a report from Reuters, Algeria has made a significant gas discovery in the province of Tindouf, the widespread belief is that this discovery could help boost exports; adding 6,600 cubic meters and 7,200 litres daily to the current production level. Elsewhere in Malawi, Peter Mutharika was announced winner of the presidential election, after a court lifted an opposition injunction on announcing the result. The win was a close one over Lazarus Chakwera and sees President Malawi to continue a second term.