UNITED STATES

US stocks closed higher after the Federal Reserve dropped its long-running “patience” stance indicating it was ready to ease monetary policy if needed even though rates remained unchanged as widely expected. The DOW was up 0.15% while the S&P and the NASDAQ closed 0.30% and 0.42% higher. The central bank remained largely positive about economic outlook, maintaining GDP growth estimate at 2.1% while lowering the forecast for Personal Consumption Expenditures price index to 1.5% from 1.8%. Eight of the senior Fed officials are expecting one or two rate cuts as the market expected. Yield on 10Y USTs shed 3bps to 2.0233%.

UNITED KINGDOM

Tory hopeful Rory Stewart crashed out of the race to 10 Downing Street in yesterday’s vote getting 27 votes, lower than the 37 he got in Tuesday’s vote. Boris Johnson cemented his status as the frontrunner as he obtained 143 votes, the same as his other three rivals – Jeremy Hunt, Michael Gove and Sajid Javid combined. Stewart’s elimination means the threat of a no-deal is now very real as the remaining candidates are all open to it. Conservative MPs will cast votes twice today, eliminating one contender each time before the final two will be announced at 6p.m. London time. The pound was higher against the dollar at 1.2639 while yield on 10Y UKTs rose 6bps to 0.8636%.

EUROPEAN UNION

As EU leaders gather today to decide on leaders of the bloc’s key institutions, France has somewhat relented in its fight with Germany over leadership of the ECB as it sets its eyes on the top post of the European Commission. The French believe the Commission will have more sway in the future with issues such as climate change, social policy and migration being at the fore of future discussions while the ECB has seemingly used up all tools at its disposal. Should the French proceed with their plan, this will increase chances for Germany’s pick Kens Weidmann to replace Mario Draghi at the helm of the ECB. The euro closed higher at $1.1226 while yield on 10Y DBRs lost 3bps to -0.2893%.

ASIA

Asian markets rose on indications by the Federal Reserve that it would ease monetary policy if needed as well encouraging news regarding US-China trade talks after US Trade Representative Robert Lighthizer announced plans to meet his Chinese counterpart ahead of the G20 summit. Lighthizer did highlight that he doesn’t know when actual negotiations will resume but his meeting was going ahead. The CSI had the most gains in the afternoon, trading 2.21% up while the HANG SENG and NIKKEI rose 0.98% and 0.60% respectively.

TURKEY

Turkey is digging in on its decision to buy the Russian S-400 missile defence system in defiance of the threat of sanctions alleging that trust in Washington is broken. Turkey is also banking on its position as a strategic ally of the US in the volatile Middle East and the US would struggle to replace it easily. On the other hand, Turkey would risk losing its strongest Western ally and main arms supplier. Also at stake is Turkey’s economy as another bout of sanctions would cripple the already distressed economy. The lira firmed, closing at 5.7904 to the dollar while TURKEY 47s closed higher at 80.110.

LATAM

Brazil held its benchmark rate at a record low 6.50% and indicated it can cut borrowing costs when the key pension reform advances in Congress. In the accompanying statement, the committee said progress on reforms is essential for a fall in structural rates and sustainable economic recovery. Policymakers in the committee also highlighted the danger of faster inflation if pension overhaul does not pass in a remark that would likely cool off wagers on an imminent rate cut. Economists and traders however remain optimistic that the benchmark Selic will be cut to 5.75% by year end. The real closed stronger at 3.839 to the dollar while BRAZIL 47s traded higher, closing at 105.292.

RUSSIA

The ruble firmed to close to its highest close against the dollar at 63.7625 just shy of its best close of 63.6903 in April. This followed an OFZ bond auction which raised an equivalent $357 million in two tranches maturing in 2028 and 2039. Meanwhile, the Finance Ministry is at odds with the central bank as the minister Anton Siluanov is saying the spending of the excess money from the National Wealth Fund will be targeted thus will pose minimal risks of fueling inflation as the central bank governor Elvira Nabiullina suggested. RUSSIA 47s closed higher at 109.655.

SSA

On the back of MTN’s listing on the London Stock Exchange, Airtel Africa is also making similar moves and targeting a GBP3.6 billion valuation on the exchange setting the unit price of its Initial Public Offering within a range of 80-100p. The company also suggested that its main requirement for the listing is to cut debt levels which are sweeping across its operations in 14 African countries. In the currency space at the opening of markets today the South African Rand (ZAR) was trading for 0.07000 against the greenback while the yield on EGYPT 27s was priced at 6.420%.