UNITED STATES

Despite renewed optimism over renewed US-China trade talks, US stocks mostly closed lower with the DOW and S&P closing 0.04% and 0.12% lower respectively. The NASDAQ recorded the only gains, closing 0.32% higher, on the back of Micron stock’s 13% lift as the chipmaker had better than forecast results in its fiscal Q3. Yield on 10Y USTs was up 6bps to 2.0468%.

UNITED KINGDOM

Sajid Javid has turned from rival to possible ally in Boris Johnson’s camp as he has emerged as Boris’ favourite to become chancellor and spearhead the expansionary new policy. Boris this week backed Javid’s proposal to spend £1 billion on bolstering the police force over three years in what is perhaps an alignment of policy. People in Boris’ camp are saying the Home Secretary commands respect in the city and has worked at Treasury before making him a suitable candidate to move into Downing Street. The pound closed about flat at $1.2689 while yield on 10Y UKTs was up 3bps to 0.8295%.

EUROPEAN UNION

ECB President Mario Draghi faces a potential legal hurdle should he resume large-scale purchases of government debt. Having promised to add monetary stimulus last week should outlook not improve, his comments that the self-imposed limit on how much debt the bank could buy can be raised is likely to face challenge in courts. The main challenge remains in German courts which have not agreed to the EU Court of Justice’s decision on the legality of quantitative easing. Draghi is no stranger to legal challenges to his policies though with his previous Outright Monetary Transactions having been subject to challenge before it was ruled legal by Germany’s constitutional court. The euro was about flat at $1.1369 while yield on 10Y DBRs rose 3bps to 0.3036%.

ASIA

Asian stocks opened in the green on increasing signs that US-China trade talks are on the mend with the meeting between the respective presidents the highlight of the G20 summit. The US Treasury Secretary Steven Mnuchin had earlier signaled confidence that President Xi and President Trump would make inroads to restart negotiations. Stocks remained trading in the green in afternoon trading with the NIKKEI 1.19% up while the HANG SENG and CSI gained 1.04% and 0.48% respectively.

LATAM

President Jair Bolsonaro’s pension reform proposal could be facing a hurdle as some centrist parties are seeking modifications to the bill. The bill may thus not proceed to a vote in a special lower house committee this week meaning debate will extend to Monday or Tuesday instead of concluding this week. With minutes from the central bank’s meeting in June having emphasised that reforms were in the way of lower borrowing costs as other central banks are easing policy, speedy delivery of pension reform has become even more key. Lower house leaders remain optimistic however that the first of two floor votes will proceed before congressional recess starts on July 18. The real was closed lower to the dollar at 3.8441 while BRAZIL 47s closed lower at 105.923.

RUSSIA

Demand for Russia’s OFZ bonds remains fairly high with Wednesday’s offering raising an equivalent $292 million having had a bid-cover of over 2.5. Having opened about flat, the ruble slipped against the dollar to as low as 63.22 before the OFZ auction as market hopes for a Fed rate cut became somewhat dented. It then rallied to close at 63.0514, albeit weaker than Tuesday’s close. RUSSIA 47s closed lower at 110.065.

SSA

Angola, Africa’s second largest oil producer is searching for investment to re-ignite the dwindling oil export performance; production has fallen from 2010 high of 1.9m bpd to 1.4m bpd and this drop has put a strain on overall economic performance which has slowed and is predicted to reach 0.5% at best this year. The government is looking to kick off new exploration projects in order to boost supply of the black gold, experts suggest that it could take years for this to materialize due to investors’ appetite. The rand (ZAR) strengthened on the back of the news of government’s support for state owned companies such as Eskom. The yield on R2026’s continued its rise to reach 8.18% on the back of a sell-off mainly led by non-resident South Africans. As at today the ZAR is currently trading for 14.2463 against the greenback.