UNITED STATES

The S&P logged another record close, two weeks after its last, gaining 0.29% to close at 2,973.02 points. The DOW and NASDAQ also closed in the green at 0.26% and 0.22% and are now within 1% of their record closes. Equity investors are seemingly shrugging off the pessimism about the global economic outlook and instead focusing on prospects of renewed monetary stimulus. Yields on 10Y USTs shed 5bps to 1.974%.

UNITED KINGDOM

Bank of England Governor Mark Carney said during a conference on Tuesday that the sharp shift in investor expectations of rates “suggests a shock to US and Chinese business confidence and investment analogous to what has happened in the UK” after Brexit. While he noted that the reaction was a tad extreme, it reflected concerns on the impact of the trade tensions and may prompt policy response in the short-term to maintain expansion. His remarks inspired a rally in gilts with yield on 10Y UKTs shedding 9bps to 0.721%. Curiously, investor bets on a BoE rate cut this year increased even as Carney said global markets were already pricing in more stimulus than was justified. The pound slid against the dollar to 1.2593.

EUROPEAN UNION

European leaders finally agreed on their picks to fill the EU’s most important jobs with Christine Lagarde being the pick for the ECB job and Ursula von der Leyen picked for the European Commission post. Ms von der Leyen, who is Germany’s defence minister, is likely to face some difficulty to her confirmation in the European Parliament. Such is the resistance to her backing in Parliament that Angela Merkel had to abstain from the deal to back her defence minister because her party’s coalition partners did not endorse von der Leyen. The picks should quell the German-French rivalry as they are both represented. The euro was about flat at $1.1285 while yield on 10Y DBRs was a basis point lower at -0.369%.

ASIA

Asian markets opened in the red and had not made recovery in afternoon trading. Uncertainty over when a trade deal may actually be struck is starting to pervade markets with no concrete details regarding any high-level negotiations having been put out so far. The CSI was trading the lowest at -0.94% while the HANG SENG and NIKKEI were trading 0.27% and 0.53% down respectively.

TURKEY

Turkey’s inflation fell more than forecast to 15.7% from 18.7% a month earlier, lower than the median 16.1% in a Bloomberg survey. The slowdown in inflation, which began three months back, is projected to reach 11% at the end of Q3 and with the lira being the world’s best performer since the beginning of May, policymakers are likely to be confident to resume easing. Economists are already pricing a cut this quarter with a central bank meeting just over three weeks away. The lira closed slightly weaker to the dollar at 5.6574 while TURKEY 47s was lower at 85.845.

LATAM

Signs that Brazil may be sliding into another recession increased as industrial output fell in May. Production fell 0.2% having picked up 0.3% a month earlier. YoY, production was up 7.1% due to subdued output in May last year during the trucker strike. Industrial production has fallen in three of five months this year, contributing to the 0.2% contraction in Q1 GDP. This has prompted economists to cut their year-end Selic forecast to 5.5% from 5.75% previously. The real closed weaker to the dollar at 3.8482 while BRAZIL 47s closed higher at 107.431.

RUSSIA

Deputy Finance Minister Alexei Moiseev has called for the curbing of lending to Russian consumers noting that the debt burden is reaching a critical level. This is in line with earlier comments by Economy Minister Maxim Oreshkin that there are signs of a bubble in the consumer lending market. While the Bank of Russia said last week that the debt burden so far does not pressure consumer incomes, further growth will pose significant risks. The bank however, is cognizant of the risks and in June said it will introduce a debt load indicator into regulation from October 1. The ruble was weaker against the dollar at 63.3070 while RUSSIA 47s was slightly higher at 111.757.