UNITED STATES

US stocks closed in the red on Friday after a stronger-than-expected jobs report. The government payrolls report estimated that 224,000 jobs had been added in June compared to 170,000 according to a MarketWatch poll. While the market’s bet on a 50bps rate cut this month fell significantly, there is still optimism that a cut will happen although at 25bps. The S&P closed the lowest in the aftermath, shedding 0.18% while the DOW and the NASDAQ fell 0.16% and 0.10% respectively. Yields on Treasuries picked up with the 10Y note in particular gaining 8bps to 2.0338%.

UNITED KINGDOM

Boris Johnson is set for a landslide victory in the race to become the UK’s next prime minister according to a YouGov poll which showed him having 74% of the Tory votes while rival Jeremy Hunt only had 26%. Following on from the poll results, Boris also got the backing of former contender and Home Secretary Sajid Javid with the Home Secretary declaring that Boris is “better placed” than Hunt “to deliver what we need to do at this critical time,” according to the Sunday Times. The new prime minister is expected to be announced and then take office during the week of July 22. The pound closed lower against the dollar at 1.2521 while yield on 10Y UKTs closed 6bps higher at 0.7363%.

EUROPEAN UNION

Germany industrial production picked up slightly in May providing a glimmer of hope in what has largely been a gloomy quarter for eurozone’s largest economy. Output gained 0.3% on the month, just shy of analyst estimates of a 0.4% gain, clawing back only a fraction of the 2% drop recorded in April. In an ominous sign that the bloc’s slowdown may be turning into a more serious downturn, German factory orders slumped 2.2% in May, far worse than a predicted 0.2% drop predicted in a Bloomberg survey. The YoY decline of 8.6%, the biggest in almost a decade, has prompted predictions of a contraction in Q2 for Germany according to JPMorgan. Germany’s troubles will no doubt weigh on the rest of the bloc and Commerzbank is now forecasting a 20bps cut in the ECB deposit rate this month, larger than previously anticipated. The euro closed lower at $1.1225 while yield on 10Y DBRs gained 3bps to -0.363%.

ASIA

Asia stocks fell on Monday after strong US labour data dampened hopes of a massive rate cut by the Federal Reserve. Stocks opened lower and had retreated further in the afternoon with the NIKKEI 0.98% down while the HANG SENG was trading 1.80% lower. The CSI bore the brunt of the slide, trading 2.40% in the red, having opened 2.3% lower.

TURKEY

In a sign of his increasing influence on central bank policy, President Erdogan dismissed CBRT governor Murat Cetinkaya on Saturday replacing him with deputy Murat Uysal. Cetinkaya, whose four-year term was due to end in 2020, was at loggerheads with the government over his decision to keep rates unchanged in June and was finally ousted following his refusal to an informal request to resign. While previously the decision to name central bank governors would have needed the support of cabinet, last year’s general election resulted in the president’s office being granted executive powers that allow him to unilaterally name central bank governors among other decisions. As expected, Turkey stocks took a beating on opening Monday morning: the lira tumbled from its close of 5.6280 to the dollar on Friday to as low as 5.8247 in early Asian hours while the Borsa Istanbul shed more than 1.5% at open, the most in more than a month. TURKEY 47s traded as low as 82.935 having closed at 84.825 on Friday.

LATAM

Argentina is bracing itself for an economic contraction this year according to a draft of the 2020 budget. The budget is forecasting a contraction of 0.8% this year before a pickup of 3.5% in 2020 led by investments, export growth and recovery in consumer demand. Meanwhile, the central bank said in a press release that it will keep the benchmark interest rate at 58% or higher in July. The bank’s monetary policy committee also ratified its decision to keep the FX band between 39.755 to 51.448 to the dollar until the end of 2019. The peso closed higher against the dollar at 41.8202 while ARGENT 47s closed higher at 75.121.

RUSSIA

The European market for Russian crude remained surprisingly intact despite the biggest disruption to Russian oil flow in decades. There are little signs that buyers are turning away from Russian crude despite the Druzhba pipeline having been shut for weeks after chemical contamination. The pipeline operator, Transneft PJSC, will be relieved that it retained its customers although it is likely to face compensation claims potentially costing into the hundreds of billions. The ruble closed weaker at 63.8070 to the dollar while RUSSIA 47s closed lower at 111.802.