UNITED STATES

US stocks fell for a second straight session as the market continued to reconsider expectations for a deep rate cut by the Federal Reserve at the end of this month. Investors will be closely watching Fed Chair Jerome Powell’s bi-annual monetary report to Congress on Wednesday and Thursday for any hints on the central bank’s interest rate policy. The S&P fell 0.48% while the DOW closed 0.43% lower. Tech-heavy NASDAQ (-0.78%) shed the most following the tumbling of Apple shares by more than 2% after Rosenblatt Securities predicted the company’s outlook would deteriorate over the next 6 to 12 months. Yield on 10Y USTs was up 1.4bps to 2.0476%.

UNITED KINGDOM

Signs are increasingly pointing to a contraction of the UK economy after data released by the British Retail Consortium showed that retail sales fell 1.6% YoY on a like-for-like basis. Predictions for Q2 GDP growth fell to 0.1% in a Bloomberg survey having previously been predicted to stagnate. The latest data adds to the gloomy figures that have accompanied the British economy lately after last week’s surveys showed a contraction in manufacturing and construction as well as near stagnation for services. The pound was slightly lower at 1.2515 against the dollar while yield on 10Y UKTs fell 2bps to 0.7132%.

EUROPEAN UNION

The ECB is likely to restart quantitative easing in earnest as soon as September according to financial firms, which would be barely nine months after they capped the programme at €2.6 trillion in December. The eurozone economy has been mired in a slump for over a year persuading some officials, notably ECB Governing Council member Olli Rehn, to say the downturn is no longer a temporary blip. The nomination of Christine Lagarde to take over at the ECB after Mario Draghi’s tenure ends has given momentum to expectation of the resumption of bond purchases as she has previously praised the policy measure. The euro closed slightly weaker at 1.1214 against the dollar while yield on 10Y DBRs fell marginally to -0.3677%.

ASIA

Asia stocks retreated on Tuesday in quiet trading as the market awaited signs of how US interest rates may move in the future. Stocks opened largely in the red but had made some recovery in afternoon trading. The HANG SENG and CSI made some gains from their openings but were still lower in the afternoon trading 0.61% and 0.11% in the red respectively. The NIKKEI was the only performer on the day, trading 0.14% higher having opened flat.

TURKEY

The Borsa Istanbul closed 0.9% lower on Monday, its biggest fall since shedding 2.3% in June as the market grappled with President Erdogan’s dismissal of central bank governor Murat Cetinkaya. While this pointed to signs of Erdogan’s increasing grip on central bank policy, the fallout was not too drastic with rate-cuts having already been priced in and as central banks globally have taken a dovish tilt that has led to a demand for riskier assets. The lira recovered from earlier lows to close at 5.7344 to the dollar, almost 2% weaker than Friday’s close, while TURKEY 47s slid further from morning lows to close at 82.712.

LATAM

Argentinian polling firm Poliarquia is noting improvements in chances of incumbent Mauricio Macri winning the October elections. Having polled 28% in May, Macri’s approval rating surged to 34% in June despite economic distress in Argentina with the country in recession and unemployment in double digits. The June rating is a far cry from the 62% he had in November 2017 after the mid-terms. The elections have a fair chance of being concluded in October, with Poliarquia not seeing anyone getting a first-round victory; a first-round victory requires a win with over 45% of the vote or a 40% win with a lead greater than 10 percentage points over the second-placed candidate. His main rival, Alberto Fernandez, is billed to win the first round by the polling firm but with not enough a lead to be declared outright victor. The peso closed lower at 41.8202 to the dollar while ARGENT 47s were lower at 74.005.

RUSSIA

Russian inflation decreased at a faster pace in June to 4.7% from 5.1% in May according to a Federal Statistics Service release on Monday; monthly inflation was flat, the first time in about a year. Signs are pointing towards an easing of underlying price pressures and at faster than anticipated giving room for the central bank to proceed with easing this month. VTB economist Alex Isakov, noting the ruble’s strong performance in June – a 3.5% rise – as a key driver to inflation slowing, is expecting another cut at the July 26 interest rate meeting should the rate remain stable prior to the meeting. Most economists in a Bloomberg survey expect the central bank to hold rates this month however. The ruble firmed slightly against the dollar to 63.6797 while RUSSIA 47s closed lower at 111.647.