UNITED STATES

President Trump’s comments that a trade truce with China had “a long way to go” roiled US stocks to end a two-day run of record closes. The DOW closed 0.09% under while the S&P was 0.34% down. The tech-heavy NASDAQ took the heaviest hit closing at -0.43% as Trump’s sentiment coupled with antitrust Congress hearing for Google, Facebook, Apple and Amazon. Better-than-expected June data for factory output and retail sales looked to have brought in concerns over a Fed rate cut this month but fears were eased after Fed Chair Jerome Powell remarked that outlook has not improved since June in Paris at the Bank of France. Yield on 10Y USTs closed higher at 2.1026%.

UNITED KINGDOM

Wages in the UK grew at their fastest pace in 11 years and unemployment remained at its lowest rate since the 1970s according to the latest release by the Office for National Statistics. For the three months to May, average earnings rose 3.6% while firms took 28,000 more employees to record a 44-year low unemployment rate of 3.8%. Wage growth comfortably outpaced consumer price inflation which averaged 2% over the same period. Employment growth was however at its weakest since last summer and could be another reflection of weaker demand for workers as a result of decreased production. The pound closed lower at $1.2407 while yield on 10Y UKTs closed 2bps higher to 0.8196%.

EUROPEAN UNION

Ursula von der Leyen won confirmation as the next president of the European Commission and in the process became the first woman to assume the most powerful policymaking position in Europe. Her confirmation by the European Parliament had looked shaky initially but was finally confirmed after she made significant pledges on climate change including a commitment to turn parts of the European Investment bank into a “climate bank” in a bid to unlock investment worth €1 trillion over the next decade. Von der Leyen also hopes to dissuade President Trump from tariffs on EU cars by leveraging on areas where American and European interests collide. The euro closed lower at $1.1211 while yield on 10Y DBRs closed lower at -0.244%.

ASIA

Renewed pessimism over prospects of a US-China trade truce sent Asian markets down at opening. President Trumps comments that he could impose tariffs on another $325 billion of Chinese imports added to the negative sentiment. Trump’s remarks echoed those of China’s Commerce Minister Zhong Shang who berated the US for starting the trade dispute. Analysts are seeing the more visible involvement of Zhong as a sign that the talks are getting more complicated and need more trade experts; prospects of the talks being more protracted are increasing. In late afternoon trading, markets had not recovered with the NIKKEI lower by 0.31% while the HANG SENG and the CSI were 0.17% and 0.20% down respectively.

TURKEY

A budget deficit for the fifth month straight for Turkey has seen the country mark its longest stretch in the red since 2010. The deficit was 12.1 billion liras ($2.1 billion) compared to 25.6 billion liras in the same period a year earlier. While tax revenues rose 5% YoY in June, adjusting for inflation of about 16%, this points to a significant drop as the slowdown in the economy persists. The lira was slightly firmer at close, trading 5.7102 to the dollar while TURKEY 47s picked up trading in the high 82s.

LATAM

The latest survey by Brazil’s central bank saw analysts slash their estimates for Brazil’s GDP growth to 0.81%, the 20th consecutive week they have done so. The latest survey is less than their forecast in February underlining the dashed hopes for a faster recovery. The economy is also on the brink of entering a technical recession as most recent data points to a contraction in Q2 having already contracted in Q1. Investment inflows have largely been subdued in anticipation of an overhaul of the pension system with the next vote for the bill only scheduled for August. The real closed lower at 3.7694 to the dollar while BRAZIL 47s fell slightly trading in the low 109s.

RUSSIA

A slew of weak reports is throwing doubts on the Russian government’s optimism for the economy in the second half of the year. Already published figures show car sales – an indicator of consumer demand – continued falling, business activity contracted for the first time since 2016 and retail data due this week is expected to show a slowdown in monthly retail sales for June. The government is banking on increased spending to spur the economy in the second half as the $400 billion infrastructure program kicks off but it faces headwinds with worsening global outlook in addition to domestic woes. The ruble closed weaker at 63.0339 to the dollar while RUSSIA 47s was slightly unchanged, trading in the high 111s.