UNITED STATES

US stocks closed at their lowest levels in a month on Friday as the market got concerned that escalation of the trade war would impact economic growth. This was after China vowed to retaliate against the planned 10% tariffs that were announced by President Trump on $300 billion of goods. The DOW closed 0.37% down while the NASDAQ shed 1.32%. The S&P closed 0.73% down, marking a fifth straight day of losses and in turn recording the steepest weekly loss since December’s selloff. Yield on 10Y USTs closed about 5bps lower at 1.8452%.

UNITED KINGDOM

Prime Minister Boris Johnson has already set in motion plans to increase spending that he promised during his campaign with the National Health Service set to receive £1.8 billion as he seeks to upgrade 20 hospitals. Boris described the NHS as an institution that “truly showcases the very best of Britain” over the weekend. Experts however commented that the capital injection fell short of what was needed to make up for a long period of underfunding for NHS infrastructure. The pound closed slightly higher against the dollar at $1.2162 while yield on 10Y UKTs fell to 0.5491%.

EUROPEAN UNION

30Y German bunds rallied on Friday to send yields across the entire German sovereign curve below zero for the first time after the tariff announcement by President Trump. This resulted in the total stock of investment-grade debt yielding less than 0% to $14 trillion globally. The scenario with the bunds highlights the prevailing investor hunt for yields; funds are being forced to look further out the yield curve or into riskier debt markets such as Italy or Greece. Benchmark 10Y bunds closed 4bps lower to -0.495%, continuing the tumble into record lows.

ASIA

Asian markets tumbled in early trading as US-China trade tensions took hold and fresh protests shut down Hong Kong. The HANG SENG was hit the hardest by the combination, trading 2.80% lower in the afternoon; Monday’s protests resulted in at least 100 flight cancellations and wide disruption of the subway service as protestors called for a general strike. The ASX and the NIKKEI were trading lower as well in the afternoon at -1.85% and -1.74% respectively. Meanwhile, China’s CSI was trading 1.19% down as the currency fell below the key seven level against the dollar. This was the first time the currency fell below the 7 mark in 11 years and will likely increase tensions with the US which closely watches the yuan for currency manipulation.

TURKEY

Turkey’s inflation ended the 3-month slowdown in July after consumer prices rose 16.7% YoY from 15.7% in June; the figure came just slightly lower than the median 16.7% according to a Bloomberg survey. The Turkstat report released on Monday also showed that prices increased 1.4% on the month. The central bank however expects the inflation slowdown to resume as it cut its year-end inflation projection to 13.9%. The lira closed firmer at 5.5584 to the dollar while TURKEY 47s were about flat, trading in the low 84s.

LATAM

Brazil’s industrial production fell 0.6% in June raising prospects that GDP was dragged into negative territory for a second straight quarter. YoY, output plunged 5.9% with confidence in the sector having fallen to its lowest level since the October elections. Meanwhile, the unemployment rate only fell marginally to 12% in Q2 from 12.3% previously, a third consecutive decline albeit at a slower pace than was expected. The high figures may undermine the latest rate cut according to some economists as demand for consumer credit may not be as high as anticipated with such unemployment figures. The real closed weaker at 3.8897 to the dollar while BRAZIL 47s traded higher in the mid 112s.

RUSSIA

The ruble plunged about 1.4% on Friday to 65.2550 against the dollar after President Trump signed an executive order authorising sanctions for the 2018 nerve-agent attack on a former Russian agent in the UK. The order said American banks would be prohibited from “participating in the primary market for non-ruble denominated bonds” issued by Russia, marking the first time sanctions have targeted sovereign debt. The sanctions had been expected since last year but were not as severe as the market anticipated with OFZ bonds not included in the latest sanctions; sanctions on OFZ bonds is largely regarded as a nuclear option as this would severely damage Russia’s ability to raise capital. RUSSIA 47s were about flat, trading in the mid 112s.

SSA

The Zambian government led by the newly appointed Minister of Finance Bwalya Ngandu, has proposed to the parliament, a K9.8 billion/US$758 million supplementary budget to re-finance both foreign and domestic debt repayment among other activities. The minister further proposed that 65% of the funds be allocated to cover debt obligations which have increased due to the recent depreciation of the Kwacha against the US Dollar. The IMF on Friday trimmed the GDP forecast for Zambia from 2.3% to 2% sighting the economic and fiscal difficulties linked to mounting debt and a slowdown in mining sector as the major factors for the cut. The Zambian Kwacha (ZMW) was trading at 12.911 to the greenback on Monday morning while the yield on ZAMBIN 27s slipped to 15.636% at close of markets on Friday.