US stocks ended their losing streak on Tuesday led by gains on China-reliant stocks that had the most losses on Monday. This followed moves by China’s central bank to fix the yuan below 7 at 6.9683 per dollar restoring some confidence in the market after fears that the yuan was now being weaponised. The NASDAQ led the gains, closing at 1.39% while the S&P and the DOW were up 1.30% and 1.21% respectively. Yield on 10Y USTs closed about flat at 1.702%.
Rebel Tory MP Dominic Grieve is hoping to come up with a cross-party coalition to stop the Boris administration from crashing out of the EU on October 31. With Labour leader Jeremy Corbyn signaling that he will call for a vote of no confidence when Parliament resumes next month and should there be enough support for this, Parliament could force the appointment of a new premier for a government of national unity. Grieve however conceded that a coalition would be very difficult in practice as this would mean surrendering of power by political leaders. Boris himself would refuse to step down according to a report in The Times further complicating moves to have a new government. The pound closed firmer at $1.2171 while yield on 10Y UKTs closed slightly higher at 0.5132%.
The EU is becoming more resigned to the prospect of Britain crashing out of the bloc without a deal with Brussels officials saying that relations with the UK have reached a stalemate after refusing to concede to Prime Minister Boris Johnson’s demands to drop the Irish backstop. Boris has insisted that no-deal Brexit planning should go ahead while he wants the UK to leave in an orderly way should the EU concede to drawing up a new deal. This was reiterated by the new UK chief Brexit negotiator, David Frost, during a Brussels trip last week making the prospect of a no deal highly likely. The euro closed slightly lower at $1.1199 while yield on 10Y DBRs closed 2bps lower at -0.536%.
Asia stocks were mixed in early trading following moves by the People’s Bank of China to alleviate fears of a full-blown currency war. Market movements were muted on Wednesday compared to the previous two trading sessions with the CSI and ASX trading higher in the afternoon at 0.11% and 0.64% respectively. The HANG SENG recovered from a -0.7% opening to trade about flat in the afternoon at 0.01% while the NIKKEI was still in the red at -0.33% despite recovering from a -0.8% opening.
Turkey’s markets dependency on government support came to the fore in the latest figures for vehicle sales released by the Automotive Distributors Association. Just a month after government tax cuts expired, sales of cars and light commercial vehicles plunged 66% in July YoY to about 18,000 units, the highest since October last year. The association’s chairman Ali Bilaloglu noted that the industry had been in contraction for two years and called for a repealing of a tax that applies to vehicles with small engine capacity. Should this not be done he forecasts domestic sales of 350,000 for the year, a far cry from 2016’s record 983,720 sales. The lira closed firmer at 5.5219 to the dollar while TURKEY 47s was about flat trading in the high 82s.
Brazil’s central bank highlighted that acceleration in economic growth would be slow in its minutes for the July 30-31 monetary policy meeting. Contrary to the prevailing expectation, policymakers commented that GDP was likely stable or slightly positive in Q2 and that growth will probably accelerate going forward. Governor, Campos Neto commented that Brazil will be able to face international economic uncertainties as it has significant reserves and a small current account deficit. The real closed firmer, at 3.9618 to the dollar, while BRAZIL 47s were lower, trading in the mid 112s.
Russia is moving ahead with President Putin’s pledge to shrink the role of the dollar in international trade amid US-Russia tensions as Moscow tries to limit the vulnerability of the Russian economy to US sanctions. As much as a third of international dollar payments suffer delays as Western companies have to check whether the transactions are permitted. Shares of euros increased for a fourth straight quarter to 42% in Q1 2019 from 32% a year earlier. Russia still relies heavily on the dollar however for international trade, with more than half of its annual $687.5 million trade being on dollar, though less than 5% of the deals were directly with the US. The ruble closed firmer to the dollar at 65.2813 while RUSSIA 47s were higher, trading in the low 113s.
The Trade Unions of four African countries are advocating the inclusion of sterner rules to protect African markets for local products in the implementation of the African Continental Free Trade Area (AfCTA) agreement. Nigeria, Ghana, South Africa and Kenya relayed that the rules were vital to protect the market from developed economies like France, Belgium etc. which already have trade agreements with several African nations. The Ghanaian Cedi (GHS) was exchanging at 5.388 to the United States Dollar, while the yield on GHANA 8⅛ 01/18/26 was 7.226% at close of business yesterday.