UNITED STATES

US stocks closed lower on Friday to cap off a week that saw indices shedding overally. Friday’s slide came after President Trump’s remarks that a US-China trade deal was unlikely soon. While he said that things are going “very well with China”, he said he was not ready to make a deal and could cancel the September round of trade talks in Washington. The NASDAQ shed the most, closing 1.00% lower while the S&P and DOW closed 0.66% and 0.34% down respectively. Yield on 10Y USTs closed higher at 1.7447%.

UNITED KINGDOM

The British economy shrank in Q2 for the first time in some seven years as GDP contracted 0.2% down from a 0.5% expansion in Q1. Brexit uncertainty contributed to the slowdown and this was exacerbated by the prevailing global slowdown; Chancellor Sajid Javid blamed the economy’s slowdown on the slow global growth. Stockpiling activity in Q1 boosted the economy as industry braced for the initial March 29 Brexit deadline but this was markedly slow after the extension of the deadline to October 31 with changes in inventory contributing a 2.24 percentage points decline from GDP growth in Q2. Stockpiling activity is expected to pick up in Q3 as the October deadline draws close. The pound fell 0.8% to 1.2033 while yield on 10Y UKTs fell 3bps to 0.4817%.

EUROPEAN UNION

Fitch held its rating for Italian debt at BBB on Friday but the agency maintained its negative outlook for the country citing high debt levels and the latest round of political uncertainty following the League party’s no-confidence vote in the government. The party, led by Deputy Prime Minister Matteo Salvini, tabled the motion on Friday and if Prime Minister Giuseppe Conte loses the vote after parliamentarians reconvene, President Sergio Matarella will most likely call for a fresh election unless some parties form a majority. Yield on 10Y Italian debt rose 25bps, with spread over German bunds of the same maturity (which closed slightly higher at -0.576%) rising to its highest level since June. The euro closed higher at 1.1200 against the dollar.

ASIA

Asian markets were about flat in early trading following last week’s volatility in global markets as trade tensions escalated. In afternoon trading, the HANG SENG and ASX were about flat trading 0.04% and 0.09% higher respectively. The CSI was the pick of the markets on the day solidifying early trading gains of 0.7% to trade 0.99% in the afternoon. The People’s Bank of China set the currency reference point at 7.0211 per dollar, weaker than the psychological 7 level but stronger than analyst expectations.

TURKEY

Turkey posted an annual current account surplus for the first time since 2002 after recording a $538 million surplus in the 12 months to June according to a central bank release on Friday; the country had a $60 billion deficit just as recently as May last year. The reversal has been mainly due to the drop in imports following the currency crisis. The news, while positive as the deficit was a key weakness in the $750 billion economy, will be watered down by the fact that this was largely due to a fall in imports (19% down in the first half) than a rise in exports (just 4% up over the same period). The lira closed slightly weaker at 5.4952 to the dollar while TURKEY 47s traded higher in the mid 85s.

LATAM

Alberto Fernandez was leading in Argentina’s primary presidential elections by a far wider margin than was expected in most polls which called a close victory for the challenger. Although only 60% of the votes have been counted, Fernandez led by 47% to President Mauricio Macri’s 32.7% and the market is concerned that this could mark a return to populism which accompanied the era of Christina Fernandez de Kirchner and her husband’s presidencies. Winning outright in the first round requires garnering 45% of the vote or getting 40% of the vote and leading the runner-up by 10%; Fernandez appears to be set for an outright victory unless voting patterns drastically change in the yet-to-be-announced 40% of votes cast. The peso closed weaker at 45.3134 to the dollar while ARGENT 47s were higher in the mid 70s.

RUSSIA

Fitch upgraded Russia’s credit on Friday citing strong fiscal policies and commitment to inflation-targeting. The sovereign rating was increased to BBB from BBB- with a stable outlook. The Fitch statement also noted that the constant risk of sanctions escalation will weigh on the country’s financing flexibility, investment and growth prospects. Five years of sanctions have pushed the nation to maintain tight fiscal policy with last year’s budget surplus being the widest in a decade and reserves topping $500 billion. The ruble closed weaker at 65.2835 to the dollar while RUSSIA 47s were trading lower in the high 115s.