UNITED STATES

US stocks snapped their short-lived winning streak to close lower on Tuesday as investors contended with concerns over the strength of the US economy faced with the continuing global slowdown. The DOW closed 0.66% lower while the S&P and the NASDAQ shed 0.79% and 0.68% respectively. Yield on treasuries was lower with the 2Y, 10Y and 30Y notes closing at 1.5123%, 1.5555% and 2.0375% respectively.

UNITED KINGDOM

The stand-off between the UK and the EU became clearer after European Council President Donald Tusk dismissed the letter received from Prime Minister Boris Johnson saying the UK had offered “no realistic alternatives” to avoid a hard border in Ireland; Boris’ argument is that the backstop negotiated by Theresa may would tie the UK into a potentially indefinite customs union and regulatory regime with the EU. Interestingly, both parties are accusing each other of a lack of seriousness to re-engage for negotiations and this is fueling expectations of a no-deal exit. A leaked document of the government’s Operation Yellowhammer – the government’s contingency plan for a no-deal exit – shows a gloomy picture of the aftermath of a no-deal exit. Flow of traffic and goods across the Channel is expected to reduce by 40 – 60% within just 24 hours and will severely impact delivery of medical supplies with three quarters of medicines delivered via the Dover-Calais route. The disruption is expected to extend to supply of fresh food as well though not to the extent of acute shortages but just limited availability and choice which should lead to price increases. The pound closed higher at 1.2170 against the dollar while yield on gilts fell with the 10Y note closing at 0.4496% while the 30Y note closed at 1.0067%.

EUROPEAN UNION

Italian Prime Minister Giuseppe Conte resigned on Tuesday to mark the end of the coalition between the League Party and the Five Star Movement. Conte pulled no punches in his resignation address accusing League Party leader Matteo Salvini of only serving self-interests by calling for an election as well as not satisfactorily responding to allegations of Russian sponsorship for the League Party. President Sergio Mattarella will now try to see if a new majority can be formed between the Five Star Movement and the Democratic Party to form a government else the country will hold fresh elections. Italian notes closed lower with yield on 10Y and 30Y notes falling to 1.3698% and 2.4255% respectively. Meanwhile, the euro was firmer against the dollar at 1.1100 while yield on 10Y DBRs closed 2bps lower at -0.690%.

ASIA

Asian markets were mostly down in early trading on Wednesday following the lead of their Wall Street peers which closed lower on Tuesday amid recession worries. President Trump insisted that his hard line against China is necessary as he admitted that the tariffs may cause economic pain in the short-term. The ASX led the slide in the afternoon, trading 0.94% lower while the NIKKEI was down 0.28% in the same session. The HANG SENG and the CSI gave up early gains to trade slightly lower at -0.05% and -0.02% respectively.

LATAM

Brazil’s central bank announced that it will sell its dollar reserves to shore up the real. This marks the first time in a decade that the central bank has resorted to selling dollars on the spot markets having last done so in the aftermath of the global financial crisis in 2009. The move comes after a sharp depreciation of the real past the 4-per-dollar level amid a global sell-off and growing default fears in neighbouring Argentina. The real closed firmer at 4.0555 to the dollar while BRAZIL 29s and 47s were up, trading in the mid 105s and high 113s respectively.

RUSSIA

President Trump called for Russia’s readmission into the G7 to revert to the G8 grouping of countries. Russia’s attendance in the grouping of the world’s leading economies was revoked in 2014 after the annexation of Crimea. Trump’s comments are likely to put him at odds with fellow allies in the G7 particularly French President Emmanuel Macron who told reporters that he was opposed to Russia’s readmittance on Monday after a meeting with President Putin; Putin himself quipped, “How can I come back into an organization that doesn’t exist? It’s the G7, not the G8.” The ruble closed firmer against the dollar at 66.5471 while RUSSIA 29s and 47s were up closing in the high 106s and high 117s respectively.

SSA

President Edgar Lungu arrived in New Delhi, India, yesterday on a three-day state visit in a bid to foster relations and sign various Memorandum of Understanding in the area of Agriculture and Mining. The Zambian President is scheduled to meet with President Shri Ram Nath Kovind and Prime Minister Narendra Modi. Elsewhere in Egypt, analysts are betting on a rate cut of 100bps as the Central Bank continues to seek to accelerate growth as fundamentals continue to excite whilst the country’s debt continues to be the toast in EM debt. The ZAR was trading at 15.324 against the greenback at early trading this morning while the yield on ZAMBIN 22s was up to 20.77% as bond price continues to trickle down.