UNITED STATES

US stocks closed at session highs on Tuesday as a late rally in cyclical stocks dwarfed a sell-off in tech shares. Tech shares took a hit following the announcement by attorneys general in 50 states that they were investigating Google’s potential monopolistic behaviour highlighting regulatory concerns surrounding large tech firms. The DOW maintained its winning streak closing higher at 0.28% for a fifth straight day. The S&P and NASDAQ finished just about unchanged with the S&P up 0.03% while the tech-heavy NASDAQ shed 0.04%. The sell-off in treasuries continued with yields on 2Y and 10Y USTs up 8bps and 9bps to 1.6760% and 1.7316% respectively.

UNITED KINGDOM

There are rising expectations in the EU that beleaguered Prime Minister Boris Johnson is prepared to shift his position to broker a deal. With Parliament having passed a law effectively barring a no-deal exit, the Boris administration will have to put their all in reaching a deal with the EU in time for Parliament’s resumption in October. Chief Brexit negotiator will be pressed in Brussels to provide more detail on Boris’ softer stance on the Irish border, an issue he said will be key to any renegotiated deal. The pound closed marginally higher against the dollar at 1.2350 while yield on 10Y and 30Y UKTs closed higher at 0.6364% and 1.1301% respectively.

EUROPEAN UNION

Germany Finance Minister Olaf Scholz announced that the country would be sticking to its balanced budget policy for the 2020 fiscal year in a speech to parliament on Tuesday. While he did hint that the government would act if the slowdown grew into a genuine crisis, it dampened growing calls to ditch the policy and provide massive stimulus. Chancellor Angela Merkel reiterated the same later in the day as she emphasised that the government will continue to reduce the proportion of debt to under 60% of GDP. Yield on bunds was little changed after the announcement with 10Y DBRs gaining 4bps to -0.547% while 30Y DBRs rose 4bps to 0.042%, closing above 0 for the first time since early August.

ASIA

Asian stocks were mostly higher ahead of expected easing by the ECB and an easing of the US-China trade war. China announced a range of US goods, including pharmaceuticals and lubricant oils, would be exempt from 25% extra tariffs put into effect last year. Stocks had cemented the early gains in the afternoon with the HANG SENG leading the charge with gains of 1.65% while the NIKKEI followed suit up, up 0.96% as the ASX was up a modest 0.11%. The CSI had however slipped from early lows to trade 0.23% lower. The ouster of US National Security Adviser John Bolton may have played a hand as analysts believe geopolitical risk was now lower as Bolton was widely known to have pushed for the war in Iraq during his time in the George Bush administration.

MIDDLE EAST

Egypt’s inflation eased in August to its lowest level since early 2013 paving way for what could be a major interest rate cut. While consumer prices rose 7.5% YoY according to the nation’s statistics agency, core inflation – the central bank measure that strips out volatile and regulated items – slowed to 4.9% YoY, the lowest in almost seven years. Despite having the fastest economic growth in the MENA region, monetary stimulus could be justified as business activity has contracted in all but 2 of the past 12 months. Having already shaved 150bps off the benchmark rate during the August meeting to 14.25%, BNP Paribas SA predicts the depth of easing will only be second to Turkey’s 425bps cut in July. The Egyptian pound closed firmer at 16.4498 to the dollar while EGYPT 29s and 49s were lower, trading in the low 107s and mid 109s respectively.

LATAM

Mexico could be in line for another bout of monetary easing at the next central bank meeting following a sharp slowing in inflation in August; consumer prices rose 3.16% YoY in August down from July’s 3.78%. While it remains within the central bank’s target range of 3±1%, the lower inflation provides additional monetary policy flexibility given the country only narrowly avoided recession in Q2. A Citabanamex survey sees the rate falling to 7.5% from the current 8% with a unanimous expectation of a quarter point cut this month. The peso closed firmer at 19.4951 to the dollar while MEX 29s and 48s were lower, trading in the high 108s and low 107s respectively.

RUSSIA

Russia’s Finance Ministry will be offering 20 billion rubles of OFZ bonds maturing in November 2025 in today’s auction. The market will be looking at how this auction goes in terms of uptake by foreign investors as the trend has been on a downward trajectory lately. Non-resident share of OFZs fell to 29% in August from 30% in July according to a central bank release on Monday, falling by 18 billion rubles ($275 million); the share of foreign investors taking part in August auctions stood at 38%. The central bank however added that fresh US sanctions had not caused any significant OFZ bond sales by foreign investors. The ruble closed weaker at 65.4255 to the dollar while RUSSIA 29s and 47s were lower, trading in the low 107s and low 119s respectively.

SSA

In Nigeria, finance minister Zainab Ahmed moderated GDP expansion to 2.93% from 3.6% projections a year ago, the moderation came on the back of a lowering of oil-output estimate by the government. The Minister went on to suggest that expansion will gain momentum in 2021 and should hit 3.85% in 2022 as the nation continues to implement policies towards diversified and inclusive growth among other key priority policies to support this growth. In the currency markets the Ghanaian Cedi (GHS) was trading for 5.4688 against the US Dollar, while the yield on GH 23s was 5.18% this morning.