UNITED STATES

US stocks closed only modestly higher save the NASDAQ which shed 0.11%. The DOW and the S&P closed 0.13% and 0.03% respectively. Treasury yields rose after the decision with 10Y USTs paring earlier losses to close at 1.7961% (-0.5bps) while 2Y USTs closed at 1.7621% (+3.7bps).

UNITED KINGDOM

The Bank of England is largely expected to hold rates constant in its monetary policy announcement today. Having previously been on a path of raising rates, the BoE said it would only do so if there was “some recovery in global growth” in August in addition to a smooth Brexit; global growth has been on an opposite trajectory and the odds of a smooth Brexit have not upped by that much since doing away with the prospect of raising rates. On the other hand, a hard Brexit – still a possibility by some accounts – would create a supply-side shock that would not warrant a boost to demand following a rate cut. The pound closed lower at $1.2470 while yield on 10Y and 30Y UKTs closed lower at 0.6397% and 1.0611% respectively.

EUROPEAN UNION

European car sales fell sharply in August highlighting the prevailing weakness in manufacturing across Europe. Vehicle registrations fell 8.4%, the steepest monthly decline this year, amid the woes of sluggish demand in crucial markets and the challenge of rolling out electric vehicles. While the fall was also due, in part, to exceptionally high growth a year back, sales have fallen in all but two months since September 2018. The European Automobile Manufacturers Association is forecasting a 1% drop in sales this year as China, a key car market, is in a slowdown of its own. The euro closed lower at $1.1030 while yield on 10Y and 30Y DBRs closed lower at -0.510% and 0.016% respectively.

ASIA

Asian markets were mixed in early trading following the Fed’s rate cut on Wednesday. Most stock had retreated from early morning positions in afternoon trading with the ASX 0.54% higher while the CSI and the HANG SEB+NG were trading 0.19% and -1.14% respectively. The NIKKEI had the greatest pullback, falling from 1% in the morning to 0.38% in the afternoon as the Bank of Japan held its benchmark interest rate. The bank however hinted at possible action at its October meeting reiterating that it wouldn’t hesitate to take additional easing measures “if there is a greater threat to price stability.” Japan has been struggling with persistently low inflation running at below 1%, short of the BOJ’s 2% target.

TURKEY

Turkey’s banking regulator BDDK took its boldest step to cleaning up the growing pile of bad debt held by banks on Tuesday. In a statement released late in the day BDDK told lenders to reclassify 46 billion liras ($8.1 billion) of loans as non-performing by year-end, a move that will bring the ratio of NPLs to 6.3% this year. The directive, while potentially hurting earnings this year, will allow banks to ram up lending faster, something the government has been calling for. The Borsa Istanbul Banks Sector Index fell 1.9% in the aftermath with bank stocks also plunging, notably Yapi Kredi Bankasi AS which shed 5%. The lira closed firmer at 5.6768 to the dollar while TURKEY 29s and 47s were higher, trading in the high 104s and mid 83s respectively.

LATAM

Brazil’s central bank opened the door for a prolonged easing cycle following a 50bps cut on the Selic in Wednesday’s meeting to a record low 5.5%. The bank’s board wrote in the accompanying statement that expected inflation would be short of next year’s target even if the Selic reaches 5% by year-end allowing for “additional adjustment of the degree of stimulus.” Growth forecasts at about 1% for a third straight year have helped keep prices in check with inflation almost a full percentage point below the targeted 4.25%. The real closed weaker at 4.1109 to the dollar while BRAZIL 29s and 47s were higher, trading in the mid 105s and mid 113s respectively.

RUSSIA

Years of austerity for Russia are coming to an end as the government begins to fiscal policy in a drive to revive a stalled economy. The government is expected to approve a three-year budget plan calling for cutting the surplus to 0.8% of GDP next year and narrow it to 0.2% in 2022; last year’s surplus was among the largest among major economies at 2.7%. Tight fiscal policy has helped the country weather the storm of sanctions and an oil price slump but pressure is now on policymakers to revive the economy with public discontent with living standards has resulted in bubbles of protests around the country. The ruble closed firmer at 64.1885 to the dollar while RUSSIA 29s and 47s were up, trading in the mid 107s and high 118s respectively.

SSA

Lower inflation rates in Ghana may not be signal enough for the GCB to cut policy rates, even as inflation rate fell to 9.4% following a rebasing of the inflation indicators. Cobus de Hart, chief economist for west, central and north Africa at NKC African Economics suggested that the new rate may not fully reflect the underlying pressures in the economy and urged some caution regarding rate cuts in the short term. This follows the GCB governor’s comments earlier this month that the central bank has some head room for expansionary policies as the country is on a path of deflation. The Ghanaian Cedi was trading for 5.4812 against the greenback, while the yield on Ghana 10-year Eurobonds was 7.585 at early trading this morning.