The debacle surrounding President Trump’s alleged attempts to seek foreign election interference sent US stocks lower on Thursday. The market had largely brushed off the decision by Democrats to institute impeachment proceedings against Trump but reacted negatively after the whistleblower’s complaint in the case was released. Investors also had to deal with reports that the US is unlikely to extend the waiver to allow American businesses to engage Huawei when it expires in November. The NASDAQ shed the most closing 0.58% lower while the DOW and S&P closed 0.30% and 0.24% lower respectively.
One of the more hawkish members of the Bank of England Michael Saunders said the BoE may have to cut rates even if the UK avoids a no-deal Brexit. Saunders was arguing that Brexit uncertainties will likely continue to dampen growth especially in the face of weak global outlook. The pound shed 0.3% after the comments having closed at 1.2328 against the dollar on Thursday. The sentiments also put him in line with markets which are pricing a cut when the BoE makes its first move. Yield on 10Y and 30Y UKTs closed slightly lower at 0.5171% and 0.9463% respectively.
Asian stocks were mostly lower amid gloomy Chinese Industrial data and the potential impact of an impeachment inquiry of President Trump. China’s industrial profits dropped 2% YoY in August and 1.7% for the first eight months of the year compared to the same period last year. The CSI traded slightly higher however at 0.07% in the afternoon while the ASX led gains at 0.58%. The NIKKEI and HANG SENG shed 0.77% and 0.28% respectively.
Turkey will eke out a GDP expansion of 0.25% in 2019 according to the IMF, a reversal from the previous forecast of a 2.5% contraction. The IMF however called out the government for failing to embark on reforms in the market lull as it instead makes efforts to drive growth; such is the determination to grow the economy that President Erdogan unveiled a highly-ambitious target growth of 5% in 2020, more than twice 2019’s 2.3% target which is a near-certain miss. Particularly citing the actions to push for credit growth, the IMF described the prevailing calm as “fragile”. The lira firmed against the dollar to close at 5.6672 while TURKEY 29s and 47s closed higher, trading in the low 106s and high 86s respectively.
Brazil’s central bank predicts that inflation will remain below target in the next two years as it begins ushers an era of monetary stimulus. According to Tuesday’s quarterly inflation report, inflation will rise 3.7% in 2021 against a target of 3.75%; the 3.7% forecast came out in both the bank’s weekly economist survey and the bank’s outlook considering a steady key rate and currency. Inflation is also expected to slip below 3% this year temporarily according to the bank, which would put it way under the target 4.25% this year. The economy is however expected to grow 0.9% this year and 1.8% in 2020. The real closed weaker at 4.1691 to the dollar while BRAZIL 29s were lower, trading in the mid 104s.
Egypt cut its benchmark rate by a point to 13.25% in Thursday’s monetary policy meeting, a third time this year. The central bank took advantage of the easing inflation – 7.5% in August, lowest since 2013 – and should add some stimulus to business activity which has contracted in all but two of the past 12 months according to Markit Egypt Purchasing Managers Index. In the accompanying statement, the central bank said the decision was consistent in achieving an inflation target of 9±3% in 2020. The Egyptian pound closed slightly unchanged at 16.324 to the dollar while EGYPT 29s were higher, trading in the low 105s.