UNITED STATES

The DOW and the S&P wiped away all Q3 gains on the first trading day of Q4 as ISM’s September survey for manufacturing firms showed the worst reading since June 2009; the reading came at 47.8 in September falling further into contraction territory having posted 49.1 in July. The DOW closed 1.28% lower while the S&P and the NASDAQ retreated 1.23% and 1.13% respectively. Yield on treasuries likewise fell with 2Y and 10Y USTs closing at 1.5459% (-7.5bps) and 1.6353% (-2.9bps).

UNITED KINGDOM

The UK government will today make a “final offer” to the EU to end the Brexit impasse, with leader Boris Johnson claiming in a speech at the Conservative party conference that his plan is a reasonable “compromise” and provides the last chance to avoid a no-deal exit. The proposal includes an extension of EU regulation to industrial goods in Northern Ireland to ease trade with the Republic of Ireland in addition to the already-proposed plan to create a single zone for food and animal checks across Ireland. The details of the plan also propose that Northern Ireland remains aligned with EU rules for four years after which an assembly would decide whether to remain aligned. The pound closed slightly higher at 1.2301 to the dollar while yield on 10Y and 30Y UKTs closed lower at 0.4687% and 0.952% respectively.

EUROPEAN UNION

European manufacturing slumped for an eighth straight month in September as the eurozone PMI fell to 45.7 from 47 in August. The slump was particularly marked in Germany which recorded 41.7, the lowest since June 2009 while Spain, Italy and France also missed expectations with only France posting growth. Employment also suffered a slowdown for a fifth month running with job cuts in September being at the fastest rate since September 2013. To add to the woes, inflation fell to 0.9% in September according to estimates, the lowest monthly rate in 3 years. The euro closed firmer however at 1.0933 against the dollar while yield on 10Y and 30Y DBRs closed slightly higher at -0.564% and -0.060% respectively.

ASIA

Asian stocks took cue from the sharp losses on Wall Street to open lower on Wednesday. This followed the worst numbers for US manufacturing since 2009 to exacerbate fears of a global slowdown following recent disappointing data from China and Japan. The HANG SENG resumed down 0.21% in the afternoon while the NIKKEI was down 0.49% in the same session. The ASX slid further from early losses to close 1.46% down, leading the slide for Asia stocks.

TURKEY

Turkey is targeting growth of 5% for the period 2020-22 according to an announcement by the Finance Ministry on Monday despite slashing this year’s forecast close to zero. The economic blueprint also sees inflation slowing to 12% at year end before dropping to 8.5% in 2020 and 6.5% in 2021. The assumption among many economists is that the growth plan is hinged on export-growth but interestingly the government is not relying on a weakening of the lira in real terms to get there according to Bloomberg calculations based on government forecasts; the lira was the best performer in emerging markets in Q3, adding 2.5%. TURKEY 29s and 47s closed lower, trading in the low 106s and high 86s respectively.

LATAM

Brazil’s industrial output for August rose more than expected growing 0.8% from July against a median forecast of 0.2%; YoY, output was down 2.3% however. The growth was primarily off a surge in extractive industries which rose 6.6% while other items such as vehicles and industrial goods suffered declines. President Jair Bolsonaro has been on a drive to stimulate growth and the central bank has been chipping in likewise having cut the rate to a record low 5.5% in September. The latest weekly survey of economists sees the rate falling to 4.75% at year end, lower than the 5% previously predicted; this follows a presser from central bank governor Roberto Campos Neto that policymakers see the inflation trend allowing for further easing. The real firmed to 4.1594 to the dollar while BRAZIL 29s and 47s traded lower, in the mid 104s and high 11s respectively.

RUSSIA

Russia’s average daily oil output exceeded its OPEC+ target yet again in September even as producers cut production from August levels. Calculations made off the Energy Ministry’s figures show that production was at a daily average of about 11.25 million barrels, 60,000 barrels higher than the cap. The figures come as minster Alexander Novak meets his Saudi counterpart Prince Abdulaziz bin Salman in Moscow at the Russian Energy Week. The ruble closed weaker at 65.2493 to the dollar while RUSSIA 29s and 47s were trading slightly lower in the high 106s and high 118s respectively.

SSA

Figures from South Africa’s National Treasury show that foreign holdings of government debt fell to 37% in August from as high as 43% in March 2018. This follows increasing likelihood that Moddy’s will downgrade the sovereign rating to junk, following on from S&P and Fitch which cut assessments to junk in 2017. A statement by Moody’s last month said its stable outlook for South Africa’s debt meant the rating was safe for another 12 to 18 months but a mid-term budget statement could sway sentiment if it does not provide enough conviction that the government has a handle on debt and the fiscal deficit. The rand closed weaker at 15.3315 to the dollar while SOAF 28s and 48s were trading in the mid 96s and mid 107s respectively.