US jobs data released by the Labour Department on Friday calmed fears of an immediate recession but provided evidence of a slowing economy after posting 136,000 new jobs in September albeit, at the slowest pace in four months; unemployment also fell to a 50-year low at 3.5%. Stocks closed higher with the DOW and S&P gaining 1.42% while the NASDAQ rose 1.40%. The DOW and S&P however posted a third week of declines, down 0.92% And 0.33% respectively as the NASDAQ snapped a two-week losing streak at 0.54%. Yield on treasuries closed lower with 10Y USTs closing lower at 1.5290%.
Prime Minister Boris Johnson urged the EU to compromise on a Brexit deal, insisting that the UK would leave the bloc without a deal if necessary. The EU is calling for changes to last week’s Brexit proposal with the European Commission saying, after Friday’s meeting with Boris’ Brexit negotiator David Frost, that the proposal did not provide the basis for reaching an agreement. The Irish border remains the main bone of contention in the negotiations particularly the clause that a decision whether to remain in the EU would be put to a vote every four years in Northern Ireland; the EU is concerned that the Eurosceptic Democratic Unionist party would have a veto on the vote. The pound closed about flat at $1.2331 while yield on 10Y and 30Y UKTs closed lower at 0.4411% and 0.9349% respectively.
Asian stocks were mixed on Monday following a largely healthy US jobs report as the market waits cautiously for the upcoming US-China trade talks. Reports suggest that China will significantly narrow the scope of issues up for discussion with Vice Premier Liu He allegedly telling dignitaries that China will not commit to reforming industrial policies or government subsidies, two of the main complaints by the US. The HANG SENG and CSI were closed for a holiday as the NIKKEI shed 0.16% on the day while the ASX closed 0.71% higher.
President Recep Erdogan said he is satisfied with the pace of interest rate cuts so far although he expects further monetary easing, in a markedly tempered tone from his previous calls for rate cuts. The remarks, made to his ruling AKP members over the weekend, seemingly show a noticeable satisfaction with how central bank governor Murat Uysal is carrying out the rate cute cuts given that the record 425bps cut in the July meeting was deemed not sufficient by Erdogan. The comments should also give Uysal some breathing room given that the governor had earlier signaled that the central bank may look to moderating future cuts. The lira closed weaker at 5.6989 to the dollar while TURKEY 29s and 47s traded higher in the low 107s and mid 87s respectively.
A statement from Brazil’s Economy Ministry said that Petrobras, Banco do Brasil and Caixa Economica Federal will not be privatized, at least for the time being. President Jair Bolsonaro’s drive to ramp up the economy has seen the state relinquishing control over some of its companies in the past couple of months. The Secretary of Privatisation and Divestment of the Ministry of Economy told journalists however that for the afore-mentioned companies only subsidiaries would be sold. The real closed firmer at 4.0561 to the dollar while BRAZIL 29s and 47s traded higher, in the low 105s and high 111s respectively.
Russia’s annual inflation slowed to 4% in September making way for the Bank of Russia to make a possible rate cut, for the fourth time in a row; the slowing in inflation was for a sixth straight month Speaking on Friday, First Deputy Governor of the Bank of Russia Ksenia Yudaeva indicated that the outlook was for further easing of inflation as the September figure reached the central bank’s target. Some economists are projecting that the inflation trajectory requires the central bank to cut rates more aggressively echoing the Economy Ministry’s calls, which highlight the need given its 2020 projection of below-3% inflation. The central bank however says it needs clarity on budget spending plans for next year as jumps in spending will inevitably feed into inflation. The ruble firmed against the dollar to 64.6307 while RUSSIA 29s and 47s rallied to trade in the mid 107s and mid 119s respectively.
Foreign investors in South African stocks took cue from their bonds counterparts to offload an equivalent $711 million in equities for the week ending October 4, marking the biggest week of outflow since September 2017. An upcoming Moody’s rating review seems to have added some caution to investors in addition to a stagnant economy. Stocks fell 5.8% in Q3 to mark the worst third quarter performance since 2011. The rand continued with the firming against the dollar following an increase in the country’s reserves to a record $54.9 billion in September recording a low of 15.0268 having closed at 15.0506 on Friday. SOAF 26s traded half a point up in the high 103s while SOAF 26s rose about a point to trade in the mid 108s.