UNITED STATES

US stocks closed lower ahead of the next round of tariff negotiations between the US and China. Investor concerns were mostly centred around reported Chinese reluctance to put up for discussion such issues as commitments on reforming industrial policy and government subsidies. The S&P led the losses, closing 0.45% down while the DOW and the NASDAQ closed 0.36% and 0.33% lower. Yield on treasuries closed higher with 2Y and 10Y USTs closing at 1.4617% and 1.5580% respectively.

UNITED KINGDOM

UK consumers held back spending in September to mark the worst September on record for spending growth according to a British Retail Consortium-KPMG report. UK retail sales fell 1.3% YoY as the threat of a looming no-deal Brexit weighed heavily on shopper purse strings. For Q3, retail sales were down 0.4% YoY on nominal value weighed down by a 1.7% contraction in non-food sales. Official retail figures, due next week, might paint a different picture however as the BRC survey does not include online spending which saw a 9.8% rise in spending on digital content and subscriptions such as Spotify and Netflix. The pound closed weaker at $1.2293 while yield on 10Y and 30Y UKTs closed higher at 0.4479% and 0.9469% respectively.

EUROPEAN UNION

German industrial manufacturing for August surprisingly grew 0.3% over July figures although production was down YoY at 4% lower. The euro made gains over the dollar by 0.12% on the news, having closed weaker on Monday at $1.0971. The report follows a Monday report showing a fall in factory orders for the same month, with orders falling 0.6% from July. Figures from the Economy Ministry showed that the drop had been precipitated by a sharp 2.6% fall in domestic demand. Yield on 10Y and 30Y DBRs meanwhile closed higher at -0.575% and -0.060% respectively.

ASIA

Asian markets gained in early trading on Tuesday amid hopes of progress at US-China trade talks this week; Vice Premier Liu He was confirmed to be leading the delegation to Washington for the talks resuming Thursday. Minor flare-ups of tensions continue to play out however ahead of the negotiations with the US blacklisting a group of Chinese AI companies over alleged use of technology to suppress Muslims after China reportedly took off some issues from the negotiating table. The CSI resumed trading with a 0.44% gain in the afternoon while the HANG SENG and the ASX rose 0.59% and 0.45% respectively in the afternoon. The NIKKEI led gains, closing 0.99% higher.

TURKEY

The lira tumbled 2.3% against the dollar on Monday to 5.8324 after President Trump threatened to “obliterate” the economy if Turkey went ahead with its plan to undertake a military operation in Kurdish-controlled Syria. The close was the weakest since the end of August and intra-day drop the highest since March. President Trump had earlier in the day faced backlash over his decision to withdraw US troops from Syria before officials from his administration later said only a small number of troops were being withdrawn from a zone were clashes between the Turkish army and the Kurdish militia was likely to occur. TURKEY 29s closed about a point lower in the high 105s as TURKEY 47s shed close to 2 points to close in the mid 85s.

LATAM

Brazil’s record low rates are already making an impact in several facets of the economy. The current 5.5% rate, almost a third of the 14.25% in 2016, has allowed for an increasing uptake in mortgages – up 13% YoY for the year up to August – and enabled cheaper financing for companies – local debentures up 7.3% for the year up to August compared to the same period in 2018. The lower rates have also lowered interest payments on government debt to roughly 5% of GDP, almost half the figure at the end of 2015. Most of the federal debt is linked to either inflation or the key rate, both of which have been on a downward trajectory. The real closed over 1% weaker against the dollar at 4.1074 following reports that Economy Minister Paulo Guedes is preparing to leave government next year. BRAZIL 29s and 47s traded lower, in the high 104s and mid 111s respectively.

SSA

Zambia’ parliament will today debate a motion put forward by Finance Minister Dr Ng’andu to increase the nation’s domestic and external debt limits. With external debt already making up about 40% of GDP, compared to total debt being 20% of GDP a decade back, the country is edging to wards debt distress with the IMF projecting that total debt could go up to 91.6% of GDP this year. The kwacha closed little changed against the dollar at 13.1150 while ZAMBIN 27s were trading about flat in the low 69s.