UNITED STATES

The US earning season kicked off on a largely upbeat note to send stocks to their highest levels in 3 weeks. The NASDAQ led gains at 1.24% while the S&P and DOW closed 1.00% and 0.89% higher. Tuesday’s gains saw the DOW and S&P turn positive for the month at 0.4% and 0.6% while the NASDAQ is now 1.9% up for the month. Yield on treasuries closed higher at 1.6180% and 1.7710% respectively.

UNITED KINGDOM

Tuesday Brexit talks went well into the night on Tuesday but sentiment was mostly positive in stark contrast to last weekend’s. While negotiations went on in Brussels, back home Prime Minister Boris Johnson was trying to get support for the deal taking shape across the channel by dangling a big cash payment for Northern Ireland in the hopes of securing support from Northern Ireland’s Democratic Unionist Party. Crucially for Boris, the hardline Tory European Research Group which helped vote down Theresa May’s deals seemed to be in support with the deal taking shape in Brussels. Negotiators will have to ensure a deal is reached by this afternoon for it to be submitted to this week’s summit. The pound rallied to its highest since May at $1.2787 while the euro edged up to $1.1033. Yield on 10Y and 30Y UKTs closed higher at 0.694% (+5.7bps) and 1.155% (+4bps).

ASIA 

Asian stocks were mostly higher in early trading as Tuesday gains on Wall Street added to the (diminishing) optimism over a US-China trade war. Tensions between the economic giants may have ratcheted a notch after the House passed three bills in support of demonstrators in Hong Kong provoking a warning from China for possible retaliation if the bills became law – a move China considers to be interference in internal matters. The CSI was, as such, lower in the afternoon trading 0.30% down while the HANG SENG was 0.56% higher. The ASX and the NIKKEI closed 1.27% and 1.20% higher.

TURKEY

Turkey state bank Halkbank has been accused by the US of violating Iran sanctions with the charges of fraud and money laundering involving multiple billions of dollars. The scheme was allegedly carried out with the help of several former ministers in President Erdogan’s government. The charges interestingly comes just as Vice President Mike Pence leads a delegation to Ankara over its military operation in Syria and are likely to be viewed with suspicion. HALKBK bonds had shed 4-8 points at 10.30am Turkey time on Wednesday to trade in the 80s having closed in the 90s on Tuesday. Meanwhile, the country posted a budget deficit in September as cash injections from the central bank that had resulted in surpluses for the July and August stopped. The deficit was an equivalent $3 billion as YoY spending grew about 7% against revenue growth of about 3%. The lira closed slightly firmer at 5.9158 to the dollar while TURKEY 29s and 47s were over a point higher in the high 103s and mid 83s respectively.

LATAM

A sharp fall in September inflation prompted economists in the weekly Brazil central bank survey to cut inflation and key rate forecasts in the latest weekly survey released on Monday. Inflation is now expected to reach 3.28% this year and 3.73% next year down from previous forecasts of 3.42% and 3.78% respectively, marking the third straight week that analysts reduced projections. Estimates for benchmark Selic fell to 4.75% at the end of 2020 from 5% as well. The real closed weaker at 4.1803 while BRAZIL 29s and 47s were about flat, trading in the high 107s and mid 111s.

RUSSIA

Yield on 10Y RFLBs fell to a 6-year low of 6.59% intraday on Tuesday amid expectations of further easing by the Bank of Russia; yields had already slipped 5bps on Monday. This comes ahead of today’s OFZ auction where the Ministry will offer a no-limit auction on bonds maturing in 20039 as well as 5.35 billion rubles of inflation-linked bonds maturing in 2028. The ruble was about flat at 64.2811 to the dollar while RUSSIA 29s and 47s were slightly higher trading in the low 107s and high 118s.

SSA

Nigeria’s foreign reserves have been falling sharply since June to mark their lowest level in more than 18 months. Reserves have fallen 8.4% from a June figure of about $45 billion to about $41 billion as at October 14 according to the Central bank of Nigeria. Bank of America analysts see this being largely because of outflows from the naira bond market, a darling of carry traders with yields of almost 15%. The slowdown in the global economy has turned sentiment towards risky markets more bearish leading to the pullout. The naira closed weaker at 361.82 to the dollar while NGERIA 27s and 47sclosed over half a point higher in the mid 99s and mid 95s respectively.