UNITED STATES

A fall in US retail sales coupled with Chinese anger over the passed House bills on Hong Kong offset a good start to the Q3 corporate earnings reports season to send stocks mildly lower on Wednesday. Retail sakes fell 0.3% in September, the first time in 7 months, spurring fears that the slowdown may finally be catching up with consumer spending. Odds of a rate cut in October spiked to 90% on the report from 78% on Tuesday. The NASDAQ led the slide at -0.30% while the S&P and the DOW fell 0.20% and 0.08% respectively. Yield on treasuries closed lower with 2Y and 10Y USTs ending at 1.5835% and 1.7395%.

UNITED KINGDOM

Brexit talks went well into the night for a second successive day on Wednesday as the UK and EU tried to thrash out final details on the legal text of the deal. EU chief Brexit negotiator Michel Barnier had expressed optimism when he addressed EU27 diplomats in the evening even as the issue of preventing VAT remained a key sticking point. Hopes which had been pinned on Northern Ireland’s DUP supporting the deal fell away on Thursday morning as the DUP announced that it could not support the custom terms on the deal being finalised in Brussels. The pound, which had closed higher at $1.2832, fell to $1.2755 on the news. Yield on 10Y UKTs also fell to 0.666% having closed at 0.713% on Wednesday.

EUROPEAN UNION

Eurozone inflation dropped to the lowest level in some 3 years as consumer prices rose only 0.8% YoY in September. Price pressure has remained stubbornly subdued dspite the monetary stimulus announced by the ECB with France the only country of the larger economies recording inflation above 1% at 1.1%; Germany was at 0.9% while Spain and Italy had 0.2% increases in prices. Meanwhile,  German outlook dropped less than expected in October according to the Zew survey. Sentiment for the eurozone’s biggest economy desclined slightly from September’s -22.5 to -22.8, less than the expected -27. The indicator rebounded from an 8-year low of -44.1 in August and the October result adds to the recent economic data that provides some hope that Germany may avoid recession this year. The euro closed higher at $1.1072 while yield on 10Y and 30Y DBRs closed higher at -0.387% and 0.154%.

ASIA

Asian stocks were mostly lower on Thursday as reports suggested that a ‘Phase 1’ deal was still some way away coupled with Beijing irritation at the passed House bills that were pro Hong Kong demonstarators. The South China Morning Post reported that Treasury Secretary Steven Mnuchin hoped negotiations would be wrapped up in time for signing at the Asia pacific Economic Cooperation summit next month although the Chinese were yet to extend an invitation to Washington for further talks. The HANG SENG bucked the trend of declines to trade 0.62% in the afternoon while the CSI and the NIKKEI slid 0.05% and 0.09% respectively. The ASX led the slide at -0.77%.

TURKEY

President Erdogan seemingly turned back on an earlier decision to snub visiting US vIce President Mike Pence and Secretary of State Michael Pompeo. Having earlier reportedly said that he “will only talk” to Presidennt Trump, his communications team later announced that he would be meeting the American delegation. The decision to pull out US forces from Syria has received bipartisan criticism with the House on Wednesday overwhelmingly voting in favour of a resolution opposing Trump’s move. The goal of the delegation is to secure a cease-fire in Syria which Turkey has all but rejected and it remains to be seen whehter the meeting with Erdogan today will yield any results. The lira closed firmer at 5.8870 while TURKEY 29s were slightly lower in the mid 103s.

LATAM

Argentine inflation surged in September with the 5.9% monthly increase being the most in ayear while the YoY figure stood at 53.5%. The worsening economic fundamentals will play into Alberto Fernandez’ hands as the country heads for elections on October 27. Polls have also interestingly gone missing following their poor underestimation of Fernandez performance in the August primaries where he led by 16 points depite pollsters across the spectrum having largely seen only a mild lead. Investors have pulled away investment in any polling firms with some even asking for refunds for polls that  had been scheduled post the primaries. The peso closed weaker at 58.347 to the dollar while ARGENT 28s closed a point lower to trade in the high 42s.

RUSSIA

Expectations are high that increased government spending by the Kremlin has begun feeding into the economy. Data due today is expected to show an acceleration in real wage growth to 3.4% YoY in September according to a bLoomberg survey and the strongest reading in more than a year while retail sales growth is forecast at 1%. The central bank estimates that the Russian economy will grow only 1% this year, below the government’s 1.3% estimate and the weakest since 2016. The ruble closed slightly firmer at 64.0847 to the dollar while RUSSIA 29s were about flat, trading in the low 107s.

SSA

Kenya intends to double its debt ceiling according to a National Treasury proposal among a raft of other measures intended to provide East Africa’s largest economy with funds for infrastructure development. Lawmakers last week approved a plan to present the debt limit as an absolute figure not as a percentage of GDP as the Treasury proposes a ceiling of 9 trillion shillings ($86 billion equivalent) which would almost match the size of the economy and almost double the previous 50% of GDP limit. With outstanding debt having more than tripled since 2013 fears are that the new measures may lead to distress with the IMF having raised the probability of external debt distress from low to moderate in 2018. The shilling was about flat at 103.72 to the dollar while KENINT 27s were slightly higher in the high 103s.