US stocks closed higher as investors drew optimism from largely upbeat corporate results as well as the Brexit draft agreement. The DOW closed 0.09% up while the S&P and the DOW rose 0.28% and 0.40% respectively. Yield on treasuries was up with 2Y and 10Y USTs closing at 1.5999% and 1.7518%.
The optimism that swept the market after the announcement of a Brexit deal began to fade as investors pondered over the likelihood of it being passed during Saturday’s Commons sitting. The pound, which had surged to a high of $1.2971 retreated to close at $1.2891, yet higher than Wednesday’s close nonetheless. Northern Ireland’s DUP maintained its stance that it would not support the deal while Labour stepped up efforts to put any deal to a second referendum to put a dent in hopes of the deal being passed on Saturday. The EU also seems to have had enough of Brexit with European Commission President Jean-Claude Juncker saying there would be no further extensions; Donald Tusk, European Council President however refused to rule out such a ove. Yield on 10Y closed lower at 0.677% having spiked as high as 0.787%.
Germany slowed its growth forecast for 2020 in another sign for darkening prospects for Europe’s largest economy. Growth was slashed from 1.5% to 1% but remained at 0.5% for 2019 according to the Economics Ministry. In addition to the slowdown in the global economy, Germany will also now have to face US tariffs which came into effect today which should put a further dent in demand from across the Atlantic. The economics ministry forecasts a drop in the current account surplus to 6.2% of GDP in 2020 from 7.25% in 2018 with exports dropping at a faster rate than imports.
Asian markets were mostly lower on Friday as data showed a slowing in China’s economic growth. The economy expanded 6% YoY in Q3 compared to 6.6% over the same period last year and below the 6.1% estimate from a WSJ survey. This was the worst pace of growth since 1992 but is in line with government expectations of 6-6.5% growth in 2019. The NIKKEI braved the downward pressures to close 0.18% even as it retreated form early trading figures of 0.6% after core inflation for September came at 0.3%, the lowest since April 2017. The ASX slipped 0.52% while the HANG SENG and the CSI were trading 0.53% and 1.43% in the afternoon.
Turkey agreed to a cease-fire in Syria following talks with the US delegation led by Vice-President Mike Pence. Turkey got its long-held demand to clear armed groups from within 32km of its border with Syria and will allow Kurdish forces to vacate the “safe zone” in five days after which it will effect a permanent cease-fire. The lira closed almost 1% firmer at 5.8312 to the dollar while TURKEY 29s and 47s rallied to close in the low 104s and mid 83s respectively.
Russia may be in for a more aggressive 50bps rate cut if central bank Governor Elvira Nabiullina’s comments are anything to go by. Speaking in an interview on Friday morning Nabiullina said the “key rate not only can be reduced but we can act more decisively,” fueling expectations of an even deeper 50bps cut. This year’s rate cuts have been at a moderate 25bps each turn but increasing evidence that inflation will continue to slow from the 4% target requires greater action, the governor said. The Economy Ministry forecasts inflation below 3% in 2020 and the central bank will update its inflation forecast at its October 25 rate meeting. The current Bloomberg survey largely forecasts a 25bps cut next Friday. The ruble closed slightly higher at 64.1328 to the dollar while RUSSIA 29s and 47s were about flat trading in the low 107s and high 118s respectively.
The Central Bank of Nigeria refunded banks part of the 500 billion naira ($1.4 billion) it had taken after lenders did not meet the 60% loan-to-deposit threshold at the end of Q3. The central bank’s head of banking supervision Ahmad Abdullahi said most of the banks had received a refund without giving a figure or the names of the banks. United Bank for Africa was refunded part of its $275 million fine according to the bank’s finance chief after the bank increased lending. The banking regulator increased the lending target to 65% for this quarter with the directive up for review every quarter. The naira was slightly firmer at 360.54 to the dollar while NGERIA 47s were about a point higher, trading in the mid 96s.