US stocks closed lower on Friday as the downward pressures on Boeing and Johnson and Johnson stocks marred a good start to the earnings season. Boeing’s 737 Max scandal came to the fore again with reports suggesting that the company failed to turn over communication between employees over the safety of the plane to the FAA during certification to send shares 6.79% lower. Johnson and Johnson also recalled a lot of baby powder after traces of asbestos were found with shares hurtling down 6.22%. The DOW, particularly dependent on Boeing, fell 0.95% while the NASDAQ and the S&P shed 0.83% and 0.39%. Treasury yields closed lower with 2Y and 10Y USTs closing at 1.5736% and 1.7536% respectively.
Prime Minister Boris Johnson will today try to get his Brexit deal over in Parliament. The deal failed to make it during Saturday’s Commons sitting as lawmakers instead voted to compel the premier to seek an extension of the Brexit deadline. Northern Ireland’s DUP support for the premier did turn out to be the difference as their 10 votes made the difference in the 322 to 306 defeat for Boris. There is optimism though that there are sufficient votes to back the deal with the Financial Times calculating that Boris may have 5 more votes than the opposition. The pound opened slightly lower on Monday having closed higher at $1.2984 on Friday while yield 10Y and 30Y UKTs closed higher at 0.709% and 1.194%.
Incoming ECB President Christine Lagarde already has a job up for her as Mario Draghi’s critics have begun calling for her to change the narrative when she takes the helm. The push has been coming from the Austrian, Dutch, French and German central banks with calls for a first strategic review in 16 years finding several supporters. The euro closed higher at $1.1167 while yield on 10Y and 30Y DBRs was higher at -0.382% and 0.169%.
Asian stocks opened the week on a slightly muted note driven by uncertainties about Brexit and the US-China trade deal. The ASX closed 0.04% higher while the NIKKEI was 0.25% up towards close despite poor trade data. September exports for Japan fell 5.2% on year and for the 10th straight month with exports to major trading partners US and China falling 7.9% and 6.7% YoY respectively. The CSI was down 0.36% in the afternoon while the HANG SENG was about flat at 0.02% as weekend protests turned particularly violent in Hong Kong on Sunday.
The CBRT expects Turkey’s economy to expand in 2019 despite the recent market volatility. Speaking at a panel discussion at the IMF summit in Washington, Deputy Governor Ugur Kucuk said 2019 growth will beat expectations before accelerating in 2020 with this year’s inflation, having dropped sharply to 9.26% in September, to finish the year in low double digits. Turkey assets continued to recover following the cease-fire agreement with the lira closing at a 2-week low of 5.7896 to the dollar. TURKEY 29s and 47s gained about a point to trade in the low 105s and mid 84s.
President Jair Bolsonaro’s recent fights with senior party leaders threaten to derail Brazil’s reform agenda especially with a final Senate vote on pension reform due this week. In just two days last week, Bolsonaro severed ties with two senior lawmakers in his Social Liberal Party potentially losing key support in his bid pass legislation through Congress. A failed bid to have Bolsonaro’s son Eduardo replace current party leader as well as a subsequent removal of the government’s leader in Congress has set the President on a likely warpath. The real closed firmer at 4.1127 to the dollar while BRAZIL 47s were about flat in the high 111s.
Russian assets continued their rally following indications by Bank of Russia Governor Elvira Nabiullina that a bigger-than-normal interest rate cut could be due at this week’s monetary policy meeting. Expectations from analysts are growing for a deeper cut of 50bps having been accustomed to quarter-point cuts so far this year. Yield on 10Y RFLBs dropped to a 6-year low at 6.5702% while RUSSIA 47s were up, trading in the low 119s. The ruble also firmed against the dollar to close at 63.7616.
Nigerian assets opened on a high on Monday following reports that an agreement had been reached with the World Bank over a loan to expand electricity infrastructure. The $3 billion loan, with the option of an extension to $4 billion, will be released in tranches of $750 million according to Finance Minister Zainab Ahmed, the report said. The minister explained that the financing will cover the difference between current tariffs and the cost of power generation and should see improvement in supply for a country beleaguered with power supply deficit. NGERIA 27s were trading in the mid 100s Monday morning having closed in the high 99s on Friday while NGERIA 47s were in the mid 97s having closed in the high 96s. The naira closed about flat at 360.48 to the dollar.