UNITED STATES

Renewed optimism over US-China trade talks added to the good earnings reports to push US stocks higher on Monday. Following upbeat comments by Vice Premier Liu He over the weekend, President Trump said efforts to end the trade war were going well with Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to talk with the Chinese on Friday. The NASDAQ led gains at 0.91% while the S&P and the DOW closed 0.69% and 0.21% respectively. Continuing woes for Boeing capped gains for the blue-chip DOW as Credit Suisse and UBS downgraded the shares from neutral to buy to send Boeing stock to a 2-month low. Yield on treasuries closed higher with 2 Y and 10Y USTs closing at 1.6210% and 1.7993%.

UNITED KINGDOM

Boris Johnson’s Brexit deal was denied a vote yet again on Monday as House Speaker John Bercow ruled that it would be out of order to try to put it to a vote after lawmakers had declined to do so just the previous sitting. The Prime Minister will get his wish today when MPs vote on the general principles of the bill on Tuesday night which, should the bill pass, will be followed by a more meaningful final say vote on the bill on Thursday. The pound spiked to an intraday high of $1.3012 before closing lower for the day at $1.2960. Yield on 10Y and 30Y UKTs closed higher at 0.750% and 1.251%.

EUROPEAN UNION

Germany’s Bundesbank may have confirmed what the market largely expected: the economy entered a technical recession. In its monthly report the central bank said economic output may have “shrunk slightly” in Q3. The report however also mentioned that outlook was not for a prolonged and broader decline in output even as confidence indicators do not point to an immediate turnaround. The central bank hinged its less dour outlook on sectors driven by domestic demand which it says are still doing well. The euro closed slightly lower at $1.1150 while yield on 10Y and 30Y DBRs was higher at -0.344% and 0.204%.

ASIA

Asian stocks were higher on Tuesday following optimistic comments by President Trump on the ‘Phase 1’ deal. His remarks followed those of China’s Vice Premier Liu He who over the weekend said substantial progress” had been made towards the deal. The US is working towards making the deal ready for signing at next month’s Asia-Pacific Economic Cooperation summit. The ASX closed 0.30% higher with the NIKKEI being closed for a holiday while the HANG SENG and the CSI were trading 0.34% and 0.21% up late afternoon.

LATAM

Brazilian economists are anticipating more easing as they lowered estimates of the key rate and inflation in the latest weekly central bank survey. Forecasts for the indicators for this year and the next fell for a fourth straight week with the Selic now predicted to end the year at 4.5% from last week’s 4.75% while 2019 inflation fell 2bps to 3.26% and 2020 inflation fell 7bps to 3.66%. Central bank chief Roberto Campos Neto said last week that there is room for more cuts even as the economy starts to show signs of recovery particularly in the labour market. The real closed slightly weaker at 4.1296 to the dollar while BRAZIL 29s were about flat, trading in the high 104s.

RUSSIA

The ruble is expected to continue last week’s performance this week according to analyst notes from VTB Capital. Local tax payments due this week are likely to see exporters selling FX proceeds and spur outperformance. The Bank of Russia is also widely expected to cut 50bps off the key rate this Friday but expectations are for a muted response form the ruble in the aftermath. The ruble opened the week firmer at 63.7243 to the dollar while RUSSIA 29s were slightly unchanged, trading in the low 107s.

SSA

The South African government’s continued bailouts for Eskom will likely widen the budget deficit to financial crisis levels threatening the remaining IG rating. Economists in a Bloomberg survey expect a fiscal gap of 6.1% of GDP compared to Treasury’s 4.5% in what would be the biggest deficit since 2010. Moody’s, the only major ratings company still having SOAFs as investment grade, took note of the risk Eskom poses and eyes will be on its rating review on November 1. Remarks by the Revenue Service Commissioner that it will be hard to achieve the 1.58 trillion rand ($105 billion) revenue target will further fuel concerns. The rand closed slightly firmer at 14.7910 to the dollar while SOAF 48s were lower, trading in the mid 107s.