US stocks closed lower on Tuesday as the market digested a flood of corporate earnings as well as a new bill that compels social media heavyweights Facebook, Twitter, Snapchat to allow users to easily migrate their data to rival platforms. Tech-heavy NASDAQ as such led declines at -0.72% while the S&P closed 0.36% lower. Disappointing numbers from McDonald’s and Travelers outweighed outperformance by Procter & Gamble and United Technologies to force the blue-chip index lower on the day at -0.15%. Treasury yields closed lower with 2Y and 10Y USTs at 1.5944% and 1.7607%.
Boris got the backing of MPs for his Brexit deal on Tuesday but was thwarted in his attempt to rush through the exit by October 31. MPs voted 329 to 299 in favour of the Brexit deal, a bigger-than-expected majority, with a total 19 Labour MPs voting for the deal. The attempt to rush through the deal was however rebuffed with MPs voting 322 to 308 against the proposed timeline for departure. The Prime Minister had previously said that if he doesn’t get backing for his deal to pull through by October 31 he would call for a general election even as European Council President Donald Tusk recommended an extension to the deadline. The pound closed lower at $1.2872 while yield on 10Y and 30Y UKTs closed lower at 0.711% and 1.233%.
Asian markets largely retreated on Wednesday following a Financial Times report that China is making plans to replace Hong Kong chief executive Carrie Lam. With pro-democracy demonstrations having rocked Hong Kong for 5 months now, the reported plans only await President Xi Jinping’s approval to pave way for Lam’s successor by March. The HANG SENG led declines, trading 0.92% lower in the afternoon while the CSI was trading 0.26% lower. The ASX and NIKKEI closed higher at 0.34% and 0.01% respectively.
The CBRT is discussing a tweak to its accounting procedures that would allow it to boost dividend payments to its largest shareholder, the Treasury, and help cover the budget deficit. The amendment, which would require legislative approval, would allow the central bank to book as income unrealized gains from changes in the market value of foreign currency and gold holdings. The discussions come as Turkey faces a heavy debt repayment schedule in 2020 with about 75 billion liras in local currency debt due for redemption in Q1 alone. In addition, the budget deficit has been growing significantly with the 85.8 billion liras deficit up to September this year representing a 51% increase over the same period in 2018. The lira was firmer at 5.8083 to the dollar while TURKEY 29s and 47s were about a point higher, trading in the high 104s and mid 83s respectively.
Brazil’s pension reform passed its final Senate vote on Tuesday, getting a 60-19 victory. This marks the first significant legislative victory for President Jair Bolsonaro and will save the fiscus some $190 billion in 10 years, albeit significantly lower than the $300 billion envisioned when the bill was first proposed. Amendments have watered down savings and the case continued even after Senate approval as further alterations favouring workers subjected to harsh working conditions were brought to the fore; these would potentially shave off another $76 billion off current projected savings. The session had to be suspended as the Senate President said he was requesting technical opinions to clarify whether such significant alterations would require the bill to return to the Lower House. The real closed lower at 4.0830 to the dollar while BRAZIL 29s and 47s were about flat trading in the high 104s and mid 111s respectively.
Analysts believe the Bank of Russia has very likely changed its inflation forecast “considerably.” Speaking to reporters, Sberbank analysts forecast that the central bank’s new inflation forecast will be lowered to 3-3.5% for year-end 2019 from a previous 4-4.5% forecast. Expectations are also for a further 100bps cut to the rate for the year in two 50bps shavings, the first of which will be on Friday and another in December; rates would then be held steady in H1 2020. The ruble was about flat at 63.7223 to the dollar as were RUSSIA 29s trading in the mid 107s.
Kenya has shelved plans to construct an expressway linking its two largest cities Nairobi and Mombasa according to a report citing the Transport Secretary James Macharia; the plans have been put on hold for two years to allow the country’s debt levels to drop. This becomes the second major infrastructure project to stall following the abrupt end to the Belt and Road initative railway line construction as China withheld funding over concerns over project’s viability in addition to accusations of debt loading. Latest central bank data showed total debt rising to 6 trillion shillings in July from 5.81 trillion shillings in June. KENINT 28s were lower trading in the high 105s as were KENINT 48s, trading in the low 105s.