UNITED STATES

US stocks eked out minor gains on Wednesday as the market continues to digest the deluge of earnings reports. Boeing reported a 50% slide in earnings but upheld its forecast that the 737 Max would return to the skies later this year to close 1% higher. The S7P led gains on the day with 0.28% while the NASDAQ and the DOW closed 0.19% and 0.17% higher respectively. Treasury yields closed lower with 2Y and 10Y USTs ending at 1.5817% and 1.7642% respectively.

UNITED KINGDOM

As the UK awaits the EU’s decision on its application for an extension to the Brexit deadline, the two main parties Conservatives and Labour are split over the issue of a general election. With attempts to rush through the Brexit deal rebuffed on Tuesday, Conservatives could force a pre-Christmas general election or attempt to push through another timetable. While the official Labour position on a general election is that they will support it if the EU grants a Brexit extension, some senior members want a second referendum before the election and they have the support of a majority of the general party membership. The pound closed higher at 1.2912 while yield on 10Y and 30Y UKTs closed lower at 0.685% and 1.189%.

EUROPEAN UNION

The ECB will on Thursday hold a monetary policy meeting where no major policy shift is expected. The noteworthy aspect of the meeting is that it will be President Mario Draghi’s final meeting before he paves way for Christine Lagarde. The final moments of Draghi’s tenure have been fraught with opposition from eurozone’s core countries over the extent of stimulus to provide, particularly the issue of quantitative easing, and Lagarde will have a tough act in waiting when she takes the helm. There’s a growing sense that the monetary policy toolbox is all but depleted and Lagarde will have to bank on fiscal policy if any more meaningful stimulus is to be poured in. The euro was about flat at $1.1130 while yield on 10Y and 30Y DBRs closed lower at -0.394% and 0.113%.

ASIA 

Asian markets were mostly higher on Thursday following gains on Wall Street as there were no major developments on the trade-war front and on Brexit. The NIKKEI and the ASX closed 0.55% and 0.31% higher respectively while the HANG SENG was 0.62% up in the afternoon. The CSI was however lower at -0.08% late afternoon, having recovered somewhat from early morning losses of 0.2%.

TURKEY

Turkey may be in for another sizeable rate cut in Thursday’s monetary policy meeting now that the Syria standoff has been firmly defused after President Erdogan’s meeting with President Putin on Tuesday. With the lira again on the mend, fears that the turmoil would halt the inflation slowdown have abated allowing more room for monetary easing. In addition, President Trump also announced that the recently-imposed sanctions on Turkey would be lifted to send the lira firming 1.2% against the dollar to 5.7354. TURKEY 29s and 47s also surged more than a point each to trade in the mid 106s and low 86s respectively.

LATAM

Brazil inflation fell to an annual 2.72% in mid-October according to the latest national statistical agency release. The figure, lowest since mid-May 2018, is below the central bank’s 2.75% floor of this year’s target range and provides impetus for more rate cuts. The slowdown was largely driven by the third straight monthly decline in food and beverage prices which shed 0.25%. The real closed firmer at 4.0364 to the dollar while BRAZIL 29s and 47s were flat, trading in the low 105s and low 112s respectively.

RUSSIA

Goldman Sachs analysts added their voice to the growing expectations that Russia is in for another 100bps cut on its benchmark rate this year. While the majority of economists in a Bloomberg survey see a 25bps cut at Friday’s monetary policy meeting, a growing number – one third – is of the view that 50bps will be shaved off on Friday. The cut will likely spur the momentum that has seen ruble-denominated RFLBs give the most return at 28% so far this year, beating all other emerging markets. The ruble closed slightly weaker at 63.9422 to the dollar while RUSSIA 29s and 47s were slightly up in the high 107s and low 119s respectively.

SSA

ZAMBINs picked up on Wednesday as reports filtered that the US Treasury was lending its support in the Zambia’s re-engagement with the IMF. The surge was more pronounced on the 27s which picked up about 0.8pts to trade in the mid 72s and toned down with decreasing maturity with 22s gaining a modest 0.3pts. The IMF will be sending staff in two weeks to Zambia to exchange data and views on the government’s efforts to stabilize the economy.