UNITED STATES

US stocks retreated on Tuesday as earnings misses in tech shares weighed down indices ahead of the Fed’s FOMC meeting on Wednesday. Google parent, Alphabet, missed earnings target as net income dropped over 20% to send the stock 2.2% down on the day. The NASDAQ in turn fell the most closing 0.59% lower. The DOW and S&P had modest retreats by comparison, closing 0.07% and 0.08% under respectively. US consumer confidence also fell in October to 125.9 from 126.3 in September to add to the pulldown. Treasury yields closed slightly unchanged with 2Y and 10Y USTs closing 1.6415% and 1.8385%.

UNITED KINGDOM

Labour leader Jeremy Corbyn lent his support to Prime Minister Boris Johnson’s call for a snap election to see the UK set for a pre-Christmas election. Corbyn announced on Tuesday that his conditions for an election had been met, particularly with a no-deal off the table, and he would back Boris’ calls. The December 12 election date was voted for despite some Labour opposition that preferred that the polls be held on December 9. Much is at stake for the election: Boris wants secure enough support to secure a majority while Labour would want a second referendum. The pound closed flat at $1.2862 while yield on 10Y UKTs was lower at 0.711% as 30Y UKTs closed higher at 1.239%.

EUROPEAN UNION

The ECB’s quantitative easing set to resume in November with the purchase of €20 billion in bonds per month. The bond buying is set to favour more countries than others however, case in point France and Italy as these have the most bonds left for the central bank to buy. Barring any change in limits, the bank will only be able to purchase German sovereign debt for 14 months before it reaches the 33% threshold. Other smaller countries will have even smaller periods of support which could prompt a change in the parameters of the programme – something that is likely to further stoke tensions as policymakers are already deeply split over the asset purchasing programme. The euro closed slightly higher at $1.1112 while yield on 10Y and 30Y DBRs fell to -0.351% and 0.177%.

ASIA 

Asian stocks took cue from their trans-Pacific peers to trade lower on Wednesday. This followed fresh doubts on the progress of the US-China trade deal following a Reuters report on Tuesday. The report, citing an unnamed US official said the deal might not be done in time for the APEC conference in November but stressed that this will not “mean it falls apart.” The ASX led losses closing 0.87% down while the NIKKEI and CSI closed 0.57% and 0.50% in the red respectively. The HANG SENG was trading 0.44% down in late afternoon trading.

TURKEY

US lawamakers overwhelmingly voted in favour of a bill to threaten sanctions on Turkey over its military operation in Syria with the vote passing 403-16. While Vice President Mike Pence had brokered the cease-fire between Turkish and Kurdish troops, the House passed the sanctions on Turkish leaders and other financial institutions including Halkbank while also restricting military access to financing and arms. Another bill that is yet to be voted on was also introduced to the House targeting the energy industry and sovereign debt. The lira fell about 0.6% against the dollar in the morning having closed at 5.7373 on Tuesday while TURKEY 29s had shed some 0.3pts in the morning to trade in the low 107s.

MENA

Lebanon bonds extended losses on Tuesday after Prime Minister Saad Hariri resigned following two weeks of protests that descended into violence. The resignation came as supporters of Hezbollah attacked demonstrators in central Beirut with stones and setting ablaze pitched tents. LEBAN 21s fell over 5points to close at a record yield of 35.203% while LEBAN 37s fell almost 3 points to trade in the low 57s.

LATAM

Brazil economists slashed their key rate and inflation forecasts for end 2020 in the latest central bank survey. According to the survey, inflation will close the year at 3.60%, down from 3.66% last week, while the Selic will be at 4.50% from 4.75%. Widely-held expectations are for another 50bps rate cut during Wednesday’s monetary policy meeting with all 31 economists in a Reuters poll being of that view. The real closed weaker at 3.9992 to the dollar but marked the second successive sub-4 close since early August. BRAZIL 29s and 47s were slightly unchanged in the low 105s and low 112s respectively.

RUSSIA

The Russian Ministry of Finance’s OFZ auction on Wednesday will comprise reopenings of two bonds maturing in 2022 and 2025. The 2022 tranche will be seeing its first reopening having been issued in August. The 2025 tranche, issued in June 2019 and with 20 billion rubles on offer this auction, has been receiving considerable interest at each subsequent opening with issue yields falling from the 7.73% at initial issue to 6.9% at the latest reopening. The ruble closed weaker at 63.9527 while RUSSIA 29s were slightly unchanged trading in the high 107s.

SSA

The long-awaited recovery plan for beleaguered power utility Eskom was unveiled on Tuesday but left some of the major issues unattended to. The South African government made moves to allow more private players to feed into the national grid as soon as March 2020, a move that was welcomed by analysts. However broader issues such as measures to deal with the $31 billion debt as well as the new CEO were not attended, albeit to the government’s defence the promise was to do so by October 31. ESKOM 25s however closed higher, trading in the low 105s while 21s closed about flat in the mid 101s. The rand fell as much as 1% against the dollar to 14.7161 against the dollar before paring the losses to close at 14.6265, weaker than Monday’s close however.