UNITED STATES

The Fed cut a quarter points off the benchmark rate on Wednesday to spur gains on US stocks with the S&P notching a record close. The S&P gained 0.33% to close at 3,046.77 while the NASDAQ and the DOW closed 0.33% and 0.43% respectively and are both less than 0.5% of their record closes. While the Fed’s 25bps cut was widely expected, the accompanying rhetoric shifted from the usual “act as appropriate to sustain the expansion” to “assess the appropriate path” with regards to rates, a change most analysts believe signals a pause in the rate cuts. The accompanying statement also pointed to the strength of the labour market as well as the resilience of the economy – Q3 GDP grew 1.9%, just shy of the 2% in Q2 – and the Fed expects these to hold with inflation getting closer to the 2% target. Treasury yields closed lower with 2Y and 10Y USTs closing at 1.6016% (-4.6bps) and 1.7733% (-6.7bps).

UNITED KINGDOM

The pound continued its rally for a second day on Thursday amid broader weakness on the dollar and following reports pointing to an overall majority for Tories in the general election. Having closed higher at $1.2902 on Wednesday, the firming continued Thursday morning with the pound reaching $1.2951 at 8.33am London time. Reports suggested that the Brexit party is considering withdrawing hundreds of candidates although leader Nigel Farage disputed the claim that the party would only field 20 candidates. Being a strongly Eurosceptic party, the move would allow for decreased competition for the pro-Brexit rhetoric that will characterise the Tory campaign. Yield on 10Y and 30Y UKTs closed lower at 0.686% and 1.210% respectively.

ASIA

Disappointing Chinese data outweighed Wednesday’s Fed rate cut to result in a mixed day for Asian stocks on Thursday. Chinese PMI fell further into contraction territory dropping to 49.3 from 49.8 in October while non-manufacturing PMI fell to 52.8, the lowest since early 2016. Contraction in manufacturing was for a sixth straight month weighing down the CSI which closed 0.35% down. The ASX followed suit, shedding 0.39% on the day, although the NIKKEI and HANG SENG weathered the storm closing 0.37% and 0.90% respectively.

TURKEY

CBRT governor Murat Uysal will on Thursday update the central bank’s base case scenario for Turkey’s year-end inflation for 2019 and the subsequent two years. After the monetary policy meeting on October 24, policymakers said inflation is likely to end the year “notably below” the July projections, a sign that there may be more room for monetary easing. The central bank’s latest base case points to inflation at 13.9% for year-end 2019 while the government has already lowered its end-2019 estimate to 12%. The lira closed firmer at 5.7011 to the dollar while TURKEY 29s and 47s closed lower in the mid 107s and high 85s.

LATAM

Brazil’s central bank signaled it will maintain the pace of monetary easing at the next meeting after cutting yet another 50bps off the Selic to 5%. The accompanying statement following Wednesday’s decision by board members said that “the benign scenario for prospective inflation should permit an additional adjustment of the same magnitude.” Annual inflation fell below the 2.75% floor of the official target range despite the easing provided thus far and GDP expectations according to a central bank survey for 2019 have fallen from 2.6% at the beginning of January to 0.9% currently. The real was slightly firmer at 3.992 to the dollar while BRAZIL 29s and 47s were about flat in the low 105s and mid 112s respectively.

RUSSIA

The Bank of Russia announced on Tuesday that it will hold consecutive core policy meetings in December and February. Aggressive policy decisions are usually made at such core meetings and in deviance from the norm, where a core meeting is held in December followed by a non-core policy meeting at the start of the year, 2020 will start with a core meeting. VTB capital analysts see this as taking pressure of the central bank to make another cut in December, more so if monthly inflation in November and December is in the 0.3-0.4% range. The ruble closed firmer against the dollar at 63.8142 while RUSSIA 29s and 47s were slightly higher, trading in the low 108s and mid 118s respectively.

SSA

Wednesday’s Medium-Term Budget Policy Statement by South Africa’s Finance Ministry sent the country’s assets down as it failed to outline a clear path to stabilising debt. Eskom is set to receive 138 billion rand ($9.4 billion) through March 2022, an increase of 10 billion rand over previously announced allocations and Finance Minister Tito Mboweni warned more support would be need if turnaround plans are delayed. Added to the bailouts on other ailing state-owned companies including the national airline and state broadcaster, government debt will top 70% of GDP in the next three years having previously been projected to rise to 60.2% by 2024. The rand fell to 15.1210 against the dollar in the aftermath before paring to close at 15.0070, a 2.6% slide. SOAF 29s and 49s shed over a point each to close in the mid 97s and mid 97s respectively.