UNITED STATES

US stocks closed lower on Thursday as negative sentiment on the trade deal added to further evidence of manufacturing slowdown to weigh down stocks. Bloomberg reported that Chinese officials were doubtful of reaching a more comprehensive trade deal with the US even as progress was being made towards a Phase 1 deal. The latest slowdown in US manufacturing came as the Chicago PMI fell to 43.2 from 47.1 in October ahead of the national ISM PMI due Friday. The DOW closed 0.52% down while the S&P and the NASDAQ shed 0.30% and 0.14% respectively. Treasury yields fell with 2Y and 10Y USTs closing at 1.5299% (-7.2bps) and 1.6927% (-8.1bps).

UNITED KINGDOM

The Bank of England will have to wait until after the December general election for the next governor after Chancellor Sajid Javid delayed the appointment. With current governor Mark Carney set to leave office on January 31, the next government will have a shorter period to appoint a new person although Carney’s term could be extended for a few weeks while that is sorted. The rationale behind the delay is not to undermine any pre-election appointment if the Tories lose the elections with Javid keen to ensure that the governor is seen to be independent of party politics. The pound closed higher at $1.2942 while yield on 10Y and 30Y UKTs closed lower at 0.629% and 1.135%.

EUROPEAN UNION

The eurozone economy braved the industrial slump in Germany to post a Q3 growth of 0.2%, beating the 0.1% estimate according to a Bloomberg survey. This followed Italy and France topping estimates in addition to Spain maintaining its comparatively solid growth. Headline inflation dropped to 0.7% in October, further away from the just below 2% target. The euro closed about flat at $1.1152 while yield on 10Y and 30Y DBRs closed lower at -0.407% and 0.109%.

ASIA

In stark contrast to Thursday’s release by the National Bureau of Statistics which showed continued contraction in Chinese manufacturing, Friday’s data by Caixin showed an improvement in PMI with the October reading at 51.7, showing an improvement over September’s 51.4, and marking a third month in a row where the Caixin PMI has produced a reading above 50 at that. The divergence between Thursday’s official PMI which showed contraction and Friday’s unofficial one which showed growth appeared to be of little significance to Asian markets which largely gained on the news. The CSI led gains closing 0.99% higher while the HANG SENG and ASX closed 0.72% and 0.09% up respectively. The NIKKEI closed 0.33% lower however as the October IHS Jibun manufacturing PMI came at 48.4, the lowest since June 2016.

TURKEY

The CBRT cut its end-2019 inflation estimate to 12% from 13.9% in its quarterly report released on Thursday. Further easing at the December meeting has in turn become doubtful as the central bank expects prices to pick up again having slowed to 9.26%. Speaking on Thursday, Governor Murat Uysal said they had used up “an important part” of its monetary easing and subsequent policy decisions will be based on inflation trends. With Uysal having pledged to preserve “a reasonable rate of real return” for investors, a pickup in inflation will leave little room for further cuts if the pledge is to be fulfilled. End-2020 inflation forecast was unchanged at 8.2% before slowing to 5.4% in 2021 and stabilising around 5% in the medium term. The lira closed weaker at 5.7136 while TURKEY 29s and 47s were slightly higher trading in the mid 107s and low 86s respectively.

LATAM

Argentina’s central bank announced that it will lower the floor on its key rate for November to 63% from October’s 68%; the new floor will guarantee positive real interest rates according to the bank. The bank will also allow the monetary base to grow 2.5% in November in line with growth for September and October. In a statement, the bank said this aims to preserve international reserves as well as allow the incoming government more freedom for the design and implementation of its policies. The peso was about flat at 59.6522 to the dollar while ARGENT 48s were slightly unchanged, trading in the high 39s.

RUSSIA

Ruble-denominated Russian bonds had a mammoth rally in October which saw yields on RFLB 29s shed 54bps while 30s fell 62bps. Analysts believe they are close to the bottoming out however, holding that the current prices reflect the expected reduction in the key rate to 6% at the end of next year. With the Fed having signaled a pause in cuts, there may in turn be limits to further deep easing in EM hence the widely held expectations that rates will be on hold until next year. The ruble closed weaker at 64.1375 to the dollar while RUSSIA 29s and 47s were higher, trading in the mid 108s and high 119s respectively.

SSA

Kenya’s inflation rose to 5% YoY in October from 3.8% in September following a significant increase in food prices. Food prices, which account for 36% of the index, rose 8.7% as the monthly inflation rose 0.28%. Although food prices have risen in the year, this has been offset by the lower energy prices to have headline inflation averaging 5.2% in the year to September and within the 2.5-7.5% target. The shilling closed steady at 103.23 against the dollar while KENINT 48s were higher, trading in the high 105s.