Fresh highs were recorded for US stocks on Thursday despite reports that there was internal opposition in the White House to plans for tariff rollbacks announced earlier in the day. The Chinese Ministry of Commerce had earlier on Thursday said that both countries had agreed a phased cancellation of tariffs before reports surfaced later in the day noting opposition in the Trump administration. The DOW and S&P rose 0.66% and 0.27% to close at record highs while the NASDAQ was up 0.28%, closing about 0.1pts from a fresh high. Treasury yields were higher with 2Y and 10Y USTs closing at 1.6733% and 1.9190% respectively.
As was expected, the Bank of England kept the benchmark rate unchanged during Thursday’s monetary policy meeting hinted towards easing amid uncertainties to the British economy. The monetary policy committee was split for the first time in over a year as two members voted for an immediate rate cut as the central bank acknowledged growth had slowed materially in 2019. Assuming an improvement in global growth and significant Brexit progress to lessen uncertainties, the BoE expects the economy to grow from about 1% in Q4 2019 to 1.6% q$ 202 and 2.1% in 2021. Governor Mark Carney said monetary policy may need to support expected recovery in the economy if the assumptions do not materialise. The pound closed lower at $1.2817 while yield on 10Y and 30Y UKTs closed higher at 0.793% and 1.317% respectively.
Asian markets were mostly lower on Friday as the market sought clarity over tariff rollbacks in the US-China trade war. While the Chinese confirmed that tariffs would be phased out, US officials gave conflicting views on the matter with some confirming and others denying, a sign of the “fierce internal opposition” in the Trump administration over the matter. The NIKKEI closed higher at 0.26% while the HANG SENG and the ASX shed 0.70% and 0.04% respectively. The CSI shed early gains of 0.3% to close 0.49% lower as October exports fell 0.9% YoY, albeit better than September’s 3.2% decline and better than the 3.1% expected plunge in a WSJ poll.
Bankers for Aramco’s IPO are dangling the possibility of yet more bonus payouts that could take the company’s annual dividend to more than $100 billion in the next five years in what is set to be the biggest ever flotation. Having initially promised dividends of $75 billion over the next five years, a report by Bank of America Merrill Lynch on Thursday said that Aramco management emphasised the possibility of additional payouts banking on higher oil prices, with the dividend also set to grow in line with Saudi inflation or economic growth. BAML values the company between $1.2 trillion and $2.3 trillion.
Latin America’s biggest economies Brazil and Mexico added to their streaks of slowing inflation in October as central banks in the countries plan for more rate cuts. Consumer prices slowed to an annual 2.54% in October while Mexican inflation slowed to 3.02%. The latest slowdown sent Brazilian inflation further away from the year’s 4.25% target as well as below the 2.75% floor while for Mexico it is closer to the 3% goal amid disinflationary risks. Mexico’s central bank is expected to cut another quarter point at its monetary policy meeting next week while Brazil’s central bank governor Roberto Neto told lawmakers on Wednesday that another 50bps cut was likely at the December meeting. The real closed weaker at 4.1010 to the dollar while BRAZIL 29s were lower, trading in the low 105s. The peso was firmer at 19.1337 to the dollar while MEX 29s were lower, trading in the low 109s.
Russia is set to extend its efforts on reducing reliance on the dollar to the National Wellbeing Fund according to a Reuters report. The Finance Ministry will cut the share of dollar holdings beginning next year to proportions similar to international reserves. The ministry will increase shares of other currencies but only limited to reserve currencies. As at March 2019, Russia had managed to reduce the dollar holdings by almost half with the euro taking up the greatest proportion of reserves while yuan holdings had almost tripled. The ruble closed firmer at 63.5164 to the dollar while RUSSIA 29s and 47s were lower, trading in the low 108s and high 117s respectively.
The Central Bank of Nigeria’s recent move to restrict participation in OMOs has spurred a rally in longer-dated local debt with bond yields having plunged to 18-month lows. Yields on naira government bonds has dropped over 100bps since the central bank’s move with the Bloomberg index on local Nigerian sovereigns showing a yield of 13.032% as at Thursday’s close, having been as high as 14.191% on October 24 when the restriction was extended to secondary market participation having previously been only on auctions. The naira closed weaker to the dollar at 361.15 while NGERIA 49s were lower, trading in the low 113s.