US stocks closed at fresh records on Friday, edging up despite remarks by senior US government figures that the tariff rollbacks hadn’t yet been agreed. Senior US trade advisor Peter Navarro had on Thursday said that no agreement had been reached on the tariff issue before President Trump reiterated the same on Friday. The DOW eked a 0.02% gain while the S&P and the NASDAQ rose 0.26% and 0.48% respectively. Treasury yields were higher with 2Y and 10Y USTs closing at 1.6742% and 1.9417%.
Moody’s cut the outlook on UK’s sovereign credit rating to negative on Friday while affirming the Aa2 rating on long term and senior unsecured debt. The outlook downgrade was because of a weakening in the country’s ability to set policy amid Brexit resolution as well as decreased commitment to fiscal discipline, the ratings agency said. Just on Thursday, Chancellor Sajid Javid had promised to devote an extra £20 billion a year to capital projects to end years of fiscal restraint; Labour promised an even higher £55 billion a year. The pound closed weaker at $1.2774 while yield on 10Y and 30Y UKTs was lower at 0.789% and 1.306%.
Christine Lagarde’s tenure as head of the ECB is set to usher a raft of changes to how decisions are made at the central bank if some council members have their way. For her first council meeting on Wednesday, Lagarde would want council members to present ideas on how to improve internal discussions. The end of Mario Draghi’s term saw tensions with other governing council members show their dissent in public, stemming from seemingly unilateral decisions by Draghi when he would announce changes to monetary policy before council discussions. Members would also want votes on monetary policy as well as published accounts of its meetings showing voting positions. At present, voting is only done at the president’s initiative and accounts of meetings never show member positions where a vote has been made. The euro closed weaker at $1.1018 while yield on 10Y and 30Y DBRs was lower at -0.263% and 0.268%.
Asian markets were mostly lower on Monday as sentiment on trade war resolution turned negative in addition to continued unrest in Hong Kong. President Trump remarked that he no tariff rollback plan had been agreed on while acknowledging that China wanted this to happen. The NIKKEI closed a somewhat muted 0.26% lower while the ASX actually rose 0.72%. The CSI tumbled 1.83% as soaring pork prices pushed October CPI to 3.8%, the highest in some 8 years. The HANG SENG plunged 2.62% as protests turned ugly with the police shooting at least one protestor as demonstrators blocked transport during the morning commute.
Aramco published the long-awaited prospectus on Saturday for its IPO but left out some key information sought by investors. The prospectus detailed such information as projections for the future up to 2050 and Aramco for the first time acknowledged that oil demand may have peaked when as recently as February CEO Amin Nasser dismissed concerns about the growth in oil alternatives as “not based on logic and facts”. While Aramco outlined several scenarios including a worst-case in which transition from fossil fuels moves faster resulting in peak oil demand in the late 2020s, investors are still guessing on such details as number of shares on offer, price range or even a tentative date for the listing.
The IMF said it needs to know Argentine President-elect Alberto Fernandez plans on the economy before it can conduct a debt-sustainability analysis for beleaguered Argentina. The Fund’s spokesperson Gerry Rice said debt restructuring is completely at the instigation of the member country and that IMF’s capacity to restructure is constrained by the Fund’s legal and policy framework. Fernandez said the government will have “difficult” negotiations with the IMF citing the state of the economy. “The economy has to recover… and that way it’ll have dollars to face its obligations,” the President-elect said in an interview. The peso closed about flat at 59.5032 to the dollar while ARGENT 28s and 48s traded at all-time lows, in the high 36s and low 37s respectively.
Russia wants in on the growing demand for green bonds globally. The Moscow Exchange is aiming to launch three issues of ruble-denominated green bonds by year-end having introduces new listing rules to support such securities. While foreign investors account for some 30% of the RFLB market, only a tiny share is in the corporate ruble debt market and the MOEX is hoping more foreign investors will be attracted by such bonds. Green Russian bonds remain a tough sell however for the world’s fourth largest carbon emitter. That the Economy Ministry only last week ditched plans to set greenhouse emissions targets for companies will only add to the prevailing sentiment over Russia’s commitment to fight climate change. The ruble closed weaker at 63.8064 to the dollar while RUSSIA 29s and 47s were higher, trading in the mid 108s and low 118s respectively.
South African manufacturing contracted for a fourth month running in September, the worst run since 2017. Production shrank 2.4% YoY compared to a revised 1.5% slowing in August and far worse than median expectations in a Bloomberg poll of 0.9% decline. The slowing in manufacturing worsens a poor Q3 performance for the economy that is grappling to emerge from a recession and is forecast to expand only 0.5% in 2019. Manufacturing, which accounts for about 14% of the country’s GDP, contracted 0.9% in Q3 from the previous quarter. The rand closed weaker at 14.8533 to the dollar while SOAF 29s and 49s were lower, trading in the low 99s and mid 96s respectively.