Upbeat Boeing news sent the blue-chip DOW higher on Monday on a day other US stocks closed in the red. Boeing shares rose 4.55% after the aircraft maker said it expected the 737 Max to return to the skies in January and that shipments to customers would resume as early as December. The surge in Boeing sent the DOW just in the green at 0.04% to continue the winning streak while the S&P and the NASDAQ shed 0.20% and 0.13% respectively. Bond markets were however closed for Veterans Day.
Britain dodged a recession in Q3 after posting growth of 0.3% over Q2. The growth was however below expectations and the 1% YoY growth was the weakest since 2010. Consumer spending was strong and coupled with increased government spending, the effect of weak business investment was offset. Manufacturing was flat however with a recovery in vehicle output preventing a contraction in the sector. Curiously, Brexit hoarding was muted as inventories actually fell in contrast to the surge ahead of the initial March 29 deadline. The pound closed higher at $1.2860 while yield on 10Y and 30Y UKTs closed higher at 0.811% and 1.321% respectively.
Asian markets were mostly higher on Tuesday weathering the downbeat sentiment over tariff rollbacks by President Trump as well as continued protests in Hong Kong. Following Monday’s violence in Hong Kong which saw one demonstrator and another man set on fire, leader Carrie Lam suggested police would take harsher measures to quell protests which continued into Tuesday. The HANG SENG closed 0.52% higher nonetheless while the CSI and the NIKKEI were 0.17% and 0.81% up on the day. The ASX however closed lower at -0.29%,
Lebanon’s central bank chief Riad Salameh addressed a packed press conference on Monday where he said that the bank will keep defending the currency peg of 1,500 pounds to the dollar set in 1997. While the official rate remains at that peg, the parallel market rate for dollars has surged as much as 1,900 pounds per dollar in some cases as the market seeks dollars. Banks had been closed for two weeks and on reopening last week depositors rushed to withdraw their money prompting banks to impose varying capital controls, in turn fueling the unrest. Pointing to the $38 billion reserves at the central bank, Salameh said the bank is able to use these to support the currency and will not impose capital controls or haircuts on customer deposits as had been suggested in some circles. LEBANs have continued their sell-off with Monday’s prices on LEBAN 21s, in the low 21s, being 4 points lower than the previous Monday’s.
Brazil’s former President Luiz Inacio Lula da Silva addressed a crowd of supporters on Saturday following his release from prison last week. The former president, imprisoned on corruption charges following the Carwash corruption investigation, was released after the Supreme Court ruled in a tight 6-to-5 decision that a person cannot start serving a sentence before all appeals have been exhausted as in the case of Lula. Lula took the opportunity to attack President Jair Bolsonaro’s market-friendly policies and pledged to travel around Brazil and Latin America offering support to leftist leaders. There is concern that the speech may incite violence as amid the risk of supporters of Lula and Bolsonaro becoming radicalised. The real closed firmer at 4.1481 while BRAZIL 29s were about flat in the low 105s.
Bank of Russia Deputy Governor Ksenia Yudaeva told reporters on Monday that the central bank will evaluate the impact of budget spending before the December rate meeting. With the bank having already acknowledged that risks are tilted towards disinflation and seeing inflation slowing to 3%, the market was cautiously expectant of another rate cut. The central bank’s deputy chief’s remarks in Parliament fueled expectations further after she admitted that the bank sees “certain room for easing”. She however pointed out that the impact of measures already taken would need to be taken into account as the rate was now “in the middle of the neutral range.” The ruble closed slightly weaker at 63.8910 to the dollar while RUSSIA 29s was about flat, trading in the mid 108s.
Analysts, including Eurasia Group and Goldman Sachs, are of the opinion that Kenya’s recent repeal of the interest-rate cap law may not be enough to accelerate the renewal of an IMF credit facility amid a widening fiscal deficit. The bill to scrap the law which capped interest on loans at 4 points above the benchmark rate was signed into law by President Uhuru Kenyatta last week and is in line with IMF recommendations. Revenue shortfalls have led to a revision of the 2019-20 fiscal deficit to 6.2% of GDP from an earlier 5.6%. Conditions for a previous IMF facility required that the country attains a deficit of 3% of GDP by 2022 but with the gap having widened to 7.7% for the year up to June 2019, projections are that the 3% target will likely be unachievable. Add to it, the decision to shift the debt limit to an absolute figure, rather than a percentage of GDP, concerns are rife that the government plans to ramp up borrowing even as debt-to-GDP ratio stands at 60%, higher than the 50% target. The shilling was slightly firmer at 102.55 to the dollar while KENINT 28s were slightly lower, trading in the high 106s.