UNITED STATES

US stocks rebounded on Friday as positive economic data added to somewhat improved optimism on the trade front following remarks by leaders of the two warring countries. Chinese President Xi Jinping addressed a forum in Beijing saying China was actively working towards a deal with President Trump also remarking that there was “a good chance to make a deal” afterwards. IHS Markit’s flash PMIs for manufacturing and services also came higher in November at 52.2 and 51.6 respectively. The DOW closed higher at 0.39% while the S&P was 0.22% higher although both indices ended lower for the week at -0.5% and 0.3% respectively. The NASDAQ closed 0.16% up but was held back by a Federal Communications Commission vote to classify Huawei and ZTE as national security threats, in turn ending a seven-week advance. Treasury yields were higher with 2Y and 10Y USTs closing at 1.6277% and 1.7706% respectively.

UNITED KINGDOM

The Tories launched their election manifesto on Sunday to a largely warm reception by business. While others were frustrated by the lack of detail on business-specific issues with more attention being given to Brexit and public services, the CBI deputy director-general Josh Hardie noted that industry “will be heartened by a pro-enterprise vision.” The manifesto also promises to exiting the post-Brexit transition period by December 2020 potentially causing a cliff-edge exit without a trade deal having been agreed. The latest polls show that the Labour manifesto did not carry on with the momentum leader Jeremy Corbyn gained following a relatively good showing at a debate with Boris Johnson; a Datapraxis model predicts a Tory majority of 48 with most opinion polls showing a lead of at least 10 points. The pound was up Monday morning having closed at $1.2834 on Friday while yield on 10Y and 30Y UKGs closed lower at 0.705% and 1.270% respectively.

EUROPEAN UNION

Christine Lagarde’s maiden speech as ECB President saw her echo a core message of her predecessor Mario Draghi – the need for governments to chip in with stimulus so as to achieve monetary policy goals with fewer side effects. Lagarde pointed out that eurozone public investment remained “some way below its pre-crisis levels”, noting that the more relevant productive expenditure – infrastructure, R&D and education – had fallen as a share of overall spending. Lagarde’s address came as Eurozone PMI for services fell to 51.5 form 52.2 in October pushing the composite reading lower by 0.3pts to 50.3. PMI for manufacturing was higher at 46.6 helped out by an uptick in German manufacturing PMI to 43.8 from 42.1 in October. The euro closed weaker at $1.1021 while yield on 10Y and 30Y DBRs was lower at -0.359% and 0.155% respectively.

ASIA

Asian stocks rode on the wave of optimism on the trade front to open the week on a high. Friday’s remarks by Presidents Xi Jinping and Donald Trump showed a willingness by both leaders to have a deal although differences still remain unaddressed. The NIKKEI closed 0.78% higher while the CSI and the ASX closed 0.72% and 0.32% up respectively. The HANG SENG led gains, closing 1.50% higher as investors welcomed the majority win by pro-democracy candidates in the local district council elections.

BRAZIL

Brazil continues to struggle with low inflation giving impetus for the central bank to make a widely-expected 50bps cut at the December meeting. Mid-November inflation stood at an annual 2.67%, the lowest since September 2017 despite the Selic being at a record low at 5%. Central bank president Roberto Neto told Congress last week that another half-point cut is possible in December, and a pause thereafter. The real was about flat at 4.1960 to the dollar while BRAZIL 29s and 50s were higher, trading in the mid 105s and low 97s respectively.

RUSSIA

RUSSIA 29s opened the week unchanged having ended last week trading at their highest with yield reaching an all-time low of 3.168%, 15bps lower for the week. The same pattern was observed on RFLB 29s which shed 9bps for the week to reach an all-time low yield of 6.35%. The market is expecting a 25bps cut at the central bank’s December monetary policy meeting according to a note from VTB Capital. The ruble closed weaker at 63.8605 to the dollar.

SSA

S&P cut its outlook on the nation’s debt to negative on Friday citing a growing debt burden among other things. In a statement, S&P said it would lower the ratings if fiscal deterioration continued. Eskom continues to be the major bane in the government’s efforts to rein in debt as it has been subject to billions of dollars in bailouts and it remains to be seen whether recently-appointed CEO Andre de Ruyter – the 11th in 10 years – would be able to turn around the fortunes of the power utility. The rand closed weaker at 14.7160 to the dollar while SOAF 29s were flat, trading the low 99s.