UNITED STATES

US stocks started the week with fresh records as the market cheered merger activity in addition to the recent optimism on trade resolution. US National Security adviser Robert O’Brien remarked that a Phase 1 deal by year-end was still possible while the Chinese government called for more protection of IP rights, one of the key US issues. On the mergers, Charles Scwab and TD Ameritrade shares soared on the announcement of a deal that will see the latter being wholly acquired by the former while jeweler Tiffany rose over 6% after European luxury conglomerate LVMH Moët Hennessy Louis Vuitton announced it would buy the American jeweler for $16.2 billion. The NASDAQ led gains at 1.323% while the S&P and the DOW closed 0.75% and 0.68% higher. Treasury yields were lower with 2Y and 10Y USTs closing at 1.6134% and 1.7551% respectively.

UNITED KINGDOM

UK’s decade long austerity is set to end following the December general elections as major parties have signaled a rise in public spending as a proportion of national income. Just this March, the Office of Budget Responsibility forecast largely stable total public spending for the next five years with public spending set to be 39.6% of GDP in 2023-24, well below the 46.6% peak in 2009-10. Boris Johnson’s administration has opened the fiscal taps however with Chancellor Sajid Javid having added some £13.4 billion to 2020-21 public spending pre-elections already. Even after pledges of more spending by Tories, Labour is planning even greater expenditure with Jeremy Corbyn’s party set to spend about £6 for every pound the Tories have planned. The pound closed higher for the first time in a week at $1.2900 as polls showed Tories pulling ahead of Labour. Yields on 10Y and 30Y UKGs were lower at 0.696% and 1.260% respectively.

EUROPEAN UNION

German business confidence edged higher in November for a third successive month according to the Ifo Institute. The Ifo survey showed an improvement in business confidence from an upwardly-revised 94.7 in October to 95 in November, marking an about-turn from an almost uninterrupted decline over the last two years. Economists welcomed the news saying this suggests that weakness may have bottomed out although cautioned that the improvement points to stabilization at near-zero growth rather than an upturn. Manufacturing sentiment was however lower at -5.9 from October figures, albeit higher than the September 10-year low. The euro closed slightly lower at $1.1014 while yield on 10Y and 30Y DBRs was higher at -0.349% and 0.173% respectively.

ASIA

Asia stocks were largely higher on Tuesday spurred by the continued optimism on the trade front. China’s Commerce Ministry announced earlier in the day that top negotiators on both sides had spoken by phone and agreed to continue doing so to add to the momentum. The commitment by the Chinese government for greater IP rights protection as well as the pledge to step up internal cooperation in that regard also added to the mix. The ASx led the advance, closing 0.83% as Westpac rose on plans by the bank’s CEO to resign over the money-laundering scandal while the NIKKEI closed 0.35% higher. The CSI closed a more muted 0.03% higher while the HANG SENG was 0.29% lower. Alibaba’s Hong Kong listing got off to a flyer closing 6.6% above its listing price.

TURKEY

Istanbul may be planning to sell at $500 million of bonds for infrastructure projects according to the opposition mayor Ekrem Imamoglu. Having wrested control from the ruling AKP, the city has failed to find support from state banks prompting the CHP mayor to try to secure funding elsewhere; earlier in the month Imamoglu was in London to look for funding. Should the bond sale get backing from the city council, the bond sale would need to be approved by Treasury and Finance Minister Berat Albaryak, President Erdogan’s son-in-law. The lira closed weaker at 5.7418 to the dollar while TURKEY 29s were lower, trading in the mid 109s.

BRAZIL

The latest weekly survey by Brazil’s central bank saw analysts raise their end-2020 forecast for the key rate higher for the first time this year. Analysts forecast the key rate to close at 4.50% in December, up from a previous 4.25% estimate. Growth estimates for 2020 also picked up for a third straight week with 2.20% growth forecast. Recent data releases – retail sales and economic activity index – have shown signs of life to the economy driving the recent turn in sentiment. The real closed weaker at 4.2276 to the dollar while BRAZIL 29s were about flat, trading in the mid 105s.

SSA

Kenya cut the benchmark interest rate for the first time in over a year on Monday. The 50bps cut on the rate to 8.5% was aimed at propping up an economy “operating below potential” according the central bank governor Patrick Njoroge. The monetary policy committee said growth will pick up in H2 from the 5.6% recorded in H1. The scrapping of the rate cap also gave the bank room to cut as a reduction during the rate-cap era would have kept out more borrowers according to RenCap. The shilling closed weaker at 102.13 per dollar while KENINT 28s were about flat, trading in the high 104s.