US stocks closed lower for a third successive day as investor sentiment got soured by President Trump’s remarks regarding trade war resolution. Speaking on the sidelines of the NATO meeting, Trump told reporters that it may be “better to wait until after the election” before concluding the trade talks. The DOW led the decline, closing 1.01% down while the S&P and the NASDAQ shed 0.66% and 0.55% respectively. Treasury yields tumbled with 2Y and 10Y USTs closing at 1.5380%(-6bps) and 1.7157%(-10bps) respectively.
Britain’s push to introduce a digital sales tax may put it on a warpath with the US if the case with France is anything to go by. Prime Minister Boris Johnson promised to go ahead with the tax just hours after the US announced tariffs on France over a similar move. While the British version of the tax is at 2% compared to France’s 3%, the move may draw the ire of President Trump nonetheless who alleges that the tax unfairly discriminates against US tech companies. The pound closed higher at $1.2995 while yield on 10Y and 30Y UKGs closed lower at 0.670% and 1.191%.
Asia stocks were lower on Wednesday following President Trump’s remarks that a US-China trade deal may not come until after the elections. The CSI closed 0.23% lower while the HANG SENG shed 1.25%. The NIKKEI trimmed early losses to close 1.05% under as parliament approved the US trade deal while the ASX slipped further from morning losses to close 1.58% lower as the economy grew a modest 0.4% QoQ despite monetary easing and tax cuts.
Lebanon’s central bank is planning to cut interest rates as it seeks to ease the country’s economic crisis. Addressing a conference of bankers, bank governor Riad Salameh said the decision will be formalised soon. In addition, the bank is also considering formalising capital controls to stem the outflow of dollars with an equivalent $109.2 million having been withdrawn per day for the last two months. The capital controls, Salameh said, would be temporary until a government is formed and the economy normalises. While officially the Lebanese pound trades at 1,507.50 to the dollar, capital controls already instituted by banks have resulted in a parallel market where the rate is 30% higher. LEBAN 21s continue to trade lower closing in the high 55s on Tuesday.
Brazil’s economy managed to beat expectations in Q3 as GDP grew 0.6% in Q3 compared to the previous quarter against expectations of 0.4% in a Bloomberg survey. The expansion was on the back of growth in private investments (2.0%) and agriculture (1.3%) which outweighed reduced government spending. Of the larger Latin America economies, Brazil is making better progress with the economy set to expand 1% in 2019 compared to stagnation in Mexico and deep recession in Argentina. The real closed firmer at 4.2049 to the dollar while BRAZIL 50s were higher, trading in the high 96s.
Non-residents’ share of OFZ was little changed in November according to the latest set of data from the National Settlement Depository. Speaking at a briefing on Tuesday, central bank Deputy Governor Ksenia Yudaeva said the share dipped slightly to 31.4% having stood at 32% as at the end of October. Elsewhere, the ruble managed to weather the risk-off mode prompted by President Trump’s remarks on the trade war closing just firmer at 64.1551 to the dollar, while RUSSIA 29s and 47s were higher, trading in the low 110s and high 122s respectively.
South African GDP contracted in Q3 against expectations of stagnation following slumps in agriculture, mining and manufacturing. The 0.6% YoY contraction was the second quarterly contraction of the year. The rand’s woes following the report were further exacerbated on negative sentiment on the trade war closing at 14.6363 to the dollar to lead emerging market losses on Tuesday. Sovereign bonds were not spared with SOAF 29s touching their lowest, trading in the mid 98s as did SOAF 49s trading on the mid 94s.