UNITED STATES

US stocks closed slightly higher on Friday, albeit off intraday highs, as officials on both sides of the Pacific announced a Phase 1 US-China trade deal. While the deal included a rollback of some tariffs, including the scrapping of tariffs set to take effect on December 15 – and promises of agricultural purchases by the Chinese, it was scant on detail holding back stocks. Meanwhile, retail sales grew slower than anticipated in November, rising 0.2% against an expected 0.5% according to a MarketWatch poll. The NASDAQ and S&P eked out fresh records, closing 0.20% and 0.01% higher while the DOW rose just 0.01%. Treasury yields were lower with 2Y and 10Y USTs closing at 1.6037% and 1.8226% respectively.

UNITED KINGDOM

Reports suggest the next Bank of England governor will be announced in the coming days following the Tory victory in the general election. While current governor Mark Carney’s term ends in January, the decision to name a successor had been put off until a new government took office after elections. Officials are now calling on chancellor Sajid Javid, who is tipped to retain his post in a cabinet reshuffle due this week, to resolve the issue as he is already familiar with the shortlist of candidates. Treasury officials have however not ruled out waiting until January as the successful candidate may need to undergo some questioning by the Commons Treasury select committee before assuming duties on February 1. The pound closed higher at $1.3331 while yield on 10Y and 30Y UKTs closed lower at 0.791% and 1.282% respectively.

EUROPEAN UNION

European manufacturing continues to be the weak point for the turnaround of the bloc’s economy as the latest PMI data shows the November pickup was reversed in December. Manufacturing in Germany and France came in lower than expected and below November figures with Germany retreating further into contraction with 43.4 while France crept closer to contraction at 50.3. PMI for services picked up however for the two largest economies in the eurozone resulting in the bloc’s composite PMI remaining flat at 50.6. The euro closed lower at $1.1121 while yield on 10Y and 30Y DBRs closed lower at -0.289% and 0.229% respectively.

ASIA

Asian stocks were mixed on Monday despite the conclusion of a Phase 1 deal between the US and China, with the market generally not satisfied with the deal whose details largely remain murky. The ASX closed 1.63% higher while the NIKKEI and HANG SENG shed 0.29% and 0.65% respectively. The CSI was higher at 0.56% as China’s industrial output for November grew 6.2% YoY against an expected 5.0% in a WSJ poll. Chinese retail sales also outperformed, rising 8.0% YoY against a median forecast of 7.6%.

TURKEY

A Financial Action Taskforce report released on Monday warned Turkey to improve “serious shortcomings” in its efforts to combat money laundering and terrorist financing. The international watchdog cautioned that Turkey risked being added to an international “grey list” which could damage its reputation with foreign lenders. In a list of 11 effective measures, the country was reported to need “major” improvements in 9. Turkey will now undergo the International Co-operation Review Group, the monitoring process for flagged countries. The lira fell against the dollar as low as 5.8510 against the dollar on Monday having closed at 5.8061 on Friday. TURKEY 29s were about flat, trading in the low 110s it closed at on Friday.

LATAM

Argentina is set to resume the “tourist dollar” policy last used during the Kirchner era to stem the country’s dwindling reserves. Under the policy, international purchases will attract a surcharge reported to be 20% and will form part of the recovery package to be submitted to Congress on Monday. The government also introduced an export tax increase over the weekend upping the previous 4pesos per dollar for most exports to a fixed charge of at least 9%. The peso closed about flat at 59.8183 to the dollar while ARGENT 28s was slightly unchanged trading in the mid 42s.

RUSSIA

The Bank of Russia hinted at a pause in monetary easing after cutting 25bps off the rate in Friday’s monetary policy meeting. Following five consecutive cuts that have left the rate at 6.25%, Governor Elvira Nabiullina commented that “the space for reductions is shrinking” after shaving 150bps so far this year. While Nabiullina remarked that the odds of further cuts remain the same including at the next meeting in February, she also suggested that these might come later. The ruble pared gains of almost 1% following the comments before closing weaker on the day at 62.8830 to the dollar. RUSSIA 29s were slightly higher trading in the high 111s despite a general rally in emerging markets.