Turkish Inflation Cools for the First Time Since October


The UK crossed the 55,000 mark on Tuesday with Prime Minister Boris Johnson now in intensive care as his condition has further deteriorated since testing positive on March 27. Japan declared a one-month state of emergency but will not conform to the restrictions seen across Europe with “basic economic activity” continuing unaffected. Austria, meanwhile, is set to become the first European country to relax its lockdown with the government announcing that non-essential stores will start reopening starting Monday the 13th. The country has been seeing a steady decline in new cases daily with the 342 new cases confirmed on Tuesday marking an improvement from the record 531 on Wednesday 1st April. Wuhan, the original epicentre of the pandemic, finally had its lockdown lifted as China recorded no fatalities on Tuesday; residents are now permitted to leave the city without special authorisation.


US stocks closed lower on Tuesday even as the market anticipated further federal stimulus and seeming signs of the COVID-19 pandemic levelling off. The NASDAQ closed 0.32% lower while the S&P and the DOW shed 0.16% and 0.11% respectively. Yield on 10Y USTs closed higher at 0.7122%.


The British auto industry suffered a decline worse than during the financial crisis in March as the coronavirus brought the industry to a halt. New car registrations fell 44.4% You according to data released by the SMMT – the motor industry association – representing a 200,000 YoY decline in vehicle purchases. The figures further reinforce reports that the global car industry could lose more than $100 billion in 2020 with the UK vehicle market contracting by a quarter in 2020. The pound closed higher however at $1.2332 while yield on 10Y UKTs closed higher at 0.414%.


The European Commission is reportedly considering relaxing state aid rules to allow member states to provide equity aid to companies to help tackle the virus. The proposal may be announced as soon as this week and assistance would be conditional on companies meeting certain stands of governance. This should become the lasts in a series of EU measures to support the eurozone economy with 41 emergency measures having been adopted since the commission announced a framework relaxing general state support for businesses. The euro closed higher at $1.0892 while yield on 10Y DBRs was higher at -0.309%.


Asian stocks were mostly lower on Wednesday echoing Wall Street’s Tuesday session as investors considered potential damage of the coronavirus on economies. The HANG SENG closed 1.24% down while the ASX and the CSI shed 0.86% and 0.19% respectively. The NIKKEI closed 2.12% higher however as the state of emergency started in seven urban areas.


Turkish inflation slowed to an annual 11.9% in March, the first time since October. This came amid plunging oil prices which offset price increases a weakening lira would have spurred. Core inflation, which takes out volatile items such as energy and food, came in higher though at 10.5% YoY. The lira closed firmer at 6.7645 to the dollar while TURKEY 47s were higher, trading in the mid 73s.


Brazil’s rating outlook was revised by Fitch to stable from positive but maintained its BB- rating. Fitch noted that the disagreement between President Bolsonaro and Congress will add to the uncertainty amid the coronavirus. Bolsonaro has clashed with lawmakers pushing against restrictions other countries have imposed to try curb the spread of the virus repeatedly criticising governors who have imposed measures in their various states. The real closed firmer at 5.2237 to the dollar while BRAZIL 50s were higher, trading in the mid 87s.


The Bank of Russia signalled that further cuts are possible this year as the economy reels from plunging oil prices as well the coronavirus. The recent announcement by the government for Russians to self-isolate should add further headwinds with bank governor Elvira Nabiullina saying this could shave at least 1.5% of 2020 economic growth. The ruble closed firmer at 75.5284 to the dollar while RUSSIA 47s were about flat, trading in the high 125s.


Nigeria became the latest African sovereign to get a rating downgrade on foreign currency issues as Fitch downgraded it from B+ to B. Adding weight to Fitch’s considerations for the downgrade, Finance Minister Zainab Ahmed said GDP could shrink as much as 3.4% in 2020. Ahmed however stressed that the country will not seek a suspension of interest payments from Eurobond holders but will seek debt relief from China on bilateral loans. The naira was flat, trading at 386.00 to the dollar while NGERIA 49s were up, trading in the high 79s.