German ConCourt Threatens to Stop Bundesbank from Further ECB QE Programmes


US stocks closed in the green on Tuesday as oil prices rose with the reopening of major economies after the COVID-19 lockdowns. The NASDAQ led gains, up 1.13% while the S&P and the DOW rose 0.90% and 0.56% higher respectively. Yield on 10Y USTs closed higher at 0.6619%.


The COVID-19 death toll for the UK became the highest in Europe after government data showed 29,247 deaths so far on Tuesday compared to 29,316 in Italy. The data may in fact be understated with the Office for National Statistics saying 42,000 more deaths than normal had been recorded since the virus outbreak began in earnest mid-March. The pound closed about flat at $1.2435 while yield on 10Y UKTs was lower at 0.206%.


The German constitutional court questioned the legality of the ECB’s monetary policy in a ruling on Tuesday. The court ordered the German government to see that the ECB carries out an assessment of the QE programme to ensure that the economic effects did not outweigh other policy objectives. The court warned it could prevent the Bundesbank from participating in further asset purchases, a significant threat given the ECB’s recent signals to increase its €750 billion package under PEPP. The euro closed lower at $1.0840 while yield on 10Y DBRs were lower at -0.578%.


Asian stocks were higher on Wednesday as investors warmed up to signs of reopening of global economies. The CSI resumed trading after holidays to a 0.63% gain while the HANG SENG continued with its green streak, closing 1.13% higher. The ASX was lower however, down 0.42% even as retail sales data showed growth in March as well as for Q1.


The CBRT raised the limit for FX swaps lenders can have on their books to 40% from 30% in a move that should help hold back the lira slide. The central bank has been under fire for burning through reserves to defend the currency with the lira close to its all-time low of 7.2362 to the dollar recorded in August 2018. The move follows a directive to limit access to lira liquidity for foreign traders in a bid to limit short selling. The lira closed weaker at 7.0739 to the dollar while TURKEY 29s were higher, trading in the low 99s.


Argentina’s tax revenues fell 10% in April from the March figures amid a nationwide lockdown to contain COVID-19. This marked a third straight monthly drop and marks yet another grim year in store for the country that is set to default for a ninth time on debt and have its economy contract for a third straight year. The peso closed weaker at 67.0052 to the dollar while ARGENT 48s were lower, trading in the low 23s.


Kenya plans to introduce a 1.5% tax on online transactions as the government looks to cash in on the industry thriving during the coronavirus pandemic. The government will also look at levying a minimum tax on firms regardless of profitability and the draft bill will be presented to Parliament on Wednesday. The shilling closed firmer at 106.15 to the dollar while KENINT 28s were higher, trading in the mid 92s.