US futures and European and Asian equities are in the green this morning after a challenging week for the equities markets which ended the week in the red. The positive sentiment this morning is backed by the reopening of businesses amongst most major economies. Similarly, oil continues its ascent on the back of pricing of the global economy restart but also as more supply cutbacks are announced by OPEC, OPEC+ and other members. Another positive announcement this morning is that the EU is allowing its short sell bans to expire as of tomorrow’s trading including that of Italy’s. Turkey announced that it will maintain its ban
Still Fed Chairman Jerome Powell drew the attention of the markets when he warned of significant asset price declines particularly in commercial real estate which was already highly priced if the pandemic is not contained and worsens and until a vaccine is produced. US data on Friday was particularly dire as US retail sales were the worse on record as was factory output.
Last week marked the first week that saw some bounce back in peripheral EGBs both on the back of optimism of the European economies restart and also as some upcoming rating agency reviews of the debt of France, Austria, Cyprus, Holland and Ireland priced in no upcoming changes to ratings, just to outlooks given the pandemic effect. CYPRUS 49 trade up to 112 handle from 106 lows while SPGB 48s hold steady at 127 handle. BTPS yields have come lower from highs but have not tracked the rest of the peripheral rally of last week with BTPS 44 at 137 handle and 2.6% yield i.e. 100bps spread to SPGB 48s.
The risk off mood that absorbed most of the trading week last week led to a sell off in high beta EM debt from Turkey to Sub Sahara to Egypt. Actively traded NGERIA 25s 31s 49s started finished the week at 89, 79 and 89 handles respectively each down 3, 4 points from beginning of the week highs. Elsewhere in Sub Sahara Angola 25 was bid towards the end of the week and offered at 61 handle while Kenya also sold off but was bid on Friday with Kenya 24s being most traded last week to trade 92 handle.
TURKEY 47 traded low 73 handle to trade back to 76 end of the week, EGYPT 31 corrected minorly to 90 handle but continues its ascent from March lows of 76.
Interestingly HIGH IG EM debt such as Saudi and Russia barely budged in the risk off sentiment and held gains marked thus far. Newly issued KSA 60 is 106 offered this morning from 99 reoffer while Russia 35 trades at 120 handle.
We close the note by remarking that the China PMI manufacturing data is improving which tends to follow through to the US ISM manufacturing index being marked higher.