US Tech Giants Earnings Beat Expectations


Summer volatility would be a rather appropriate way to describe the markets behaviour this week. With half of investors booking holidays and rediscovering vacation places in their own countries (thanks to COVID), any headlines are sending the indices in exaggerated moves, just to fully reverse on the next bit of information.  European equities gapped down yesterday morning and continued selling off throughout the whole session, as COVID continues to act as a headwind to economic recovery with DAX down 3.17% and FTSE 100 -2.3% on the day; US equity futures showed similar moves. The tone was also underlined by some disappointing data out of Germany (2Q GDP shrank -10.1% q/q, vs. exp. -9.0%, while July unemployment fell 18,000 vs. est. +41k) as well as the Eurozone more broadly; June unemployment rate came in at 7.8% (vs. exp. 7.7%). The whole move was completely reversed, however, for US indices, as better than expected macro data in the US (GDP -32.9% vs. est. -34.5%, and Initial Jobless Claims: 1.43mn vs. est. 1.44mn) combined it superpowers with strong earning from the tech giants to lift the markets and send them back to the risk on (NDX ended the day  +0.6%, SPX -0.38%, although S&P e-mini futures ended closed +0.44% in afterhours). UST continued their rally with 10Y yields at 0.54% at the time of writing (down another 3bps yesterday). Oil was showing some wild moves yesterday with Brent sharply selling off to $41.5/b levels at some point just to move straight back up and end the day at $43.3/b.


In Europe, German bunds followed the UST moves with 10Y yields closing down 4bps on the day at -0.54%. SPGB, BTPS a PGB all moved in tandem with Bunds with the curves down 3-4bps. GGB and Cyprus curves, however, underperformed, staying marginally unchanged on the day.


In MENA, HY sector felt heavy with a lot of selling. Turkey continued to be the underperformer of the space with the curve gaining a massive 80bps in yield terms in the last couple of days, as the recent social media control law, tensions with Greece and rumours about the possibility of the exclusion of Turkey from the EM index weighed heavy on investors sentiment. Elsewhere better selling also was visible in EGYPT, BHRAIN and OMAN curves, however to a lesser extent. Bonds traded down 50c-1pt on average. MENA IG continued to trade strong on the other hand with bonds in the long end KSA, QATAR and ADGB up 1.5-2pts on the day.


In Latam, PENOMX, Mexican IG metals and mining company has successfully issued $600 mio worth of bonds, bringing a new 30Y tranche, and tapping the existing 2029s. The bonds were seen trading as high as mid 102s (100 reoffer) late in grey. Elsewhere in the pipeline, the state-owned Banco Nacional de Panama (BCONAL) announced investor calls starting today, ahead of a possible first-time issuance $1bn senior unsecured bond, with proceeds possibly to be used to support the banking system. Interesting to note, Panama has no central bank and so cannot easily flood (or promise to flood) the system with liquidity.


In CIS, bonds trended lower yesterday, following the risk-off tone. RUSSIA curve was up 4-5bps in yield terms, while higher beta names, like UKRAIN 30 widened 15bps in yield. Interesting to note, RUSSIA long end saw better selling yesterday, with bonds being sold by both street and RM accounts.


In SSA, some jittery selling was visible in ANGOL, as some loose bonds came out prior to the IMF review that was scheduled for today (although as per today’s headlines it was delayed again to at least mid-August, as the nation asked for a bigger loan). The bonds traded down 50c on average. Nigeria continued to see better buyers, with the bonds flat to 25c down on the day. GHANA and IVYCST saw some sellers, driving the curves to underperform and trade down 75c-1pt.