Stocks Brush Off Last Week Jitters to Open Week Higher


European stocks broke off from the previous week’s selloff to start the week on a high. Monday’s 1.66% gain for the STOXX and 2.38% rise for the FTSE marked a positive start to the week with Wall Street counterparts closed for a holiday. The DAX also closed 2.00% higher despite German manufacturing data showing that July had recorded a 1.2% slowdown month-on-month. Elsewhere, EU_UK trade talks will resume on Tuesday amid reports that the UK plans to pass legislation overwriting parts of 2019 withdrawal agreement pertaining to Northern Ireland.


Asian stocks were higher on Tuesday even as some disappointing data came through for Japan. The NIKKEI closed 0.79% higher despite the Japanese economy having contracted 7.9% QoQ in Q2. The ASX led gains, up 1.06% while the CSI and the HANG SENG closed 0.72% and 0.08% higher, respectively.


Brazil recorded a third straight month of growth in industrial production with July notching 8% month-on-month increase; this was significantly above a 5.9% median estimate in a Bloomberg survey even as YoY production fell 3%. IHS Markit PMI manufacturing reading for August also came at 64.7, the highest on record amid output gains in 25 of 26 surveyed sectors.


The Russian economy appears to have weathered the COVID-19 storm going by latest economic forecast with a 4.8% expected contraction according to the latest Bloomberg survey. Analysts suggest that the reduced reliance on external capital since 2014 sanctions and the low inflation and large reserves may have played a significant factor in the limited economic fallout; the government expected as much as a 10% slowdown in March. The ruble closed slightly weaker at 75.7612 against the dollar while RUSSIA 30s were about flat, trading in the mid 114s.


The SSA space was largely muted on Monday with Eurobonds trading flat to lower in the absence of any major news. Flows were seen later in the session primarily in ANGOL ahead of a postponed IMF review. South Africa Q2 GDP data is expected later in the day with estimates of 47.2% contraction YOY, a record slowdown.