US stocks notched records on Monday ahead of a packed schedule of earnings releases. The DOW led gains, up 0.36% and just shy of 35,000pts, while the S&P and the NASDAQ rose 0.35% and 0.21% respectively. Yields on 10Y USTs closed higher at 1.3645%
The UK removed dividend restrictions on UK lenders concluding that the industry is now able to manage borrower defaults – a key reason for the restrictions at the height of the pandemic. The directive, effective Tuesday, follows a relaxation in December 2020 that capped dividends at 25% of quarterly profit. UK bank stocks were buoyed following the directive, with NatWest up by as much as 3.4% and Lloyds up 1.8% on the lower end. The pound closed weaker on Monday at $1.3883 while yield on 10Y UKTs was lower at 0.651%.
Across the channel, the ECB could take steps to rein in excessive dividend payouts when the cap is lifted later this year. The remarks will dampen outlook for European lenders who are eager to boost returns after the ECB’s ban weighed on stock prices last year. Bloomberg calculations show that ten of the biggest lenders have some €22.2 billion reserved for shareholder payouts. The euro closed lower at $1.1861 while yield on 10Y DBRs was about flat at -0.295%.
Asian stocks were mostly higher on Tuesday, taking cue from Wall Street’s performance on Monday. The HANG SENG led gains, up 1.60% toward the end of the session, on the back of strong performance in tech as Chinese authorities approved an acquisition by Tencent; there had been concerns over stronger regulation in tech. The CSI also closed 0.18% higher with Chinese exports and in turn trade balance, performing better than expected. Elsewhere, the NIKKEI was up 0.52% while the ASX was a slight 0.02% lower.
Turkish unemployment slowed to 13.2% in May according to the latest release from TurkStat; April’s figure was revised to 13.8%. The figure came lower as more people stopped actively looking for employment during the May lockdown with workforce shrinking 481,000 while the numper of employees shrank 216,000. With government support for job retention ending in July, the employment numbers may be in for a bumpy ride unless economic activity rebounds. The lira closed firmer at 8.6398 to the dollar while yield on TURKEY 31s was 2bps lower at 6.224%.
Manufacturing production for May underperformed, falling 2.6% from April levels against expectations of 0.5% growth. The news came as protests continue in the country over the arrest of former president Jacob Zuma. The protests have seen closures of major highways as well as other businesses amid incidences of looting and property destruction. With growing numbers of COVID-19 infections, the recovery looks to be facing yet another set of bumps. The rand closed weaker at 14.4030 to the dollar while yield on SOAF 30s was about 2bps up at 3.940%.