US stocks notched another set of records on Monday ahead of the Fed meeting on Wednesday. The DOW and S&P closed 0.24% higher each while the NASDAQ gained a comparatively muted 0.03% as strong performance in big tech just outweighed selling in Chinese tech. Yield on 10Y USTs closed higher at 1.2896%.
The BoE looks set to continue its accommodative stance for a while longer ahead of next week’s meeting. Monetary Policy Committee member Gertjan Vlieghe became the latest member to rule out any attempts at slowing down stimulus saying the economy has not yet reached full employment. With only two members having indicated support for scaling QE, the 8-member committee looks set to maintain the status quo. The pound closed firmer at $1.3818 while yield on 10Y UKTs closed lower at 0.571%.
Chinese tech shares continued reeling from the latest regulatory clampdown for a third day. The CSI traded 3.53% lower with a strong showing in industrial profits (20% up YOY in June) failing to rein in the slide; the HANG SENG was similarly lower, down 4.75% late in the Asia session. The ASX was 0.50% higher while the NIKKEI rose 0.49% ahead of an address by the BoJ governor.
The IMF signaled that it would continue support for Tunisia as the country reels from President Saied Kais’ decision to fire the government and suspend parliament following anti-government protests. BTUN 25s, which shed some 5pts on Monday in the aftermath, opened steady on Tuesday. Sovereign bonds of regional peers Morocco and Egypt were little changed even as the protests triggered memories of the 2011 Arab Spring which reverberated across the Middle East.
Brazilian economists upped their end-2021 estimate of the Selic to 7% as inflation continues to heat up; mid-July inflation came at 8.59% YoY, some way above the central bank’s 3.75% target. The high print came amid a drought-induced soaring in electricity costs pushing economists to up their end-year estimate of inflation to 6.56% from 6.31%. The median estimate for the rate hike at the October meeting is now 100bps. The real closed firmer at 5.1765 to the dollar while BRAZIL 30s were about flat, trading about 3.75%.