US stocks had a mixed session to kick off the week with rates continuing to tick higher. The DOW managed to push higher, gaining 0.21%, while the S&P and the NASDAQ shed 0.52% and 0.52% respectively. The rally in energy stocks on supply concerns was overshadowed by the move higher in treasury yields, pushing rate-sensitive sectors such as tech lower. 10Y yields closed higher at 1.4871%.
The FTSE opens weaker, following Monday’s 0.21% loss as supply bottlenecks surface in the UK with fuel running out at service stations. The fuel crisis is at risk of extending to the delivery of other basic grocery items amid a shortage of truck drivers with the government set to rope in the army to help mitigate shortages. The government has also had to grant temporary visas for truck drivers, a U-turn on a post-Brexit move to limit work-based immigration from the EU. The pound closed slightly firmer at $1.3698 while yield on 10Y UKTs closed higher at 0.952%.
Asia stocks were mostly lower on Tuesday as concerns on Chinese power outages weighed on the region. Beijing’s efforts to rein in emissions to tackle climate change has seen reduction in power output from coal power plants in turn forcing the closure of factories in some regions. The CSI managed a 0.13% gain nonetheless as industrial profits rose over 10% YoY; the HANG SENG was similarly buoyed, gaining 1.27%. The ASX and NIKKEI were weighed down with the rest of the region, closing 0.19% and 1.47% lower.
The lira opened the week a little firmer at 8.8220 to the dollar, reversing Friday’s slump in the aftermath of the MPC’s surprise 100bps rate cut. The cut was preceded by the central bank’s policy shift on inflation with Governor Sahap Kavcioglu instead focusing on core inflation, which stood at 16.75% – 250bps lower than the headline figure. TURKEY 31s were weaker, with yield up some 9.3bps about 6.80%.
Brazilian economists held their Selic forecasts in the latest BCB survey following the 100bps hike to the Selic last week; the end-2021 remained at 8.25%, 2 percentage points above the Selic at 6.25%. End-2021 inflation was slightly upped to 8.45% however while GDP growth held at 5.04% for 2021. The real closed weaker at 5.3911 to the dollar while yield on BRAZIL 30s was higher, about 4.17%.
Brent crossed the $80/bbl mark on Tuesday, touching levels last seen in 2018 as supply concerns emerge heading into the northern winter. Damage to oil infrastructure in the Gulf of Mexico following recent hurricanes adds weight to a resumption of normal production while top African producers Angola and Nigeria may struggle to boost output to OPEC+ quotas until 2022. Analysts also predict that rising LNG and coal costs may also force a switch to oil for heating further buttressing the case for higher prices.