ECB to Hold Rates until 1H 2020 ​

UNITED STATES

US stocks continued in the green following reports that the Trump administration is considering a delay on the 5% tariff on Mexican imports. The report went on to state that if the tariffs do come into effect it may be for just a short while even as Vice President Mike Pence and White House Press Secretary maintained that the tariffs are going to be imposed on Monday. The DOW recorded gains of 0.71%, and in the process notched the longest daily win streak since March, while the S&P and NASDAQ rose 0.61% and 0.53% respectively. Yield on 10Y USTs slid to 2.1174%.

UNITED KINGDOM

As Theresa May winds down her time as Prime Minister, she is hoping to use the time to implement parts of her domestic agenda that were suppressed as Brexit took the most of her tenure. She is looking to leave office with announcements of programmes to overhaul England’s schools and colleges which could cost into the billions. Chancellor Philip Hammond is however determined not to give in and spend the fiscal treasure chest he has built up in case a no-deal Brexit is effected, especially as Treasury is estimating that it would cost upwards of £10 billion pounds. The pound was up marginally at $1.2694 while yield on 10Y UKTs slid 4bps to 0.8246%.

EUROPEAN UNION

The ECB resolved to keep rates on hold until at least 1H 2020 deciding instead to use other tools at its disposal to boost the economy should the need arise. While noting that trade friction would weigh on the bloc’s economy, the central bank nudged its forecasts for economic growth higher with 2019 growth pegged at 1.2% up from 1.1% in March. Forecasts for 2020 and 2021 were however lowered from their March projections to 1.4% in both cases from 1.6% and 1.5% respectively. The bank’s President Mario Draghi mentioned there is enough headroom for fresh quantitative easing but insisted that the bank’s efforts must be matched by an increase in public spending by governments. The euro gained 0.57% against the dollar after the address to $1.1282 before closing at $1.1276 up from the previous day’s close. Yield on 10Y DBRs fell to -0.2404%.

ASIA

Stocks in Asian markets were mostly higher in afternoon trading amid optimism that tariffs could be delayed to allow a deal to be reached between Mexico and the US. With the market closed in Hong Kong and China for a holiday, the NIKKEI was up 0.53% while the ASX was up 0.95%. President Trump said that he’ll make a decision about effecting tariffs on $300 billion more of Chinese exports after speaking with his Chinese counterpart Xi Jinping during the G20 summit.

TURKEY

Turkey’s election board removed and launched disciplinary proceedings against 13 election officials over alleged complicity in the Istanbil municipal elections irregularities. The move comes with rerun, set for June 23, left with just under three weeks. The CHP candidate who had won the March 31 election, Ekrem İmamoğlu, had been critical of the initial decision not to hold the 13 chairs responsible saying “the justification they have issued (for canceling Istanbul votes) has no meaning at all.” The lira closed weaker against the dollar at 5.7793 while TURKEY 47s traded lower at 79.245.

LATAM

The Mexican government offered the White House the deployment of a 6,000-strong police force to man its southern border and stop the inflow of migrants from Central America in a bind to stave off the tariff threat. The move apparently drove an optimistic tone in talks with the foreign minister telling reporters that talks were advancing and Friday could be one of the last sessions. The peso slid to 19.6878 to the dollar while MEXICO 47s were trading lower at 94.779.

RUSSIA

Russian Energy Minister Alexander Novak and his Saudi counterpart Khalid Al-Falih met on Thursday in St. Petersburg but could not come up with a unified response for the production levels of the OPEC+ coalition. The Saudis are bent on extending the production cuts beyond this month but Russia has been non-commital. Rosneft chief Igor Sechin has long been a sceptic of the OPEC+ arrangement and is not backing the cut saying rival US producers will “fill the void and take up the market share.” The ruble rose to 65.0779 to the dollar while RUSSIA 47s closed at 107.485.

SSA

The rand continued its free-fall yesterday dipping to a low of 15.0561/USD last seen in October 2018, the yield on SOAF   4⅞   04/14/26 reached 4.264% on Thursday. Also, in South Africa, President Ramaphosa announced that even though utility giant Eskom may be too big to fail, it may also be too big to support after reports suggest that the $1.5bn annual bailout planned for 3 years will be inadequate to change the ailing giants’ fortunes. In Kenya the Central Bank Governor’s term was renewed by President Kenyatta after he served to restore confidence in the banking system since taking up the appointment in 2015.