Reprieve for Huawei Ban

UNITED STATES

US stocks continued their downward trend as investors had concerns over how the Huawei ban would affect US companies. Tech-heavy NASDAQ led the slide at -1.46% with the S&P and DOW in similar fashion down 0.67% and 0.33% respectively. The Trump administration issued a licence on Monday that would allow US companies to continue business with Huawei in a seeming reprieve for phone users and broadband networks. The licence is for only 3 months though, and the commerce department determined that operators should have taken measures not to critically depend on Huawei equipment in that time. Yield on 10Y USTs was up at 2.41%.

UNITED KINGDOM

Theresa May is considering plans to win over Labour politicians for her Brexit deal by including a tighter customs relationship with the EU. The customs-union type arrangement would guarantee no checks on goods crossing UK borders from the EU. May’s team is weighing whether to go ahead with the customs arrangement plan despite the breakdown in the talks with Labour when they put the Withdrawal Agreement Bill to a vote next month. The pound continued its slide against the dollar closing at 1.2696 while yield on 10Y UKTs was up 3bps to 1.06%.

EUROPEAN UNION

Analysts are warning that Germany’s economy is still weak despite picking up in the first quarter. The economy expanded 0.4% in Q1 having stagnated for most of the second half of 2018. While the German central bank pointed to increased private consumption, a bounceback in auto sales and improved construction figures, risks still linger particularly in the vehicle industry with the US ban on auto exports just on hold. The euro was slightly higher against the dollar at 1.1168 while yield on 10Y DBRs gained 2bps to close at -0.081%.

ASIA

Asian stocks were mixed in afternoon trading as they reacted to the temporary reprieve on the Huawei ban by the US government. The Nikkei and the Hang Seng were down 0.14% and 0.24% respectively while the CSI was in the green at 1.23%. The yuan, oftentimes a barometer for progress in US-China trade talks, has lost 2.7% against the dollar since Trump tweeted about the tariffs and is closing in on the symbolic figure of 7 to the dollar. The offshore yuan, which is less subject to control by the central bank hit 6.945 on Friday and the market is waiting to see whether Chinese officials will step in to stem its slide.

RUSSIA

Companies working on Nord Stream 2’s natural gas pipeline may be subject to US restrictions in the near future. US energy secretary Rick Perry confirmed this in Kiev where he was leading a US delegation for the swearing in of new Ukrainian President Volodymyr Zelenskyy. He said he expects the House and Senate to prepare the bill on restrictions. This has however not swayed any of the contractors with a statement from Nord Stream 2 saying none of the contractors have pulled out. The ruble gained slighty to the dollar at 64.5766 while RUSSIA 47s likewise gained closing in the high 104s.