• Asia stocks at 17-month low as China lets yuan slip. China’s central bank fixed its yuan at 6.9019 per dollar on Tuesday.
• Dow: After 3-day downtrend and a drop of 200 points the Dow rises for the first time.
• Sovereign debt markets were calmer overnight whilst the 10 yr US Treasury maintained its 7 and a half year high.
• Oil prices are steady but up 0.6% after a late boost on Monday. Supply side shortages from Iranian sanctions claims the move.
• Google bug caused Shares of Google parent Alphabet to fall more than 2 percent immediately after the report before paring some losses. The stock was last seen roughly 1 percent down.
• The IMF cuts its global growth forecasts due to trade tensions, global economy now expected to grow at 3.7 percent this year and next year — down 0.2 percentage points from an earlier forecast.  

Asian overnight: Japanese markets have led the declines, with the likes of the Nikkei and Topix playing catch up following yesterday’s bank holiday. The Hang Seng is the one outlier, with the market trading marginally higher despite declines in Japan, China, and Australia. A wider bearish trend remains in place with fears over a Chinese slowdown coupled with Italian fiscal uncertainty.

China’s stimulus package announced on Sunday may have a positive effect for EM’s by helping to counteract a strengthening dollar and high interest rates. For many it could mean a continuation of imports and commodity prices - miners and commodity exporters should be very happy. There’s also a chance for some EM’s that government led fiscal stimulus may be initiated to counteract some of the effects seen from the US-Sino trade war. Brazil, a major source of imports for China, is one of the key emerging markets to keep an eye on. This is especially important as monday saw Brazilian stocks soar the most since 2017 after far-right candidate won the first election round. Far-right candidate Jair Bolsonaro garnered 46.7 percent of the votes in Sunday's first round. The Brazilian real rallied more than 2 percent against the U.S. dollar.   

Despite China’s best efforts to not devalue the renminbi, the currency took a hit on Monday sliding around 0.9%. Here lies the most prominent risk which could all but negate any benefit discussed above: a weak RMB. Increased relative costs, bad sentiment, and a fear of money leaving China could have some serious teeth, so anyone thinking about an EM index or localised commodity exporter trade should keep an eye on a potentially devaluing RMB as it tries to push to the psychologically important 7RMB to the dollar.

UK, US and Europe: Data-wise, there are few economic releases to watch out for, with the German trade balance already released earlier this morning. Interestingly, we have seen the German trade figure come in significantly higher, yet this remains below the figure two-months ago. With a distinct lack of any significant economic releases today, watch out for the ongoing themes of bond yields and trade wars as key drivers.

South Africa:  Global equity markets are trading flat to lower this morning, suggestive of a flat to lower start for the Jse AllShare index. Commodity prices are off their worst levels although they remain under pressure. The rand has started to renew some strength following yesterdays Finance Minister induced weakness, although remains at depressed levels in the short term. Tencent Holdings is down 1.4% in Asia, suggestive of a soft start for major holding company Naspers. BHP Billiton is up 0.3% in Australia suggestive of a marginally positive start for local resource counters.  

Crude oil futures up during mid-morning trade in Asia Tuesday. At 10:48 am Singapore time (0248 GMT), the December ICE Brent crude futures was up 31 cents/b (0.37%) from Monday's settle at $84.22/b, while the NYMEX November light sweet crude contract was up 31 cents/b (0.42%) at $74.60/b. This is despite expected mild build in US crude inventories due to ongoing concerns about supply pushing prices higher.

Economic calendar - key events and forecast (times in BST)

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

• Airbus deal to save Emirates has reached impasse amid drawn-out talks involving 36 A380 superjumbo’s engines. Further Airbus have appointed Guillaume Faury as next CEO
• WPP said that Ford had appointed a competitor as its lead creative agency, but that WPP would still be responsible for the Ford brand in key regions and channels.
• Wood Group reported it had won contracts worth a combined $250 million from the US energy sector so far this year. 
• Aviva CEO Mark Wilson will step down, although he will remain with the group until April 2019. It added that the firm continued to perform in line with forecasts, and remains on track to hit operating earnings per share growth of 5% in 2018. 
• Unite Group said that full-year rental growth from its portfolio was in line with its 3-3.5% target. It added that its portfolio for the 2018/19 academic year was 98% let. 

Commerzbank upgraded to overweight at JPMorgan
Kuehne + Nagel upgraded to outperform at RBC
Schroders upgraded to buy at Berenberg
Telecom Plus upgraded to buy at Peel Hunt
Atlas Copco cut to underweight at Morgan Stanley
RWE downgraded to hold at HSBC
Royal Mail downgraded to hold at HSBC
Sage downgraded to underweight at Barclays

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