Who has faith in emergings?

Macroeconomic environment Japa n : June headline inflation stable at 0.7% (prior: +0.7% ) , while core inflation (excluding food) reached 0.8%. Canada : June inflation stronger-than-expected at +2.5% (consensus: +2.3%; prior: 2.2%). US : no statistics, but two statements by Donald Trump, who ( i ) told CNBC he’s “ready to put tariffs on all $505bn of Chinese goods imported to the US”, and (ii) tweeted about the Federal Reserve that “t ightening now hurts all that we have done ”. Equities Volatile session on account of Donald Trump’s outbursts. European equity indices closed lower, with an underperformance by the DAX. Auto sector underperformed sharply in Euro, so too basic resources, whereas defensive sectors outperformed. S&P500 was flat Friday while MSCI EM$ outperformed (+0.89%) . Q2 corporate earnings continue at full swing this week starting with Alphabet today. Bond markets / Derivatives Tricky session for EZ sovereign bond markets, which were up in early trading (due to the trade tensions) before retracing in reaction to the bombshells from Claudio Borghi and Donald Trump. All curves underwent a bear flattening (+2bp-3bp for core), with a widening of peripheral spreads, BTP leading from the front. Against swap, spreads widen ed in anticipati on of the we ak supply this week (€9bn vs. €15bn). Implied volatility surfaces edged higher in reaction to realised volatility, in particular in the upper right corner. Money markets / Central banks Speech by James B ullard . In contrast to the US 3-month Libor-OIS spread, the TED spread recovered intraday, up to 36.8bp. The Euribor 5Y 3s6s extended its decline to 6.7. Eurodollar contracts and the Dec 19 Eurodollar contract headed lower Friday, whereas the Dec 18 inched higher. FX The US dollar weakened on Friday in reaction to Donald Trump’s comments. The DXY dollar index pulled back to 94.5, its level at Monday’s opening bell. After rebounding in late trading Thursday after earlier comments, the euro extended its rise in reaction to the latest outburst, this suggesting the US dollar could be weaker in the short term. The EUR/USD closed just about unchanged over the week at 1.17, up from its week’s low of 1.1585 set Thursday afternoon. Very few currencies weakened against the greenback on Friday. Of the G10 currencies, those having most struggled earlier in the week rebounded on Friday (sterling and Canadian dollar ). As regards emerging currencies, the Brazilian real and EEMEA currencies outperformed their peers. Yen climbs (+0.44% vs USD) this morning as BOJ is in focus with speculation s on a potential QE fin e -tuning. Commodities Oil rose slightly on Friday , still supported by Thursday’s comments from Saudi Arabia implying the Kingdom would not oversupply the market. However, prices fell on the week with US-China trade tensions and indications that the US may grant limited waivers to Iranian crude offtakers . Gold rebounded Friday after declining five sessions in a row.