When the semiconductor index was soaring in the past few weeks even as semi shipments and revenue forecasts plunged to the lowest since the financial crisis, many said that the market knew something other didn’t.

In retrospect, the market was absolutely clueless and semi stocks and tech names are freefalling today following the overnight news that in the aftermath of Trump’s ban of Huawei, some of the Chinese telecom giant’s biggest suppliers such as Intel, Qualcomm, Xilinx and Broadcom, told their employees they would not supply Huawei till further notice, while Google cut off the supply of hardware and some software services to Huawei smartphones.

As a result of this latest escalation against China’s crown tech jewel, an early push higher in S&P futures fizzled and futures slumped, dropping alongside European stocks, while bonds pared an earlier loss and crude oil advanced. In fact, after some early strength, global markets became a sea of rad with Nasdaq futures leading U.S. declines and pointed to a weak opening in New York…

… while software and chip maker shares helped pull the Stoxx Europe 600 index lower as chipmakers Infineon Technologies, AMS and STMicroelectronics dropped sharply after Nikkei Asian Review reported that German chipmaker Infineon had halted shipments to Huawei.

Stocks took a leg lower just after 4am EDT after twitter account @Money_China published unverified rumours that there had been a break down in US-China trade discussions, and that China will suspend business with all suppliers who have agreed to halt supplying Huawei. 

Investor Jim Rogers told the Reuters Global Markets Forum that he believed Washington and Beijing would soon announce a trade deal, although the current spat would not be the last time Trump tried to exploit the prospect of a trade war: “These are negotiating tactics from Mr. Trump at the moment. What will happen is we will have some good news, the market will have a rally. It will probably be the last rally.”

Others, such as former SNB governor and current vice chairman at BlackRock, Philipp Hildebrand, told Bloomberg TV that “the baseline scenario is not bad” for global growth. “It’s really a risk story. So far we don’t see much of it being manifested in the hard data. It’s really the re-ordering of the global trading system that’s at stake here.”

Equities were mixed across Asia, with regional shares playing catch up to the US, and managing to reverse some of last week’s heavy losses on Monday, after the United States said it would lift tariffs in North America, as investors cheered apparent wins by Conservative incumbent parties in elections in Australia and India. Stocks rallied in Australia and the nation’s currency jumped after a surprise election victory for conservative Prime Minister Scott Morrison.

As we reported on Sunday, Australia’s ruling Coalition led by PM Morrison is set to remain in power for a 3rd consecutive term following the Federal election on Saturday with the incumbents having at least 75 seats vs. 67 seats for Labor, while other reports suggested that the Coalition has managed to obtain a majority

While the Shanghai Composite posted another modest drop (down -0.4%), China’s offshore yuan strengthened, providing a glimpe of hope after the trade war dragged down the currency to a five-month low. The euro steadied after five days of declines as elections for the European Parliament approached. Treasury 10-year note yields erased an earlier advance to trade little changed.

“Market volatility continues to stem from announcements and interpretations of what is going on in trade disputes between the U.S. and its trading partners, but principally China,” said Jasper Lawler, head of research at London Capital Group. “Whilst the latest headlines over Canada are supportive of sentiment, a news bite which increases risk aversion could be just around the corner. Investors know this and are on edge right now. That won’t change overnight. China are unlikely to take Google’s suspension of business with Huawei lying down.”

It wasn’t all bad news: as Reuters notes, on the positive side, a U.S. decision on Friday to remove tariffs on Canadian steel and aluminum prompted Canada’s foreign minister to vow the quick ratification of a new North American trade agreement. The MSCI index of world shares rose 0.08% in early trading, but that gain was almost certain to become a loss by EOD. It remains some 3.6% below its 2019 highs as the sudden return of trade war jitters sent the stock market’s strong rally into reverse.

In rates, 10Y US Treasurys were unchanged at 2.39% after climbing 2bps earlier, while European bonds edged lower with the region’s parliamentary elections in focus this week. German government bond yields moved slightly higher. That followed a fall toward new 2-1/2 year lows last week after investors flocked to safe-haven debt. Austrian yields held firm after a scandal prompted Chancellor Sebastian Kurz to pull the plug on his coalition with the far right at the weekend, raising the chances of a snap election.

In FX, the Australian dollar was the biggest winner, jumping nearly 1% after the center-right Liberal National Coalition pulled off a shock win in a federal election, beating the center-left Labor party. The Indian rupee also rallied after exit polls pointed to a majority for Prime Minister Narendra Modi’s Bharatiya Janata Party and allies. The rupee was last up 1.1%.

China’s offshore yuan rebounded after touching its weakest against the dollar since November on Friday. It last traded up 0.1% at 6.9441 per dollar. Sources told Reuters China’s central bank is expected to use foreign exchange intervention and monetary policy tools to stop it weakening past the 7-per-dollar level in the near term. Meanwhile, the dollar slipped slightly against the euro to $1.1161. Sterling recovered 0.3% to $1.2751 after suffering its biggest weekly loss since 2017 after an apparent collapse in Brexit talks in London.

In commodities, oil prices jumped after Saudi Energy Minister Khalid al-Falih said that there was consensus among the members of the OPEC to maintain production cuts to “gently” reduce inventories (although Russia did not sound nearly as confident). Both U.S. crude and Brent crude jumped more than 1.1% on Monday, with West Texas Intermediate fetching $63.5 a barrel and Brent crude at $73.04 per barrel.  Rising tensions in the Middle East, which have supported oil prices, ratcheted up another notch on the weekend as Trump issued new threats, tweeting that a conflict with Iran would be the “official end” of that country.

Expected data include Chicago Fed National Activity. Pinduoduo and International Game report earnings.

Market Snapshot

• S&P 500 futures down 0.2% to 2,857.00
• MXAP up 0.4% to 154.63
• MXAPJ up 0.6% to 505.86
• Nikkei up 0.2% to 21,301.73
• Topix up 0.04% to 1,554.92
• Hang Seng Index down 0.6% to 27,787.61
• Shanghai Composite down 0.4% to 2,870.60
• Sensex up 3.4% to 39,217.80
• Australia S&P/ASX 200 up 1.7% to 6,476.10
• Kospi unchanged at 2,055.71
• STOXX Europe 600 down 0.1% to 381.11
• German 10Y yield rose 2.0 bps to -0.084%
• Euro up 0.04% to $1.1162
• Italian 10Y yield fell 2.4 bps to 2.287%
• Spanish 10Y yield rose 0.7 bps to 0.882%
• Brent Futures up 0.6% to $72.67/bbl
• Gold spot down 0.2% to $1,275.32
• U.S. Dollar Index down 0.03% to 97.97

Top Overnight News from Bloomberg

• Top U.S. corporations from chipmakers to Google have frozen the supply of critical software and components to Huawei Technologies Co.
• The shock election win by Australia’s center-right government and its agenda of sweeping tax cuts have cast doubt on the outlook for interest-rate cuts. Traders are pricing in a 57% chance of a reduction in the cash rate in June, down from 70% Friday, as the Reserve Bank prepares to release minutes of this month’s meeting Tuesday
• Prime Minister Narendra Modi’s ruling coalition is poised for victory in India’s general elections, exit polls showed, giving it another five years running the world’s fastest-growing major economy despite a jobs crisis and struggling rural sector
• Amber Rudd, the U.K. work and pensions secretary, will lead a group of 60 Tories seeking to stop bookmakers’ favorite Boris Johnson from succeeding PM May and pursuing a chaotic no-deal exit from the European Union
• President Donald Trump warned Iran not to threaten the U.S. or face ruinous consequences as tensions mount between Washington and Tehran
• Japan’s economy beat expectations with growth during the first quarter of the year, but a look under the hood shows that its engine is far from robust as policy makers brace for a sales tax hike in October
• Australian Prime Minister Scott Morrison’s center-right government will command a parliamentary majority with his Liberal-National coalition securing 77 seats in the 151-member lower house
• The People’s Bank of China warned that the escalating trade war could destabilize the global economy, and vowed to continue with targeted stimulus at home while keeping the currency steady
• The Trump administration’s threats to choke Huawei Technologies Co. is hitting some of the biggest component-makers. Blocking the sale to Huawei of critical components could also disrupt businesses of American chip giants like Micron Technology Inc. and hamper the rollout of critical 5G wireless networks worldwide
• China’s yuan, already battered by the U.S. trade dispute, will soon have a catalyst for further depreciation. Offshore-listed Chinese companies will sell the yuan to buy foreign currencies and fund their $18.8 billion dividend bill due from June to August, according to Bloomberg calculations

Asia equity markets were somewhat mixed as lingering trade uncertainty clouded over a buoyant start to the week. ASX 200 (+1.7%) and Nikkei 225 (+0.3%) were rampant at the open with the Australian benchmark at its highest since 2007 following a surprise win by PM Morrison’s ruling Coalition which defied the opinion polls to beat the Labor party and even reportedly secured a majority, while Tokyo sentiment was underpinned by a weaker currency and after much better than expected GDP growth for Q1. However, some of the gains were later pared as China entered the fray in which Shanghai Comp (-0.4%) and Hang Seng (-0.6%) resumed their losses amid US-China trade tensions after reports suggested negotiations were in flux and that talks have stalled, while comments from China were also concerning as Foreign Minister Wang warned the US to not go too far. Finally, 10yr JGBs were lower amid a lack of demand for safe-havens in Japan and after the better than expected GDP numbers, while an enhanced-liquidity auction for longer-dated bonds also saw slightly weaker demand from prior. China Foreign Minister Wang Yi said recent words and actions by US have harmed interests of China and its enterprises, while he added that China oppose these actions and warned the US to not go too far. Wang added that the trade dispute must be solved through negotiation on an equal footing and hopes both sides will avoid escalating tensions.

Top Asian News

• Australia’s Morrison Leads Conservatives to Shock Election Win
• Japan’s Economy Grows in 1Q Despite Global Headwinds
• China Says ‘Wait and See’ on Huawei Countermeasures
• Rupee Jumps With Stocks and Bonds as Exit Polls Signal Modi Win

European equities have kicked off the week on the backfoot [Eurostoxx 50 -1.2%] following on from a mixed lead in Asia with sentiment in Europe dampened on speculation that China will retaliate against Huawei measures [NOTE: THIS IS UNVERIFIED] after Google suspended Huawei from Android access. As such, broad based losses are seen across European equities with Italy’s FTSE MIB (-2.0%) the clear laggard amid a slew of large cap ex-divs. Sectors are mostly lower with defensive sectors buoyed by the risk-averse tone whilst energy names are supported by the price action in the complex. On the downside, material and IT names are the clear underperformers with the former subdued by price action in base metals. Meanwhile, the latter is pressured amid a decline in semiconductor names following reports via the Nikkei that Infineon (-4.6%) reportedly halted shipments to Huawei, in turn moving fellow chip names lower in sympathy including Dialog Semiconductor (-3.4%), ASM (-3.0%) and STMicroelectronics (-8.3%).  On the flip side, the aforementioned Google/Huawei news supported Huawei’s European competitors with Nokia (+2.0%) and Ericsson (+1.0%) shares underpinned by the reports. Finally, in terms of individual movers, Ryanair (-2.7%) fell as much as 5% at the open following earnings coupled with a downbeat fares outlook. Elsewhere, Deutsche Bank (-3.0%) shares slid after anti-money laundering specialists at the Co. flagged up suspicious financial transactions involving legal entities controlled by US President Trump and his son-in-law Kushner. Turning to some analysis from Nomura, Quant Insights note that CTAs seem to be looking for opportunities to unwind long positions in US equity futures. Nomura also predicts that this week, US equities “looks likely to be influenced less by trend-following trading based on systematic rules than by fundamental trading based on discretionary calls.”, given the current supply/demand balance.

Top European News

• Merkel Pressured by Her Successor to Resign After EU Vote
• Labour’s Corbyn Moves Closer to Backing Second Brexit Referendum
• ECB Has to ‘Keep Going’ on Inflation, Knot Says: Corriere
• Salvini’s Chief Aide Turns Against Italy PM Before European Vote

In FX, AUD enjoyed a sharp rebound from recent multi-month lows vs its US counterpart following the weekend Australian election that saw PM Morrison upset the pre-vote odds to secure a 3rd term in office and his coalition gain a majority over the Labour Party. Aud/Usd has reclaimed 0.6900+ status in response having traded down to 0.6862 last week in wake of disappointing jobs data that heightened the prospect of a June RBA rate cut.

• NZD – The next best G10 currency as the Kiwi catches a bid on the coattails of its antipodean peer, albeit hampered by Aud/Nzd cross-flows up to 1.0600 at one stage. Nevertheless, Nzd/Usd hit a 0.6550 overnight high compared to 0.6521 at worst and last week’s 0.6512 base (Friday), as the US Dollar loses momentum broadly after its post-data/survey and China trade war related rally. On that note, the DXY has topped out just above 98.000 and ahead of resistance including a 98.035 Fib and the early May high of 98.102.
• GBP – The Pound has also pared some losses partly on the aforementioned Dollar downturn, but also against a lagging Euro, with Cable bouncing off a 1.2723 trough to just over 1.2750 and Eur/Gbp easing back to 0.8750 from 0.8775. Brexit and UK political uncertainty are still to the fore, but Sterling appears to be benefiting from some short covering/profit taking alongside technical buying, with a Fib in the cross sitting at 0.8779.
• CHF/CAD – Also benefiting from the Buck fade, as the Franc rebounds through 1.0100 and Loonie further from 1.3500+ lows amidst more reports that a deal is done to lift US steel and aluminium tariffs. The Cad may also be gleaning traction from a post-JMMC bounce in crude prices, like the NOK, which is outperforming its Scandi rival with the Eur cross back down under 9.8000 vs Eur/Sek at 10.7600.
• EUR/JPY – As noted above, the single currency is a relative underperformer as Eur/Usd struggles to recover between 1.1168-51 parameters despite reports of bids/support at 1.1150 protecting near term support at 1.1135 and the 1.1112 ytd low. Decent option expiry interest may be keeping the headline pair in check given almost 1 bn running off from 1.1150 to 1.1160 at today’s NY cut, while chart resistance resides at 1.1190-1.1200 in the form of 100 and 200 HMAs. Meanwhile, the Yen has lost a bit more of its safe-haven allure following overnight Japanese Q1 GDP that topped consensus considerably, with Usd/Jpy up over 110.00 and as high as 110.31 at one stage.
• EM – The Turkish Lira has failed to sustain recovery gains towards 6.0000 and higher vs the Greenback yet again after weekend comments from President Erdogan suggesting that it may bring forward its planned purchase of S-400 missiles from Russia rather than delaying the order amidst opposition and the threat of sanctions from the US.

In commodities, the energy complex is ultimately in the green, albeit off highs, as sentiment dampened amidst unconfirmed reports of a deteriorating relationship between US and China. WTI (+0.2%) and Brent (+0.4%) prices are underpinned in the aftermath of the JMMC meeting as key oil figureheads noted that concerns of rising stockpiles outweighed supply issues from Iran and Venezuela. Thus, energy ministers hinted at their dedication to extend the OPEC+ output pact beyond June, although any revisions to the current deal will be decided at next months meeting. Rhetoric from the energy ministers deviated slightly, with sources stating that Saudi Arabia is in no rush to increase production as the Kingdom is satisfied with oil around USD 70/bbl, whilst its Russian counterpart noted that all options are still on the table ahead of June, including a hike in production. Furthermore, sources noted that the Russian and Saudi oil figureheads reportedly discussed two options for June. The first scenario would see an elimination of over compliance currently over 150%, equating to an output cuts just under 2mln BPD, according to calculations. This would mean a continuation of the current deal and an increase in production of around 0.8mln BPD. The second scenario would see an ease of the agreed cuts to 0.9mln BPD from 1.2mln BPD.

Elsewhere, gold (-0.2%) prices lost more ground to the rising Buck with prices now flirting with the 1275/oz mark. Meanwhile, copper prices extended losses amid the souring risk tone given the aforementioned unconfirmed reports regard US/China. Furthermore, last week money managers increased their net short positions in COMEX copper by almost 8.5k lots, holding a net short of 35.3k lots, whilst speculators increase gross shorts by 4.8k lots and liquidated 3.6k gross long positions over the week.

US Event Calendar

• 8:30am: Chicago Fed Nat Activity Index, est. -0.2, prior -0.1
• 9:30am: Fed’s Harker Speaks About Management Science in Boston
• 1pm: Clarida, Williams Take Part in ‘Fed Listens’ Event in New York
• 7pm: Powell Speaks at Atlanta Fed Financial Markets Conference

DB’s Jim Reid concludes the overnight wrap

The job of an analyst is pretty hard work and stressful with your market calls exposed to all who read. So when you get something spectacularly correct it takes a lot of will power not to boast about it. We don’t have any such will power or false modesty so this morning we are patting ourselves on the back for a wonderful call on Friday in the EMR. Yes we correctly predicted that the UK would finish bottom of Eurovision. SPOILER ALERT…… congratulations to the Netherlands. Talking of spoilers, today is about making it through the day without finding out what happened in the final ever Game of Thrones which finished only an hour or so before I type this. 73 episodes, 8 years and one or two casualties later the story has come to a close. This series has generally got slated by the army of fans but I’ve really enjoyed it. I hope I’m still saying that after we watch tonight. Please don’t worry as they’ll be no spoilers in tomorrow’s EMR.

In market terms the real Game of Thrones at the moment is the escalating trade war between the US and China. There’s a lot at stake but at least there aren’t White Walkers. Outside of trade we also have a few interesting events this week. Most fascinating could be the European Parliament elections (Thursday and through to the weekend) although results won’t filter through until Sunday. We also have the key flash May PMIs which may offer some early insight into the impact of trade escalation on sentiment. The FOMC and ECB meeting minutes are also due, along with a heavy calendar of Fed officials speaking.

Looking at these in a little more detail now. The European Parliament elections will be an interesting barometer of the current strength of anti-EU and populist party support, and with it how much they can distrust mainstream (generally EU friendly) legislation. For a full preview, our economists in Europe have written a series of notes. See part 1 , part 2 , part 3 and part 4 here. In the UK, we face the prospect of the newly founded Brexit party winning the most votes (according to recent opinion polls) which will be an uncomfortable outcome for both the UK and Europe.

As for the data, this week sees the start of surveys that cover the trade-escalation period. The highlight will be the flash May PMIs in Europe and the US on Thursday. A reminder that last month the manufacturing reading for the Eurozone bounced an albeit modest 0.4pts off the recent low to 47.9. The consensus for this Thursday is a further modest improvement to 48.2. The services reading is also expected to rise 0.2pts to 53.0 putting the consensus for the composite at 51.8 versus 51.5 in April. For Germany, the manufacturing reading is expected to improve 0.4pts but to a still lowly 44.8, while France is expected to flatline at 50.0. For the US, the manufacturing reading is expected to rise 0.4pts to 53.0. Obviously any signs that trade is denying sentiment will be seized on.

Also worth watching this week given we’re all waiting for the impact of trade on sentiment is the May IFO survey in Germany on Thursday and May confidence indicators in France on the same day.

The FOMC meeting minutes from the April 30-May 1 meeting are due on Wednesday. A reminder that at that meeting Chair Powell emphasised that a good portion of the weakness in core inflation was due to transient factors and pointed to the trimmed mean inflation rate being at the Fed’s 2% target. Powell also sounded more upbeat on the growth outlook, noting a dissipation in downside risks with financial conditions accommodative. That appeared to disappoint the market at the time which was leaning towards a more dovish outcome. The rest of the week ahead is published at the end today.

Turning now to the latest news on the trade war. Bloomberg is reporting this morning that top US corporations including Intel Corp., Qualcomm Inc., Xilinx Inc., Broadcom Inc. and Google have now frozen the supply of critical software and components to Huawei as companies respond to the new US rules. Asian markets are trading mixed with the Nikkei (+0.25%) and Kospi (+0.52%) up while the Hang Seng (-0.43%) and Shanghai Comp (-0.59%) are down. Australian markets (S&P ASX +1.61%) and the currency (+0.73%) are up on the surprise re-election of Prime Minister Scott Morrison in the weekend election. The Indian rupee is also up +0.93% this morning alongside Indian markets as exit polls showed yesterday that the incumbent Modi government is expected to retain power later this week. In terms of overnight data releases, Japan’s preliminary annualised Q1 GDP came in at +2.1% qoq vs. (-0.2% qoq expected) while the previous quarter was revised down to +1.6% qoq from +1.9% qoq. The biggest driver was imports falling much faster than exports thereby signalling that net exports fuelled the growth; however, declining imports signal that underlying demand in the economy remains weak so most analysts see the beat as anomalous. Elsewhere, futures on the S&P 500 are up +0.31% while China’s onshore yuan is +0.14% this morning. Overnight, oil prices (WTI +1.35% and Brent +1.41%) are up as Saudi Arabia and other OPEC+ members signalled their intentions to keep supplies constrained for the rest of the year. A weekend tweet from US President Trump that “If Iran wants to fight, that will be the official end of Iran” is also helping keep the oil price elevated.

In other news, the deputy governor of the PBOC, Pan Gongsheng, said over the weekend that China has the confidence and capability to keep its foreign exchange market stable and ensure that the yuan trades at a reasonable and equilibrium level. Elsewhere, the PBOC said in its quarterly monetary policy report that the escalating trade war could destabilise the global economy, and vowed to continue with targeted stimulus at home while keeping the currency steady. The report said that the government still has room for maneuver with the fiscal policy, while the PBOC will remain supportive without flooding the economy with cash. The report also added back language on structural deleveraging, likely signalling renewed focus on debt risks even amid a darkening outlook.

In terms of Brexit, the Labour Party leader Jeremy Corbyn moved closer to fully backing a second Brexit referendum, saying it was reasonable that the public should be given a choice on any deal to leave the European Union. This is change in Corbyn’s earlier stance where he has previously said that the country should be offered a vote on PM May’s Brexit deal whereas on Sunday, on the BBC’s Andrew Marr show, he seemed to be calling for a vote on any Brexit package, including one proposed by the Labour party. He also said on the show that freedom of movement would be “open for negotiation” if he were in charge of determining the UK’s future relationship with the EU, thereby moving away from the Labour’s 2017 election manifesto, which said, “Freedom of movement will end when we leave the European Union.”

Turning back to Friday’s and last week’s action now. This was understandably dominated by trade developments. The news on Friday was universally negative as far as the US-China negotiations were concerned. First, the Chinese state media outlet the People’s Daily suggested that Chinese authorities will not continue negotiating until the US shifts its current position. That suggests that further escalation is likely before any resolution can be found, an angle that was later reiterated by the recently-ubiquitous Hu Xijin (China Global Daily editor-in-chief) on Twitter, who said that “China will certainly retaliate for barbaric suppression Huawei received. It’s a unanimous attitude of officials and ordinary people.” A Reuters article about China’s currency also received some attention, since the headline suggested that Chinese authorities won’t let the yuan depreciate beyond 7.0 per dollar. However, the details of the article were much less firmly stated. One source said that the PBoC would resist depreciation “in the immediate term” and another said that the currency would be allowed to weaken if supported by fundamentals. Overall, DB’s FX team saw no reason to change their bearish yuan view as a result. The yuan ended the week -1.44% weaker (-0.23% on Friday), taking its 2-week loss to -3.03% which is the sharpest two-week depreciation since the devaluation in August 2015 which caused shockwaves around the world.

Late in the NY afternoon on Friday, a CNBC headline broke saying that “US trade talks with China have stalled.” While that certainly was not “new news” to anyone, it nevertheless sparked a -0.52% drop in the S&P 500, driving almost the entire Friday drop of -0.58%. That sent the index -0.76% lower on the week even with a strong rebound in the middle 3 days of the week. The NASDAQ and DOW ended the week -1.27% and -0.69% (-1.04% and -0.38% Friday), respectively, as the more China-exposed tech sector continues to get hit. The Philadelphia Semiconductor index, many of whose constituents rely on Chinese customers (including Huawei), and could be impacted by new US barriers, fell -5.20% (-1.96% Friday). Chinese and EM equities fell as well last week, with the Shanghai Composite down -1.94% (-2.48% Friday) and the MSCI EM index -4.00% lower (-1.78% Friday).

In fixed income, treasuries, bunds, and gilts rallied by -7.5bps, -5.9bps, and -10.1bps, respectively for the 5 days. The front end rallied as well, but marginally less sharply, causing yield curves to flatten, though the US 2y10y curve remains in its recent range at 19.2bps. The 3m10y curve briefly inverted earlier in the week and ended the week -3.6bps flatter (+0.2bps Friday), but remained marginally in positive territory at +0.5bps. The dollar continued its advance against both domestic and emerging market currencies, with the dollar index up +0.68% (+0.14% Friday). The euro shed -0.67%, but the worst G10 performer was the British pound, which dipped -2.15% (-0.59% Friday) as Brexit talks continued to deteriorate. An index of EM currencies fell -1.26% (-0.42% Friday), with losses fairly widespread. The Mexican peso dropped -0.39% (-0.28% Friday), which was actually a healthy outperformance as the country reached an agreement with NAFTA partners to allow the US to remove its steel and aluminium tariffs ahead of the likely ratification of the USMCA. One other exception in the EM space was the Russian ruble, which gained +0.53% on the week (-0.19% Friday) as WTI oil gained +1.72% (-0.24% Friday).