Rate hikes and trade optimism bring risk-takers back: EM Review | Fin24
 
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Rate hikes and trade optimism bring risk-takers back: EM Review

Nov 17 2018 12:57
Yumi Teso, Alex Nicholson and George Lei, Bloomberg

Emerging markets rebounded as central banks including those of Indonesia and Mexico signalled commitment to support their currencies.

Signs of progress in resolving US-China trade frictions bolstered riskier assets later in the week.

Highlights for the week ended November 16:

The Shanghai Composite Index posted its best weekly advance since September amid signs of improvement in the US-China trade spat; the two countries have resumed contact "at all levels" before a planned meeting between President Donald Trump and China’s Xi Jinping.

White House economic adviser Larry Kudlow said Trump said he’s optimistic about resolving the trade dispute with China after receiving a response from Beijing to his demands.

Chinese officials have outlined a series of potential concessions to the Trump administration, according to people familiar with the discussions. The US was said to hold off on new tariffs on automobile imports as top officials weigh revisions to a report on the national security implications.

Federal Reserve Vice chairperson Richard Clarida told CNBC there’s "some evidence" that the world economy is slowing. His comments follow those of Fed chairperson Jerome Powell, who cited the prospect of cooling global demand in a speech.

The US sanctioned 17 Saudi officials over the death of journalist Jamal Khashoggi. The rupiah climbed after the Bank Indonesia unexpectedly raised its benchmark rate to help rein in a widening trade deficit and bolster the currency.

Mexico’s central bank lifted borrowing costs, saying President-elect Andres Manuel Lopez Obrador’s decision to cancel a $13bn airport and broader policy uncertainty with the new administration have worsened the inflation outlook. The Philippine peso also advanced after central bank boosted its key rate for a fifth straight meeting to curb inflation

Asia:

China’s industrial production and fixed-asset investment gained pace, while retail sales growth slowed, signaling some stabilisation for policy makers grappling with the slowest economic growth in nearly a decade The rupee was emerging Asia’s best performer; India’s trade deficit widened to $17.1bn in October despite global oil prices easing. That was higher than an estimated shortfall of $16bn and the $14bn gap in September.

The Reserve Bank of India board will review rules governing the use of its reserves and transfer the surplus to the federal government, people with knowledge of the matter said. South Korean President Moon Jae-in said he will “actively consider” inviting North Korean leader Kim Jong Un to next year’s ASEAN-Korea special summit.

Blue House spokesperson said The Bank of Thailand’s monetary policy committee voted 4-to-3 in favor of keeping its benchmark rate unchanged, signaling a rate hike is near. Commerce Ministry kept 8% export-growth target for this year and 2019 Finance Ministry is preparing measures to help boost confidence in economy later this year.

Deputy Finance Minister Somkid Jatusripitak said Philippine foreign-currency debt has fallen to about 36% of outstanding liabilities, providing government room to “temporarily" bolster overseas fundraising while keeping currency risk exposure within tolerable levels.

Treasurer Rosalia de Leon said Malaysia’s gross domestic product increased 4.4% in the third quarter from a year ago, slower than the 4.6% median estimate in a Bloomberg survey of 22 economists and the weakest pace in two years. 

EMEA:

Saudi Arabia said oil producers need to cut 1 million barrels a day from October levels, as OPEC and its allies began laying the groundwork to reduce oil supply in 2019. South Africa’s rand had the best week since September. The ANC is forging ahead with plans to amend the Constitution to make it easier to seize land without paying for it.

Home Affairs Minister Malusi Gigaba yielded to pressure to quit after a court found he lied under oath and a compromising video of him was circulated on social media. Gigaba’s exit bolsters President Cyril Ramaphosa’s assertion that he’s committed to clamping down on graft and reversing the mismanagement that characterixed his predecessor Jacob Zuma’s almost nine-year rule.

Turkey posted a $1.83bn current-account surplus in September, smaller than the median estimate of $1.94bn in a Bloomberg survey. Of the six countries that reported an early calculation for third-quarter gross domestic product on Wednesday, growth beat expectations in Poland, the region’s largest economy, as well as Hungary, Slovakia and Romania.

Russia’s ruble climbed after key US senators said Congress isn’t expected to pass legislation ordering new sanctions on Russia before the end of the year. Poland’s central bank is working on “non-standard” alternatives to raising borrowing costs that would help curb inflation without harming the economy, a policy maker said.

Zimbabwean consumer prices surged at their fastest pace since a hyper-inflationary spiral a decade ago

Latin America:

The Ibovespa had its biggest weekly rally in more than a month. Banco Santander’s Roberto Campos Neto will take the reins of Brazil’s central bank under incoming President Jair Bolsonaro. With the benchmark rate at a record low, Vice-President-elect Hamilton Mourao said government wants the pension bill approval by June.

Retail sales unexpectedly fell in September from the month before as stalled consumer confidence dampened activity at the end of the third quarter.

Mexican stocks slumped for a seventh straight week. Lopez Obrador said he intends to hold a referendum this month to decide whether to build a new refinery, a tourist train for the Yucatan Peninsula, develop the Isthmus of Tehuantepec, and his proposals for social programs, including pensions for the elderly An increased use of referendums will generate uncertainty in the long run, especially on important issues such as energy reform.

Citigroup said A USMCA trade deal will definitely be signed by end of the month, and Mexico is hoping to get US tariffs on the nation’s steel exports removed before then, said Kenneth Smith Ramos Mexico’s chief Nafta technical negotiator. Colombia’s economic growth edged lower in the third quarter amid slowing credit growth and a weak agricultural sector. Fitch affirms Colombia at BBB on economic policy continuity.

Argentina’s central bank may eliminate the floor on its benchmark interest rate in early December if it sees a second consecutive decline in inflation expectations, according to two people with direct knowledge of the plan. The peso has rallied since September 28, a day before the new policy was put in place

Upcoming data & events:

  • Sunday, November 18  -       Egypt - September trade balance
  • Monday, November 19 -       Thailand, Chile - 3Q GDP
                                                   Poland - October average gross wages, employment
  • Tuesday, November 20 -       Hungary, Nigeria - Monetary-policy decision
  •                                                Taiwan - October export orders, 3Q current-account balance
                                                   South Africa - September leading indicator
                                                   Poland - October sold industrial output, PPI
                                                   Russia - October retail sales, unemployment
  • Wednesday, November 21 - Thailand - October customs trade data
                                                   South Africa, Morocco, Nigeria - October consumer price index
  • Thursday, November 22  -    South Africa - Monetary-policy decision
                                                   South Korea - 3Q short-term external debt
                                                   Taiwan - October unemployment rate
                                                   Poland - October retail sales, central-bank minutes
                                                   Turkey - November consumer confidence
  • Friday, November 23 -         South Africa - Sovereign rating update by S&P
                                                   Hungary - Sovereign rating update by Moody’s
                                                   Brazil - November inflation IPCA-15
                                                   Mexico - 3Q GDP, 3Q current-account balance
                                                   Taiwan - October industrial production

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