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Emerging-market stocks and currencies retreated after the Federal Reserve indicated it will keep raising rates, sending the US dollar higher and damping a post-midterm rally.
Assets Weekly MSCI EM stocks index -2.1% MSCI EM FX index -0.5% Bloomberg Barclays Global EM Local Currency bond index -0.2%
Highlights for the week ended November 9:
Chinese President Xi Jinping stood his ground in a speech at the Shanghai trade fair, denouncing US President Donald Trump’s “law of the jungle” trading practices. He didn’t outline any new proposals that would suggest he was prepared to meet Trump’s demands Democrats regained control of the US House in midterm elections, paving the way for more checks on Trump and a potentially weaker dollar The Federal Reserve stood pat and stayed on course to hike in December; policymakers forecast “further gradual increases,” citing strong economic activity and job growth Turkey’s inflation accelerated more than expected in October, to 25.2% from 24.5%. Finance Minister Berat Albayrak promised “more positive” data for the succeeding months; the lira’s decline ended a four-week winning streakTurkey and Argentina will undergo sharp contractions in the coming quarters, Moody’s Investors Service says in report titled “Global Macro Outlook: 2019-2020” Mexican stocks, bonds and currency were whipsawed, tumbling after the incoming political party unveiled a proposal to cut bank commissions, then recovering as President-elect Andres Manuel Lopez Obrador said he wouldn’t make any changes for his first three years in office Malaysia’s central bank kept its benchmark interest rate unchanged for a fifth meeting, helping support the economy as the government prepares to curb spending to restrain the budget deficit Ministers from the Organization of Petroleum Exporting Countries and its allies met in Abu Dhabi November 11 to discuss scenarios including the possibility of cutting production again next year, according to delegates
Asia:
China’s current-account surplus rose again in the third quarter as exports held up despite trade tensions; the yuan was the worst performer in Asia China’s exports in dollar terms rose 15.6% in October from a year earlier, exceeding estimates; growth accelerated as companies rushed to make shipments before Trump’s plans to increase tariff rates kick in CPI rose 2.5% in October from a year earlier, in line with estimates, while PPI increased 3.3%, also the same as forecast in a Bloomberg survey Whether China’s yuan hits the level of 7 to the dollar “isn’t that crucial,” as market participants have accepted flexibility in the exchange rate, People’s Bank of China adviser Ma Jun said Chinese authorities said they will reduce the amount of time stocks can stay suspended, addressing a longstanding concern that investors can be left stranded for months, unable to sell Indonesia’s rupiah was the best performer in emerging markets, while the nation’s bonds rallied; gross-domestic product rose 5.17% in the third quarter from a year earlier, in line with the median estimate in a Bloomberg survey; growth held above 5% for a seventh quarter, shaking off impact of a slew of rate hikes Malaysia’s exports increased 6.7% in September from a year earlier, in line with estimates; trade surplus was at RM15.27bn ($3.7bn) Thailand’s government reiterates February 24, 2019 as election date; election law could be effective by December 11 and the election would then have to be held within 150 days or by May 9, 2019 South Korean President Moon Jae-in nominated former finance ministry spokesman Hong Nam-ki as new finance minister and deputy prime minister to replace Kim Dong-yeonPlanned meetings between US Secretary of State Michael Pompeo and North Korean officials was postponed Philippine stocks were among Asia’s worst performers as investors assessed key economic data; October inflation at 6.7% year-on-year, unchanged from September, remains at fastest pace since February 2009; exports missed estimates, while trade deficit stood at $3.9bn; GDP expanded 6.1% in the third quarter from a year ago, versus revised 6.2% in prior quarter
EMEA:
The Turkish Treasury sold €1.5bn ($1.7bn) of bonds maturing in February 2026 in the second debt sale in international markets in a month, taking funds raised this year to $7.7bn Turkey later canceled three scheduled local-bond auctions for November, citing reduced financing needs Borsa Istanbul 100 Index retreated; Tupras Turkiye Petrol Rafinerileri AS sank after the company reported a profit that fell short of estimates and cut production guidance. The Turkish government said the nation’s largest refiner will have to cut purchases of Iranian oil by about 75% from original levels under US sanctions Russia sold half of the bonds on offer in two ruble debt auctions following the midterm elections, potentially strengthening support for harsher sanctions on RussiaThe US State Department notified Congress that Russia ignored a deadline to swear off the use of chemical weapons, opening the possibility of new sanctions linked to a nerve-agent attack in the UK South African manufacturing output increased at the slowest pace in six months in September. The nation’s FTSE/JSE Africa All Shares Index underperformed Mozambique has struck a restructuring deal with Eurobond holders, almost two years after defaulting. The southern African nation has agreed a pact in principle with holders of 60 percent of its bonds, that will see them swap into a new $900m Eurobond maturing in 2033 and another instrument linked to future gas revenues Poland kept its benchmark interest rate on hold as signs of a looming slowdown give it more time to support the economy. The WIG20 Index rose for a second week Hungarian inflation accelerated well above the central bank’s target. The BUX Index was among the world’s best performers, led higher by OTP Bank, the country’s biggest lender
Latin America:
Brazil’s Bolsonaro installed a transition team, pledging to tackle runaway pension spending; he appointed his first female cabinet member, Tereza Cristina, picking head of the farmers’ caucus in the lower house as agriculture minister Brazil’s central bank minutes showed the monetary authority sees more clarity in domestic outlook since Bolsonaro was elected; pressure on prices from currency depreciation earlier this year largely contained, and inflation has risen to appropriate levels Bolsonaro said central bank independence means there won’t be political interference Argentina’s central bank will extend the use of a currency trading band into next year and will likely manage peso fluctuations less than at present Chile’s September IMACEC index, a proxy for GDP, rose 0.4% from a month earlier, beating an estimate of a 0.2% decline Chilean Central Bank published its minutes from October 18 meeting, when it raised a key rate by 25bps; BCCh said Chile has been growing above potential for four quarters, and the labor market is in better shape than surveys show; the Chilean peso was the top performer in Latin America Chile October CPI data at 0.4% on month, versus a 0.3% median forecast of analysts surveyed by Bloomberg; data prompted muted impact in the market as year-on-year inflation at 2.9% very near BCCh’s target
Upcoming Data:
Monday, November 12 India Industrial production, consumer price index Turkey Current account balance on Tuesday, November 13 Czech Republic Current account Poland Current account, trade Russia GDP (may be on Wednesday) Brazil Retail sales o Wednesday, November 14 China Retail sales, industrial production India Wholesale prices Thailand Monetary policy meeting South Korea Unemployment rate Czech Republic, Hungary, Poland GDP Poland, Bulgaria, Ghana CPI South Africa Retail sales Colombia Retail sales, trade balance on Thursday, November 15 India Trade balance Indonesia Monetary policy meeting, trade balance Philippines Monetary policy meeting, overseas workers remittances Turkey Unemployment, Budget balance, Foreigners’ bond/stock investments, Expected inflation Russia Gold/FX reserves Egypt Monetary policy decision Mexico Monetary policy meeting Argentina National CPI Colombia GDP on Friday, November 16 Malaysia GDP Thailand Foreign reserves Turkey Industrial production Russia Money supply Czech Republic PPI
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