Dollar and Equities Sink as Trade Pessimism Rises

Pessimism regarding a Phase One trade deal has intensified; further muddying the waters are recent US Congressional actions

FOMC minutes contained no surprises; regional Fed manufacturing surveys for November continue

South Africa is expected to cut rates by 25 bp to 6.25%

Korea reported trade data for the first twenty days of November; Indonesia kept rates steady at 5.0%, as expected Continue reading “Dollar and Equities Sink as Trade Pessimism Rises”

EM Sovereign Rating Model For Q4 2019

We have produced the following Emerging Markets (EM) ratings model to assess relative sovereign risk. An EM country’s score directly reflects its creditworthiness and underlying ability to service its external debt obligations. Each score is determined by a weighted compilation of fifteen economic and political indicators, which include external debt/GDP, short-term debt/reserves, import cover, current account/GDP, GDP growth, and budget balance. Continue reading “EM Sovereign Rating Model For Q4 2019”

Dollar Firms as US-China Tensions Flare

  • The US Senate unanimously passed a bill in support of the Hong Kong protestors, inviting retaliatory threats from China
  • FOMC minutes will be released; Canada reports October CPI
  • A snap poll after the first UK debate gave a slight edge to Prime Minister Johnson
  • South Africa’s CPI came in slightly below expectations, bolstering our out-of-consensus call for a cut by the SARB tomorrow
  • Japan and Taiwan reported weak trade data; PBOC shaved 5 bp off benchmark Loan Prime Rates Continue reading “Dollar Firms as US-China Tensions Flare”

DM Equity Allocation Model For Q4 2019

  • Global equity markets continue to power higher US-China trade tensions have eased
  • MSCI World made a new all-time high today near 2290 and is up 23% YTD
  • Our 1-rated grouping (outperformers) for Q4 2019 consists of Ireland, Sweden, Israel, Denmark, and Australia
  • Our 5-rated grouping (underperformers) for Q4 2019 consists of the UK, Hong Kong, Greece, Germany, and Portugal
  • Since our last update on August 21, our proprietary DM equity portfolio has risen 6.7%, slightly underperforming MSCI World (up 7.1%) Continue reading “DM Equity Allocation Model For Q4 2019”

South Africa’s Risk Events

There are two risk events for South Africa this week: S&P’s rating review Friday and Thursday’s central bank meeting, for which we have an out-of-consensus call for a cut. While none of these events represent major risks for asset prices, they will give us important incremental information about what is still to come. Continue reading “South Africa’s Risk Events”

Dollar Stabilizes as Markets Await Fresh Drivers

  • Press reports suggest that the mood in Beijing is pessimistic after President Trump pushed back against tariff rollbacks
  • Fed Chair Powell met with President Trump and Treasury Secretary Mnuchin yesterday
  • Hungary is expected to keep rates steady; the deadline to form a government in Israel is fast approaching
  • RBA released dovish minutes from its November policy meeting Continue reading “Dollar Stabilizes as Markets Await Fresh Drivers”

EM FX Model for Q4 2019

  • EM FX has rallied sharply in recent weeks, helped by growing optimism that we’ve seen the worst of the US-China trade war
  • Given our more constructive outlook on EM, we believe MSCI EM FX should eventually test the 1657.50 high from July
  • We see continued divergences within the asset class
  • Our 1-rated (strongest fundamentals) grouping for Q4 2019 consists of TWD, THB, PHP, CNY, and KRW
  • Our 5-rated (weakest fundamentals) grouping for Q4 2019 consists of ZAR, TRY, LKR, RON, and COP
  • Our next EM FX model update for Q1 2020 will come out in January Continue reading “EM FX Model for Q4 2019”

Dollar Mixed as New Week Begins

  • The dollar remains under modest pressure; the US economy has slowed more sharply than expected in Q4
  • The Bundesbank warned that the German economy is likely to stagnate in Q4
  • Latest UK polls show the Conservative party consolidating its lead
  • China unexpectedly cut the 7-day reverse repo rate by 5 bp to 2.5%, the first since 2015; Thailand Q3 GDP grew 2.4% y/y vs. 2.7% expected Continue reading “Dollar Mixed as New Week Begins”

Drivers for the Week Ahead

  • The dollar has come under some pressure as recent US data has disappointed
  • US-China trade talks are continuing; geopolitical risks are concentrated in Asia right now
  • The US economy has slowed more sharply than expected in Q4; FOMC minutes will be released Wednesday
  • Eurozone and UK flash PMIs for November will be reported Friday; Japan reports October trade Wednesday Continue reading “Drivers for the Week Ahead”