EM Preview for the Week Ahead

EM FX was mostly weaker last week due to doubts about a Phase One trade deal between the US and China. Those talks continue this week and while we expect a deal to be struck, there is likely to be a lot of last minute posturing that will likely keep markets volatile over the short-run. In the meantime, investors need to beware of idiosyncratic country risk within EM.   Continue reading “EM Preview for the Week Ahead”

Dollar Mixed Ahead of US Retail Sales Data

  • Markets continue to dance to the tune of trade headlines
  • During the North American session, the highlight is US October retail sales
  • Banco de Mexico cut rates yesterday by 25 bp to 7.50%, as expected
  • Israel October CPI is expected to rise 0.5% y/y
  • Hong Kong tensions are likely to worsen; Malaysia reported Q3 GDP Continue reading “Dollar Mixed Ahead of US Retail Sales Data”

Emerging Market Risk Map

With year-end upon us, we review some of the key risks to EM assets and how we think they progress from here. In short, the two most significant downside risks would be a decisive improvement in Elizabeth Warren’s polling figures and an upset in the US-China trade negotiations. Continue reading “Emerging Market Risk Map”

EM Equity Allocation Model For Q4 2019

  • EM has rallied sharply in recent weeks, helped by growing optimism that we’ve seen the worst of the US-China trade war
  • MSCI EM rallied over 12% from the August 26 low to the November 7 peak
  • MSCI EM is up 9.4% YTD and compares to 21.6% for MSCI DM
  • Our 1-rated grouping (outperformers) for Q4 2019 consists of Hungary, China, Korea, Poland, and UAE
  • Our 5-rated grouping (underperformers) for Q4 2019 consists of Mexico, Brazil, South Africa, Pakistan, and Argentina
  • Since our last model update on August 9, our proprietary EM equity portfolio is up 6.1%, which is basically the same as MSCI EM (up 5.9%) Continue reading “EM Equity Allocation Model For Q4 2019”

Dollar Treads Water Ahead of Key US Data

  • US-China talks have reportedly hit a snag
  • In yesterday’s appearance before the Joint Economic Committee, Powell covered no new ground
  • Chile central bank will offer $4 bln of 30- and 90-day currency swaps to help support the peso; Mexico is expected to cut rates 25 bp to 7.5%
  • Eurozone reported solid preliminary Q3 GDP data; UK retail sales came in weaker than expected in October
  • Japan reported weak Q3 GDP data; Australia reported weak October jobs data; China reported weak October IP and retail sales Continue reading “Dollar Treads Water Ahead of Key US Data”

Persistent Social Unrest to Weigh on Chilean Assets

Social unrest in Chile has gotten worse despite President Pinera’s administration making many concessions to the protestors. The agreement to rewrite the constitution has unnerved investors and fanned fears that the government will swing too far to the populist left to quell the protests. Prolonged political and economic uncertainty should continue to weigh on Chilean assets. However, we downplay risks of capital controls for now. Continue reading “Persistent Social Unrest to Weigh on Chilean Assets”

Dollar Firm as Risk-Off Sentiment Takes Hold

  • Uncertainty about the US-China trade deal has weighed on risk appetite
  • During the North American session, the US reports October CPI and budget data
  • Reports suggest President Trump has asked his economic advisors to explore a tax cut ahead of the 2020 elections
  • UK reported lower than expected October CPI data; Spain is moving towards a left-leaning coalition faster than expected
  • RBNZ unexpectedly kept rates steady at 1.0% Continue reading “Dollar Firm as Risk-Off Sentiment Takes Hold”

Dollar Firm as US Returns from Holiday

  • With US-China talks ongoing, we got some good trade news from Europe
  • President Trump speaks before the New York Economic Club today
  • The UK Conservative party – and the pound – received a boost yesterday on news that the Brexit Party will not run against them in the elections
  • UK labor market data was mixed; German data continue to suggest small green shoots; Japan reported weak October machine tool orders Continue reading “Dollar Firm as US Returns from Holiday”

Dollar Mixed as Risk-off Impulses Take Hold

  • Markets should be prepared for negative headlines as we approach the endgame of the first stage of the US-China trade deal
  • Due to the US holiday, there are no US data reports
  • The political campaign in the UK has shifted into high gear; UK data came in largely weaker than expected
  • Spain’s election went roughly as expected: back to political limbo
  • Japan reported weak September core machine orders; China reported weak October money and loan data Continue reading “Dollar Mixed as Risk-off Impulses Take Hold”