Category Archive: 5.) Brown Brothers Harriman

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Emerging Market Risk Map

2019-11-15

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2019-11-15

BBH Risk MingMap
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.

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EM Preview for the Week Ahead

2019-11-11

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2019-11-11

EM was mostly lower last week, as doubts crept in about the recent trade optimism. Some events also served as reminders of idiosyncratic EM risk that can’t be overlooked, such as downgrade risks (South Africa), failed oil auctions (Brazil), and violent protests (CLP). EM may remain on its back foot until we get further clarity on the US-China talks, but we remain confident in our call that a deal will be struck soon that lower existing tariffs. 

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Dollar Rally Stalls as Fresh Drivers Awaited

2019-11-06

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2019-11-06

US-China relations continue to improve with news of cooperation in a major fentanyl case. Eurozone final services and composite PMIs surprised on the upside; UK Parliament will be dissolved today. Poland is expected to keep rates steady at 1.5%; Russia October CPI is expected to rise 3.8% y/y. China sold €4 bn in its first euro-denominated bond since 2004; Thailand cut rates 25 bp to 1.25%, as expected.

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EM Preview for the Week Ahead

2019-11-04

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2019-11-04

EM should continue to benefit from the generalized improvement in the global backdrop. Trade tensions have eased whilst the risks of a hard Brexit have fallen, at least for now. Yet recent developments in some major EM countries underscores how important it is for investors to differentiate between the strong credits and the weak ones.

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Mexico vs. Brazil Near-Term Outlook

2019-11-02

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2019-11-02

Interest Rates Favor Peso vs Real
Both Brazil and Mexico are in a good position to benefit from the current improvement in market sentiment. However, when comparing the factors driving the currencies of both countries, we think there are relatively more near-term positives for the Mexican peso than for the Brazilian real.

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FOMC Preview

2019-10-31

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2019-10-31

Fed Funds Dot Plots, 2019-2022
The FOMC begins a two-day meeting today with the decision due out tomorrow afternoon.  The Fed is widely expected to cut rates 25 bp for the third meeting in a row.  What’s next? US data have undeniably softened in September.  Weakness in the manufacturing sector appears to have spread to the wider economy.  ISM PMI, jobs, CPI, PPI, and retail sales all came in weaker than expected. 

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Dollar Firm as Two-Day FOMC Meeting Begins

2019-10-29

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2019-10-29

The dollar continues to gain traction as the two-day FOMC begins; US political uncertainty has entered a new phase. Yesterday marked the third time that UK Prime Minister Johnson lost a vote for elections; he will try again today. Weak South Africa data support our call for imminent easing; the threat of sanctions against Turkey are back on the table.

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EM Preview for the Week Ahead

2019-10-28

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2019-10-28

EM has been on a good run but this week will be a big test.  Brexit uncertainty may finally end.  Or it may not.  A delay would be positive for EM, whilst a potential hard Brexit would be negative.  The Fed meets Wednesday and key US data will be reported during the week, culminating with the jobs report Friday. 

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A New Stage of the US-China Conflict

2019-10-23

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2019-10-23

The US-China diplomatic relationship may be entering a new stage. The balance of power between the key players – Trump, China, the US Congress, and the Democrats – is changing and their roles are being reshuffled. This might be enough to break the endless cycle of agreements and re-escalations. In short, we think both Trump and Chinese officials have a greater incentive to reach a deal (or at least not to escalate) this time around.

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EM Preview for the Week Ahead

2019-10-21

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2019-10-21

We are beginning to become more constructive on EM.  The main trigger for some optimism is the shifting US-China dynamic. In our view, the partial trade deal reveals weakness on the part of the US.  Reports suggest China will begin pushing for all existing tariffs to be dropped as part of Phase 2, which would be very positive for EM.  That is still likely months away but this shifting dynamic bears watching. 

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Dollar Broadly Weaker as Brexit Deal Takes Shape

2019-10-17

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2019-10-17

The dollar remains under pressure due to weak US retail sales and rising optimism on Brexit and the trade war. Brexit negotiations remain tense and we should expect a higher than usual noise-to-signal ratio at this stage. China said its goal is to stop the trade war and remove all tariffs. US has a full data schedule; we remain constructive on the US economic outlook.

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Dollar Resilient as Cracks in Risk-On Appear

2019-10-16

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2019-10-16

Some cracks have appeared in the market’s risk-on sentiment. We continue to believe that recent developments take some pressure off the Fed to cut rates again this month. Our base case for a Brexit delay has been strengthened; UK reported weak labor market data. The situation is Turkey continues to develop negatively for asset prices; trade data out of China once again showed the impact of the trade war and the resulting global slowdown.

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EM Preview for the Week Ahead

2019-10-14

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2019-10-14

EM benefited greatly from the improvement in US-China trade relations and quite possibly Brexit.  The dollar is likely to remain under some pressure near-term as a result. Yet we must caution investors against getting too optimistic.  The details of the partial trade deal still need to be worked out, while existing tariffs will still remain in place if the deal is signed next month as most expect.

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Dollar Remains Soft as Risk-On Sentiment Continues

2019-10-12

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2019-10-12

Markets have seized on the possibility of a partial trade deal as well as some hopes that a hard Brexit will be avoided. The main event for the day will be President Trump’s meeting with Vice Premier Liu He. These market movements (if sustained) will take pressure off of the Fed to cut rates this month. The notion of a “pathway” to a Brexit deal continues to capture investors’ imagination.

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Dollar Soft Despite Heightened Geopolitical Risks

2019-10-09

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2019-10-09

The dollar staged a stunning comeback yesterday as risk-off took hold on rising geopolitical risk; those risks remain high. US-China tensions have risen ahead of trade talks that begin Thursday. The US abruptly announced that it would withdraw its troops from northeast Syria. US reports September PPI; German IP came in better than expected.

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Drivers for the Week Ahead

2019-10-07

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2019-10-07

The dollar rally has been derailed by weak US data and rising recession fears. The September jobs data was not a game-changer and so we are left waiting for more clues. Believe it or not, the US economy remains solid; however, the US repo market has not fully normalized yet. The Chinese trade delegation arrives in Washington Thursday for two days of trade talks.

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Musings on the Repo Market, Fed Policy, and the US Economy

2019-10-02

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2019-10-02

Fed Balance Sheet, 2007-2019
The US repo market appears to finally be normalizing. The low pace of normalization is concerning and so a more permanent solution may be needed to head off similar problems at year-end. We do not think this issue has any implications for the economic outlook, which we continue to view as solid.

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Drivers for the Week Ahead

2019-09-30

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2019-09-30

We continue to think that the US economy is in better shape than most appreciate, and that underpins our strong dollar call. Tensions are likely to remain high after reports emerged last week that the US will look into limiting capital flows into China. US September jobs data Friday will be the data highlight of the week; there is a heavy slate of Fed speakers this week.

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Dollar Firm as US Economy Continues to Outperform

2019-09-29

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2019-09-29

Political uncertainty is likely to persist in the US; the big unknown is whether this will impact the US economy. US core PCE reading will be of particular interest and is expected to rise 1.8% y/y; Quarles (voter) and Harker (non-voter) speak. Dovish BOE comments are weighing on sterling; France reported weak CPI and consumer spending data.

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Dollar Firm Despite Rising US Political Uncertainty

2019-09-27

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2019-09-27

The dollar continues to benefit despite US political uncertainty President Trump claimed to be getting “closer and closer” to a trade deal with China; we are very skeptical. There is a lot of US data to be reported and a heavy slate of Fed speakers today.

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