Category Archive: 5) Global Macro

Emerging Markets: What has Changed

The New York Times reported that the US is preparing to seize $1 bln in assets tied to 1MDB. S&P downgraded Turkey a notch to BB with a negative outlook, citing political uncertainty. Turkish President Erdogan declared a three-month state of emergency. The Nigerian Naira weakened above 300 per dollar for the first time. Brazil’s central bank signaled a longer wait until it cuts rates.

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Emerging Markets: Preview of the Week Ahead

EM ended last week on a soft note, due in large part to the attempted coup in Turkey. Weakness in the lira spilled over into wider EM weakness in thin Friday afternoon market conditions. The situation in Turkey has calmed, and so EM may gain some limited traction this week. However, that calm will likely be very fragile and so we retain a defensive posture with regards to EM.

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Emerging Markets: Preview of the Week Ahead

EM and other risk assets rallied on Friday after the strong US jobs data. It appears that markets are pricing in a benign backdrop for risk near-term; that is, the US economy is recovering but not by enough to warrant an imminent Fed rate hike. The July 27 meeting seems unlikely, and so the next likely window would be September 21. Yet EM typically weakens in the run-up to FOMC meetings and so investors should be very careful about taking on too...

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Emerging Markets: What has Changed

In the EM equity space as measured by MSCI, Hungary (+3.0%), UAE (+2.0%), and Qatar (+0.7%) have outperformed this week, while Mexico (-3.4%), South Africa (-2.1%), and Colombia (-1.7%) have underperformed. To put this in better context, MSCI EM fell -1.2% this week while MSCI DM fell -0.3%. In the EM local currency bond space, the Philippines (10-year yield -22 bp), Singapore (-12 bp), and Brazil (-11 bp) have outperformed this week, while Russia...

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Emerging Markets: Preview for the Week Ahead

EM and risk recovered nicely from the Brexit turmoil last week. Yet we think markets are getting too carried away with the "low rates forever" theme and are likely underestimating the capability of the Fed to tighten before 2018. This Friday, the June jobs data could spark a shift in sentiment with a strong reading. Consensus is currently 175k jobs created, up from 38k in May.

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Emerging Markets: What has Changed

Indonesia’s parliament approved a tax amnesty bill. Korea announced KRW20 trln ($17 bln) in fiscal stimulus. Czech President Zeman said a referendum on EU and NATO membership should be held Russia ended its tourism ban to Turkey. Brazil’s central bank is sending hawkish signals

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Emerging Market Preview: Week Ahead

The Brexit vote is a game-changer for EM. While the direct impact on EM is limited, the damage to market sentiment is undeniable. And to make matters worse, there will be a protracted period of uncertainty as the UK and the EU negotiate the divorce proceedings.

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What Does It take to Be Upper Middle Class?

What's left unsaid is much of the upper middle class is prospering due to privileged positions that are increasingly at risk of disruption. What does it take to be upper middle class? According to one analyst, the answer is: at least $100,000 a year for a family of three. The Growing Size and Incomes of the Upper Middle Class (Urban Institute).

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China and Japan Chart Update

A chart-up from China and Japan. Growth of Chinese industrial production, retail sales, fixed asset investment is at lows not seen since the Asian financial crisis. The Yuan is falling. Economic data from Japan is not a lot better.

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Emerging Markets: Preview of the Week Ahead

EM ended last week under pressure.  With two potentially disruptive events (FOMC meeting and Brexit vote) still in play, we think that EM softness should carry over into this week.  

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Emerging Markets: What has Changed

China granted US asset managers a CNY250 bln ($38 bln) quota under the existing QFII system Bank of Korea surprised the market by delivering a 25 bp rate cut to 1.25% Oman issued its first global ...

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Emerging Markets: Preview of the Week Ahead

Russian central bank meets Friday and is expected to keep rates steady at 11.0%.  However, the market is split.  Of the 25 analysts polled by Bloomberg, 13 see no move and 12 see a 50 bp cut to 10.5%.  The central bank has been on hold since the last...

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Emerging Markets: What has Changed

Local press is reporting that RBI Governor Rajan does not want to serve another term The incoming Philippine government is signaling looser fiscal policies ahead

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Emerging Market Preview

EM ended last week on a soft note.  The icing on the cake was Yellen’s speech Friday afternoon, which confirmed the more hawkish stance seen in the FOMC minutes and other recent official comments.  We warn tha...

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Emerging Markets: What has Changed

Korea will extend trading hours for stock and FX markets by 30 minutes effective August 1 The Monetary Authority of Singapore said it will withdraw BSI Bank’s license for breaches of money-laundering rules The US lifted a decades-old arms embargo on Vietnam The Nigerian central bank said it would allow “greater flexibility” in the FX …

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Emerging Market Preview for the Week Ahead

EM had another rocky week, but managed to end on a slightly firmer note Friday.  Market repricing of Fed tightening risk was the big driver last week, and that could carry over into this week.  There are several Fed speakers in the days ahead, capped...

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Emerging Markets: What has Changed

The Philippine central bank moved to an interest rate corridor Saudi Arabia is preparing to sell its first global bond ever Transport Minister Yildirim, a close ally of President Erdogan, will become Turkey’s new Prime Minister The new Brazil cabinet continues to take shape with a market-friendly bias In the EM equity space, South Africa …

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Emerging Markets Preview: Week Ahead

EM ended last week on a soft note, and that weakness seems likely to carry over into this week. Dollar sentiment turned more positive after firm retail sales data on Friday, though US rates markets have yet to reflect any increase in Fed tightening expectations. Over the weekend,

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EM FX Technical Picture

Note that MSCI EM fell 21% from November 4 to January 21.  It then rallied 25% to challenge the November highs, but it has since fallen back.  MSCI EM has now retraced about a quarter of this year's rally.  Major retracement objectives come in near 7...

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Emerging Market Preview for the Week Ahead

EM ended the week on a firm note, which should carry over into this week.  The biggest near-term risk to EM is the US jobs data on Friday, as the weekly claims data points to another strong gain.  Otherwise, the global liquidity backdrop remains EM-supportive. Thailand reported April CPI earlier today.  It rose 0.07% year-over-year.  …

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