by Summary:
EM ended last week on a soft note. Perhaps the main driver was rising US yields, as markets become wary of a more hawkish Fed this Wednesday. Perhaps it was technical, as the EM rally became over-extended. Whatever the reasoning, the correction continued into the weekend and is likely to carry over to this week as well. While we remain cautious on EM at such rich valuations, a significant correction (which we have not seen in quite some time) could make some assets more attractive. The global liquidity backdrop remains supportive of EM for now. The central banks of Hungary, Russia, Brazil, and Colombia all meet and it’s a mixed bag. Hungary is easing, while Brazil and Russia are expected to ease in the coming months. Colombia is an outlier, and is expected to hike rates 25 bp to 6.75%. As always, country-specific risks remain in play.Singapore reports March IP Tuesday, which is expected at -2.3% y/y vs. -4.7% in February. No wonder the MAS eased policy this month. Deflation could be deepening even as the real economy remains weak. Singapore reports Q1 unemployment rate Thursday, which is expected to tick up to 2.0% from 1.9% in Q4. Korea reports Q1 GDP Tuesday, which is expected to grow 2.7% vs. 3.1% in Q4. It then reports March IP Friday, which is expected at -0.1% y/y vs. +2.4% in February.
Topics:
Win Thin considers the following as important: emerging markets, Featured, FX Trends, newsletter
This could be interesting, too:
EM ended last week on a soft note. Perhaps the main driver was rising US yields, as markets become wary of a more hawkish Fed this Wednesday. Perhaps it was technical, as the EM rally became over-extended. Whatever the reasoning, the correction continued into the weekend and is likely to carry over to this week as well. While we remain cautious on EM at such rich valuations, a significant correction (which we have not seen in quite some time) could make some assets more attractive. The global liquidity backdrop remains supportive of EM for now. The central banks of Hungary, Russia, Brazil, and Colombia all meet and it’s a mixed bag. Hungary is easing, while Brazil and Russia are expected to ease in the coming months. Colombia is an outlier, and is expected to hike rates 25 bp to 6.75%. As always, country-specific risks remain in play.Singapore reports March IP Tuesday, which is expected at -2.3% y/y vs. -4.7% in February. No wonder the MAS eased policy this month. Deflation could be deepening even as the real economy remains weak. Singapore reports Q1 unemployment rate Thursday, which is expected to tick up to 2.0% from 1.9% in Q4. Korea reports Q1 GDP Tuesday, which is expected to grow 2.7% vs. 3.1% in Q4. It then reports March IP Friday, which is expected at -0.1% y/y vs. +2.4% in February.
Topics:
Win Thin considers the following as important: emerging markets, Featured, FX Trends, newsletter
This could be interesting, too:
Nachrichten Ticker - www.finanzen.ch writes Krypto-Ausblick 2025: Stehen Bitcoin, Ethereum & Co. vor einem Boom oder Einbruch?
Connor O'Keeffe writes The Establishment’s “Principles” Are Fake
Per Bylund writes Bitcoiners’ Guide to Austrian Economics
Ron Paul writes What Are We Doing in Syria?
EM ended last week on a soft note. Perhaps the main driver was rising US yields, as markets become wary of a more hawkish Fed this Wednesday. Perhaps it was technical, as the EM rally became over-extended. Whatever the reasoning, the correction continued into the weekend and is likely to carry over to this week as well. While we remain cautious on EM at such rich valuations, a significant correction (which we have not seen in quite some time) could make some assets more attractive. The global liquidity backdrop remains supportive of EM for now.
The central banks of Hungary, Russia, Brazil, and Colombia all meet and it’s a mixed bag. Hungary is easing, while Brazil and Russia are expected to ease in the coming months. Colombia is an outlier, and is expected to hike rates 25 bp to 6.75%. As always, country-specific risks remain in play.
Singapore reports March IP Tuesday, which is expected at -2.3% y/y vs. -4.7% in February. No wonder the MAS eased policy this month. Deflation could be deepening even as the real economy remains weak. Singapore reports Q1 unemployment rate Thursday, which is expected to tick up to 2.0% from 1.9% in Q4.
Korea reports Q1 GDP Tuesday, which is expected to grow 2.7% vs. 3.1% in Q4. It then reports March IP Friday, which is expected at -0.1% y/y vs. +2.4% in February. The BOK just lowered its 2016 growth and inflation forecasts, and so further slowing should be expected. Indeed, we think the BOK is setting the table for an eventual rate cut this year. Over the weekend, Korea will give the first snapshot of global activity for April when it reports trade data.
Hong Kong reports March trade Tuesday. Exports and imports are both expected at -7% y/y. This would seem to undercut the mainland trade data for the month, which showed an 11.2% y/y increase in exports that month. However, mainland data is often distorted by the Lunar New Year holidays. With EM sentiment positive, HKD continues to trade near the strong end of its 7.75-7.85 trading band.
Hungarian central bank meets Tuesday and is expected to cut rates 15 bp to 1.05%. The real economy remains fairly robust. However, deflation has returned with CPI at -0.2% y/y in March and well below the 2-4% target range. Further rate cuts are seen in the coming months, and other unconventional measures are possible too.
Mexico reports March trade and February GDP proxy Tuesday. The IGAE is expected to rise 3% y/y vs. 2.3% in January. Q1 GDP will be reported Friday, and we note that Q4 GDP growth came in at 2.5%. With inflation still below the 3% target, we do not think Banco de Mexico will hike rates anytime soon.
Chile central bank releases minutes from its last policy meeting Wednesday. The central bank is in the midst of a tightening cycle but has been on hold since the last 25 bp hike to 3.5% in December. We think the tightening cycle is nearing an end. The latest central bank survey shows median expectations for only one 25 bp hike in 2016 and one 25 bp hike in 2017. Next policy meeting is May 17, no change expected then. Chile then reports March IP and retail sales Friday.
Brazil’s COPOM meets Wednesday and is expected to keep rates steady at 14.25%. If disinflation continues, we think that rate cuts are likely. However, we do not think a move will be seen while the impeachment process is ongoing. That rules out this COPOM meeting, while the June 8 is possible only if the Senate acts quickly to impeach. Perhaps the July 20 meeting is most likely. Brazil reports IGP-M wholesale inflation and central government budget data Thursday, which will be followed by consolidated budget data Friday. The consolidated primary deficit is seen at -BRL11 bln.
South Africa reports March PPI Thursday, which is expected to ease to 7.5% y/y from 8.1% in February. March CPI came in lower than expected, and so we see downside risks for the PPI reading as well. This could give the SARB leeway to keep rates steady at its next meeting in May. South Africa then reports money and credit growth, trade, and budget data Friday.
Taiwan reports Q1 GDP Friday, which is expected at -0.6% y/y vs. -0.5% in Q4. The economy is one of the worst performers in the region, which is why the central bank has cut rates to 1.50%. We note that the policy rate troughed at 1.25% during the depths of the financial crisis in 2009. With the economy contracting y/y in H2 and apparently carrying over to 2016, another 12.5 bp cut is expected at the next meeting June 21.
Turkey reports March trade data Friday, which is expected at -$5 bln vs. -$3.2 bln in February. With oil prices going up, the external balances will likely deteriorate in the coming months. If the central bank cuts rates in Q2 as we expect, this will be another headwind for the lira.
Russian central bank meets Friday and is expected to keep rates steady at 11.0%. However, a minority of analysts expect a 50 bp cut to 10.50%. It has been on hold at 11.0% since its last 50 bp cut in July 2015. Inflation fell to 7.3% y/y in March, the lowest since April 2014 but still above the 4% target. Comments from Governor Nabiullina support easing ahead, but also suggests that more time is needed before she feels comfortable easing again.
Poland reports April CPI Friday, which is expected at -1% y/y vs. -0.9% in March. This would be further below the 1.5-3.5% target range. Despite deflation risks, it seems the bank will remain on hold near-term. The last piece of the puzzle may fall into place in June, when central bank President Belka will also be replaced. With a new head, we think the bank will likely ease in H2. Next meeting is May 6, no action seen then.
Colombian central bank meets Friday and is expected to hike rates 25 bp to 6.75%. However, the market is split. Of the 19 analysts polled by Bloomberg, 11 see a 25 bp hike while 8 see a 50 bp hike to 7.0%. CPI rose 8.0% y/y in March, the highest since October 2001 and double the top of the 2-4% target range. The latest Bloomberg survey shows median expectations for only two more 25 bp hikes in H1 that would take the policy rate to 7.0%.
Over the weekend, China reports official PMI readings for April. Manufacturing PMI is expected to remain steady at 50.2. Markets appear comfortable with the China macro story for now. Indeed, with improving data, the PBOC appears to be less concerned about stimulus and more concerned about financial sector stability and risks. For now, the PBOC is likely to remain on hold.