strategy bullish
trend
no profit taking
The trade is over ,if the trend conditions change
Argentina’s experience after the collapse of the peso ten years ago supports the view that Greece, and perhaps other peripheral economies, would ultimately be better off leaving the euro-zone rather than struggling on with the current mix of austerity, bail-outs and debt restructuring.
Summary
Peronism, a populist movement established by President Juan Peron in the 1940s, remains the dominant political ideology in Argentina, but several parties with varying philosophies now vie for power.
Despite its economic might, Argentina has often struggled to meet its international financial obligations, defaulting on its sovereign debt nine times.
Argentina has maintained a close partnership with the United States since the Obama administration, but its relations with the rest of South America have been strained over China’s growing influence in the region.
Argentina is considered one of the most stable democracies in Latin America, but the government faces several enduring challenges, including endemic corruption and low levels of public trust. In 2020, Argentina ranked 78 out of 180 countries on Transparency International’s Corruption Perceptions Index, tying with states including China and Kuwait.
What is the state of Argentina’s economy?
Argentina is the third-largest economy in Latin America, behind Brazil and Mexico. Its major industries include automobiles, textiles, mining, technology, agriculture, and tourism. Additionally, analysts say there is significant economic potential in the development of renewable energy, such as solar and wind power, and related resources, such as lithium.
Argentina has historically shifted between pro-business and populist administrations, which have taken a more heavy-handed role in the economy and increased social spending. Before taking office, Fernandez promised to reverse the austerity measures enacted under Macri. His administration has since increased taxes on exports and high-income households, lowered interest rates, and raised the minimum wage. However, while year-on-year unemployment has fallen recently, the country still has one of the highest inflation rates in the world, and four in ten Argentines live below the national poverty line.
Argentina’s top trading partners are the United States, Brazil, and China. The United States is also Argentina’s largest foreign investor, with more than three hundred U.S. companies operating there. In addition, Argentina is a member of several regional trade groups, including the Southern Common Market (Mercosur) and the Latin American Integration Association, and it is currently a prospective member for the Organization for Economic Cooperation and Development, a bloc of the world’s most advanced economies.
What are Argentina’s major economic challenges?
Argentina’s climate for business and investment has worsened in recent years, weakening due to political dysfunction, price and capital controls, high inflation, debt concerns, and the COVID-19 pandemic. In 2020, foreign investment dropped to $4.1 billion, down 38 percent from the previous year, and several international companies announced they were downsizing or leaving Argentina amid the country’s ongoing recession. The overall economy has shrunk each year since 2018.
Argentina was one of the ten wealthiest countries per capita in the early twentieth century. However, economists say that its overreliance on commodity exports and unsustainable government spending fueled frequent boom-bust cycles, resulting in political instability and economic decline in the decades that followed.
Successive administrations have struggled to keep the country’s finances in check during periods of economic turmoil. As a result, Argentina has often failed to pay its international creditors; it has defaulted on its sovereign debt nine times over the last two centuries, one of the most frequent in the world to do so. The largest default occurred in December 2001, when the government reneged on nearly $93 billion in loans, causing Argentina to lose access to international debt markets. To restore its ability to borrow, Macri cut export taxes, lifted currency controls, and negotiated a debt settlement with holdout creditors in 2016. While these actions were successful, Argentina lost access again following the country’s default in May 2020.
As of December 2020, Argentina’s total national debt was $336 billion, or nearly 90 percent of its gross domestic product (GDP). Of that, the government owes $45 billion to the International Monetary Fund (IMF) and $2.4 billion to the Paris Club, an informal group of private creditors.
trend
no profit taking
The trade is over ,if the trend conditions change
Argentina’s experience after the collapse of the peso ten years ago supports the view that Greece, and perhaps other peripheral economies, would ultimately be better off leaving the euro-zone rather than struggling on with the current mix of austerity, bail-outs and debt restructuring.
Summary
Peronism, a populist movement established by President Juan Peron in the 1940s, remains the dominant political ideology in Argentina, but several parties with varying philosophies now vie for power.
Despite its economic might, Argentina has often struggled to meet its international financial obligations, defaulting on its sovereign debt nine times.
Argentina has maintained a close partnership with the United States since the Obama administration, but its relations with the rest of South America have been strained over China’s growing influence in the region.
Argentina is considered one of the most stable democracies in Latin America, but the government faces several enduring challenges, including endemic corruption and low levels of public trust. In 2020, Argentina ranked 78 out of 180 countries on Transparency International’s Corruption Perceptions Index, tying with states including China and Kuwait.
What is the state of Argentina’s economy?
Argentina is the third-largest economy in Latin America, behind Brazil and Mexico. Its major industries include automobiles, textiles, mining, technology, agriculture, and tourism. Additionally, analysts say there is significant economic potential in the development of renewable energy, such as solar and wind power, and related resources, such as lithium.
Argentina has historically shifted between pro-business and populist administrations, which have taken a more heavy-handed role in the economy and increased social spending. Before taking office, Fernandez promised to reverse the austerity measures enacted under Macri. His administration has since increased taxes on exports and high-income households, lowered interest rates, and raised the minimum wage. However, while year-on-year unemployment has fallen recently, the country still has one of the highest inflation rates in the world, and four in ten Argentines live below the national poverty line.
Argentina’s top trading partners are the United States, Brazil, and China. The United States is also Argentina’s largest foreign investor, with more than three hundred U.S. companies operating there. In addition, Argentina is a member of several regional trade groups, including the Southern Common Market (Mercosur) and the Latin American Integration Association, and it is currently a prospective member for the Organization for Economic Cooperation and Development, a bloc of the world’s most advanced economies.
What are Argentina’s major economic challenges?
Argentina’s climate for business and investment has worsened in recent years, weakening due to political dysfunction, price and capital controls, high inflation, debt concerns, and the COVID-19 pandemic. In 2020, foreign investment dropped to $4.1 billion, down 38 percent from the previous year, and several international companies announced they were downsizing or leaving Argentina amid the country’s ongoing recession. The overall economy has shrunk each year since 2018.
Argentina was one of the ten wealthiest countries per capita in the early twentieth century. However, economists say that its overreliance on commodity exports and unsustainable government spending fueled frequent boom-bust cycles, resulting in political instability and economic decline in the decades that followed.
Successive administrations have struggled to keep the country’s finances in check during periods of economic turmoil. As a result, Argentina has often failed to pay its international creditors; it has defaulted on its sovereign debt nine times over the last two centuries, one of the most frequent in the world to do so. The largest default occurred in December 2001, when the government reneged on nearly $93 billion in loans, causing Argentina to lose access to international debt markets. To restore its ability to borrow, Macri cut export taxes, lifted currency controls, and negotiated a debt settlement with holdout creditors in 2016. While these actions were successful, Argentina lost access again following the country’s default in May 2020.
As of December 2020, Argentina’s total national debt was $336 billion, or nearly 90 percent of its gross domestic product (GDP). Of that, the government owes $45 billion to the International Monetary Fund (IMF) and $2.4 billion to the Paris Club, an informal group of private creditors.
Comment:
Wall Street Ends Higher after CPI
The RICS UK Residential Market Survey house price balance, which measures the gap between the percentage of respondents seeing rises and falls in house prices, fell to -46 in June 2023 from -30 in May, posting the weakest reading in four months and coming in below forecasts of -34. This points to a slowdown in the British housing market as higher borrowing costs weighed on demand, with average two-year fixed mortgage rates in the country recently hitting a 15-year high. Expectations that the Bank of England will raise interest rates further this year to bring down inflation also dampened sentiment. Simon Rubinsohn, chief economics at RICS, said: “The latest increase in interest rates and the impact this has already had on mortgage rates is clearly visible in buyer enquiries, sales and prices which have all retreated over the past month.”
The BusinessNZ Performance of Manufacturing Index in New Zealand fell to 47.5 in June 2023 from 48.9 in the previous month. It marked the fourth straight month of contraction in the manufacturing sector and the steepest since last November as activities negatively influenced by declining demand, cost increases and production/staffing issues as the key negative influences on activity for the current month. Production (47.5 vs 45.7 in May) remained subdued and new orders (43.8 vs 50.8) fell back to contraction zone. Meanwhile, employment (47 vs 49.5) contracted further while deliveries (50.5 vs 46) rebounded.
Brazil’s Ibovespa stock index gave up on earlier gains to close 0.1% higher to finish around 117,700 on Wednesday, inline with global positive mood, after the US inflation data came in below expectations in June, even the core measures, suggesting a possible turning point for Federal Reserve policymakers in the coming months. On the domestic data front, services activity in Brazil grew by a more-than-expected 0.9% in May, following a decline of 1.5% in the previous month, placing the sector 11.5% above the pre-pandemic level of February 2020. On the corporate front, shares in the world's largest meatpacker JBS surged 9%, the most in the index, after proposing a dual listing of shares in Sao Paulo and New York in a securities filing today. It was followed by B3 (+2.4%), Gerdau (+2.1%) and PetroRio (+2%).
The RICS UK Residential Market Survey house price balance, which measures the gap between the percentage of respondents seeing rises and falls in house prices, fell to -46 in June 2023 from -30 in May, posting the weakest reading in four months and coming in below forecasts of -34. This points to a slowdown in the British housing market as higher borrowing costs weighed on demand, with average two-year fixed mortgage rates in the country recently hitting a 15-year high. Expectations that the Bank of England will raise interest rates further this year to bring down inflation also dampened sentiment. Simon Rubinsohn, chief economics at RICS, said: “The latest increase in interest rates and the impact this has already had on mortgage rates is clearly visible in buyer enquiries, sales and prices which have all retreated over the past month.”
The BusinessNZ Performance of Manufacturing Index in New Zealand fell to 47.5 in June 2023 from 48.9 in the previous month. It marked the fourth straight month of contraction in the manufacturing sector and the steepest since last November as activities negatively influenced by declining demand, cost increases and production/staffing issues as the key negative influences on activity for the current month. Production (47.5 vs 45.7 in May) remained subdued and new orders (43.8 vs 50.8) fell back to contraction zone. Meanwhile, employment (47 vs 49.5) contracted further while deliveries (50.5 vs 46) rebounded.
Brazil’s Ibovespa stock index gave up on earlier gains to close 0.1% higher to finish around 117,700 on Wednesday, inline with global positive mood, after the US inflation data came in below expectations in June, even the core measures, suggesting a possible turning point for Federal Reserve policymakers in the coming months. On the domestic data front, services activity in Brazil grew by a more-than-expected 0.9% in May, following a decline of 1.5% in the previous month, placing the sector 11.5% above the pre-pandemic level of February 2020. On the corporate front, shares in the world's largest meatpacker JBS surged 9%, the most in the index, after proposing a dual listing of shares in Sao Paulo and New York in a securities filing today. It was followed by B3 (+2.4%), Gerdau (+2.1%) and PetroRio (+2%).
Comment:
Japanese Shares Rise as US Inflation Eases
The Nikkei 225 Index jumped 0.8% to above 32,200 while the broader Topix Index gained 0.3% to 2,228 on Thursday, rising from one-month lows and tracking a rally on Wall Street overnight as cooler-than-expected US inflation data raised hopes that the Federal Reserve is closer to the end of its tightening cycle. Investors also bought back technology stocks following days of consolidation, with notable gains from SoftBank Group (1.9%), Advantest (1.4%), Socionext (2.8%), Tokyo Electron (0.6%), Z Holdings (2.8%) and Renesas Electronics (2.5%). Other index heavyweights also advanced, including Sony Group (4.5%), Fast Retailing (1%), Daiichi Sankyo (4.5%), Mitsui & Co (1%) and Eisai Co (1.6%).
Australia Inflation Expectations Stable inJuly
NZX Trades Slightly Higher
New Zealand Factory Activity Shrinks to 7-Month Low
Argentina Indicators
Industrial Production 1.1 1.8 percent May/23
Industrial Production Mom 1.2 3.2 percent Apr/23
Capacity Utilization 68.9 67.3 percent Apr/23
Changes in Inventories -20633 20148 ARS Million Mar/23
Car Production 53282 54399 Units May/23
Car Registrations 38.6 33.8 Thousand May/23
Leading Economic Index -0.48 -0.28 percent May/23
Corruption Index 38 38 Points Dec/22
Corruption Rank 94 96 Dec/22
The Turkish lira extended losses to new all-time lows of 26.2 per USD, amid increasing signs of a shift to a more orthodox approach and as the central bank reportedly stopped using its reserves to support the currency. On June 22nd, the central bank of Turkey raised interest rates by 650 bps to 15%, marking a reversal from its previous ultra-loose and unorthodox monetary policy although the move fell short of meeting market expectations for a higher rate of 21%. Few days later, policymakers loosened measures designed to boost the lira, including lowering the securities maintenance ratio to 5% from 10% and the threshold for the share of lira deposits to 57% from 60%.
The Nikkei 225 Index jumped 0.8% to above 32,200 while the broader Topix Index gained 0.3% to 2,228 on Thursday, rising from one-month lows and tracking a rally on Wall Street overnight as cooler-than-expected US inflation data raised hopes that the Federal Reserve is closer to the end of its tightening cycle. Investors also bought back technology stocks following days of consolidation, with notable gains from SoftBank Group (1.9%), Advantest (1.4%), Socionext (2.8%), Tokyo Electron (0.6%), Z Holdings (2.8%) and Renesas Electronics (2.5%). Other index heavyweights also advanced, including Sony Group (4.5%), Fast Retailing (1%), Daiichi Sankyo (4.5%), Mitsui & Co (1%) and Eisai Co (1.6%).
Australia Inflation Expectations Stable inJuly
NZX Trades Slightly Higher
New Zealand Factory Activity Shrinks to 7-Month Low
Argentina Indicators
Industrial Production 1.1 1.8 percent May/23
Industrial Production Mom 1.2 3.2 percent Apr/23
Capacity Utilization 68.9 67.3 percent Apr/23
Changes in Inventories -20633 20148 ARS Million Mar/23
Car Production 53282 54399 Units May/23
Car Registrations 38.6 33.8 Thousand May/23
Leading Economic Index -0.48 -0.28 percent May/23
Corruption Index 38 38 Points Dec/22
Corruption Rank 94 96 Dec/22
The Turkish lira extended losses to new all-time lows of 26.2 per USD, amid increasing signs of a shift to a more orthodox approach and as the central bank reportedly stopped using its reserves to support the currency. On June 22nd, the central bank of Turkey raised interest rates by 650 bps to 15%, marking a reversal from its previous ultra-loose and unorthodox monetary policy although the move fell short of meeting market expectations for a higher rate of 21%. Few days later, policymakers loosened measures designed to boost the lira, including lowering the securities maintenance ratio to 5% from 10% and the threshold for the share of lira deposits to 57% from 60%.
Comment:
Bullish
Comment:
Brazilian Stocks Fall to Finish Week on Sour Note
Brazil’s Ibovespa stock index fell 1.3% to close at 117,698 marks on Friday, after a report that showed retail sales in Brazil unexpectedly decreased in May. Brazil's retail sales fell 1% in May from a month earlier, the first decrease since December. Among single stocks, BRF tumbled 7.4% after pricing its stock offering at 9 reais per share, raising 5.4 billion reais. Also, GOL declined 6% due to forecasts indicating a loss in the second quarter and Azul slipped by 6.5%. Meanwhile, the heavyweight Petrobras lost 2.3% in line with the downward movement of oil prices. On the other hand, Méliuz surged 14.1% after closing at a record low the day before. For the week, the Ibovespa went down by 1%.
China New Home Prices Flatten in June
Average new home prices in China's 70 major cities were flat year-on-year in June 2023 after edging up 0.1 percent in the previous month. Among the biggest Chinese cities, prices increased in Beijing (3.5% vs 4.3% in May), Chongqing (0.6% vs 1.3%), Shanghai (4.8% vs 4.9%), and Tianjin (0.2% vs -0.3%). By contrast, cost fell in both Shenzhen (-2.4% vs -0.2%) and Guangzhou (-0.8% vs -0.4%). On a monthly basis, new home prices were unchanged, the weakest result so far this year, as as broad efforts from Beijing have not revived the ailing property sector with recovery weakening in the world's second-largest economy.
Shares in New Zealand fell 15 points or 0.13% to 11,998 in early trading at the start of the week, slightly retreating from a nearly 2-month peak hit in the prior session, amid losses from non-energy minerals, industrial services, and transport. A decline in US stock futures rattled sentiment after Wall Street closed mostly lower Friday, with the S&P 500 snapping a 4-day win streak, as investors digested bank earnings. Traders also took a cautious stance ahead of a flurry of economic data from China later in the day, including Q2 GDP readings, with concerns growing that the post-pandemic bounce is rapidly losing momentum.
US Natgas Prices Fall to 1-Month Low
Colombia Industrial Output Falls Less than Expected
Manufacturing production in Columbia sank by 3.4% year-on-year in May 2023, following a 6.4% decline in the previous month and compared with market estimates of a 4.9% contraction. The downturn added to recent evidence that the Colombian economy is succumbing to the aggressive interest rate hikes from its central bank. Output fell primarily for paper products (-15.1%), beverages (-11.2%), chemical products (-14.7%), and textiles (-22.1%).
Brazil’s Ibovespa stock index fell 1.3% to close at 117,698 marks on Friday, after a report that showed retail sales in Brazil unexpectedly decreased in May. Brazil's retail sales fell 1% in May from a month earlier, the first decrease since December. Among single stocks, BRF tumbled 7.4% after pricing its stock offering at 9 reais per share, raising 5.4 billion reais. Also, GOL declined 6% due to forecasts indicating a loss in the second quarter and Azul slipped by 6.5%. Meanwhile, the heavyweight Petrobras lost 2.3% in line with the downward movement of oil prices. On the other hand, Méliuz surged 14.1% after closing at a record low the day before. For the week, the Ibovespa went down by 1%.
China New Home Prices Flatten in June
Average new home prices in China's 70 major cities were flat year-on-year in June 2023 after edging up 0.1 percent in the previous month. Among the biggest Chinese cities, prices increased in Beijing (3.5% vs 4.3% in May), Chongqing (0.6% vs 1.3%), Shanghai (4.8% vs 4.9%), and Tianjin (0.2% vs -0.3%). By contrast, cost fell in both Shenzhen (-2.4% vs -0.2%) and Guangzhou (-0.8% vs -0.4%). On a monthly basis, new home prices were unchanged, the weakest result so far this year, as as broad efforts from Beijing have not revived the ailing property sector with recovery weakening in the world's second-largest economy.
Shares in New Zealand fell 15 points or 0.13% to 11,998 in early trading at the start of the week, slightly retreating from a nearly 2-month peak hit in the prior session, amid losses from non-energy minerals, industrial services, and transport. A decline in US stock futures rattled sentiment after Wall Street closed mostly lower Friday, with the S&P 500 snapping a 4-day win streak, as investors digested bank earnings. Traders also took a cautious stance ahead of a flurry of economic data from China later in the day, including Q2 GDP readings, with concerns growing that the post-pandemic bounce is rapidly losing momentum.
US Natgas Prices Fall to 1-Month Low
Colombia Industrial Output Falls Less than Expected
Manufacturing production in Columbia sank by 3.4% year-on-year in May 2023, following a 6.4% decline in the previous month and compared with market estimates of a 4.9% contraction. The downturn added to recent evidence that the Colombian economy is succumbing to the aggressive interest rate hikes from its central bank. Output fell primarily for paper products (-15.1%), beverages (-11.2%), chemical products (-14.7%), and textiles (-22.1%).
Comment:
Most Latam currencies rise, Argentine peso touches historic low
Peru central bank decision due
Argentine peso hit record low of 512/dollar after CPI data
Peru extends state of emergency in key mining region
Guatemala's court excludes top party from election
Most Latin American currencies rose against a weak dollar on Thursday after slowing U.S. inflation signaled a faster farewell to the U.S. rate-hiking cycle, while Argentina's peso hit a historic low in parallel market trading after inflation data.
Brazil's real
USDBRL
, (BRBY) and Chile's peso
USDCLP
rose 0.5% and 0.3%, respectively, with the dollar tumbling to its lowest since last April after U.S. inflation readings cemented bets of an imminent end to Federal Reserve rate hikes.
The Argentine peso (ARSB=) fell 0.9% in black market trading to a historic low of 512 pesos per dollar after data showed the monthly inflation rate stood at 6.0% in June, below a Reuters poll forecast of 7.0%.
Inflation in the 12 months through June hit 115.6% in Argentina.
As the country struggles with an economic crisis, an Argentine delegation is meeting with the International Monetary Fund this week to renegotiate its $44 million loan.
Peru's sol
USDPEN
added 0.2%, holding near its strongest level since November 2020 ahead of a monetary policy decision later in the day.
The country extended an emergency state for another 30 days along its main roadways, including a key mining corridor, as a new round of protests is expected to kick off next week.
Colombia's peso
USDCOP
rose 0.9%, touching a three-week high.
William Jackson, chief emerging markets economist at Capital Economics, also noted that shocks from the El Nino weather pattern could prompt inflation in central and south American regions to cool more slowly than previously expected.
"Latin American central banks are unlikely to look through food price shocks given how strong headline inflation and wage growth in the region still are. So, upside inflation surprises could postpone the upcoming monetary easing cycles, or make them more gradual."
The Mexican peso slipped 0.4% and was set to snap a four-day winning streak, after touching its highest level since early December 2015 on Wednesday.
The MSCI gauge for Latam stocks (.MILA00000PUS) gained 1.3%, led by a 1.4% advance in Brazil's Bovespa
IBOV
.
Foreigners funneled over $22 billion net into emerging market portfolios in June, the largest amount since January, according to data from the Institute of International Finance.
A Guatemalan court ordered the suspension of anti-graft presidential candidate Bernardo Arevalo's political party, threatening his place in a run-off vote and prompting U.S. warnings of a challenge to democracy.
Elsewhere, the International Monetary Fund's executive board has approved an immediate $189 million disbursement to Zambia following its first review of a $1.3 billion loan programme.
Latam FX hits 10-year high on weak dollar as US inflation slows
The index for Latin American currencies touched a 10-year high on Wednesday, led by Brazil's real, as the dollar dwindled after a U.S. inflation reading indicated just one more interest rate hike by the Federal Reserve this year.
The MSCI index for Latam currencies (.MILA00000CUS) jumped 1.6%, hitting its highest level since April 2013.
Most currencies hit multi-year highs against a weakening dollar after June U.S. consumer prices rose at their smallest annual pace in over two years.
Although talks of rate cuts have intensified in Latam of late, bets on the U.S. rate-hiking cycle coming to an end will likely lead to a favorable interest rates differential.
The Mexican peso
USDMXN
jumped 1%, breaking below the psychological barrier of 17 pesos per dollar, touching an eight year high.
Higher crude oil prices also boosted the Mexican peso and top exporter Colombia's peso
USDCOP
by 0.8%.
Copper prices hit 2-1/2-week highs, boosting currencies of main exporters. Chile's peso
USDCLP
added 0.7% and Peru's sol
USDPEN
rose 1.3%, to its highest level since November 2020. Peru's central bank is set to decide on policy rates on Thursday.
Chile's Finance Minister Mario Marcel said the government now expects gross domestic product (GDP) to grow 0.2% in 2023, revising its forecast down from a previous estimate of 0.3%.
The Brazilian real (BRBY)
USDBRL
gained 0.8%, touching a one-week high.
The rapporteur for Brazil's tax reform bill in the Senate, Eduardo Braga, on Tuesday said that he expects the proposal to be voted on in October in the House.
Data showed Brazil's services activity grew by much more than expected in May, paring some losses seen in April despite high interest rates.
"Progress on the structural reform agenda and the (Brazil) government decision to maintain the CPI target at 3% have cleared the way for rate cuts; we expect a 50bps cut on August 2," said Lawrence Brainard, chief EM economist at TS Lombard.
Meanwhile, Argentine polling firms warned of difficulties accurately predicting the upcoming presidential primaries' results due to low turnout and the emergence of surprise candidates, leaving the October election also uncertain.
The MSCI index for Latam stocks (.MILA00000PUS) jumped 2.5%, touching a one-week high, led by a 1.4% advance Brazil's Bovespa
IBOV
.
World's largest meat packer JBS SA
JBSS3
jumped 9% after proposing a New York listing.
Separately, the International Monetary Fund (IMF) approved a $3 billion, nine-month bailout programme for Pakistan.
Peru central bank decision due
Argentine peso hit record low of 512/dollar after CPI data
Peru extends state of emergency in key mining region
Guatemala's court excludes top party from election
Most Latin American currencies rose against a weak dollar on Thursday after slowing U.S. inflation signaled a faster farewell to the U.S. rate-hiking cycle, while Argentina's peso hit a historic low in parallel market trading after inflation data.
Brazil's real
USDBRL
, (BRBY) and Chile's peso
USDCLP
rose 0.5% and 0.3%, respectively, with the dollar tumbling to its lowest since last April after U.S. inflation readings cemented bets of an imminent end to Federal Reserve rate hikes.
The Argentine peso (ARSB=) fell 0.9% in black market trading to a historic low of 512 pesos per dollar after data showed the monthly inflation rate stood at 6.0% in June, below a Reuters poll forecast of 7.0%.
Inflation in the 12 months through June hit 115.6% in Argentina.
As the country struggles with an economic crisis, an Argentine delegation is meeting with the International Monetary Fund this week to renegotiate its $44 million loan.
Peru's sol
USDPEN
added 0.2%, holding near its strongest level since November 2020 ahead of a monetary policy decision later in the day.
The country extended an emergency state for another 30 days along its main roadways, including a key mining corridor, as a new round of protests is expected to kick off next week.
Colombia's peso
USDCOP
rose 0.9%, touching a three-week high.
William Jackson, chief emerging markets economist at Capital Economics, also noted that shocks from the El Nino weather pattern could prompt inflation in central and south American regions to cool more slowly than previously expected.
"Latin American central banks are unlikely to look through food price shocks given how strong headline inflation and wage growth in the region still are. So, upside inflation surprises could postpone the upcoming monetary easing cycles, or make them more gradual."
The Mexican peso slipped 0.4% and was set to snap a four-day winning streak, after touching its highest level since early December 2015 on Wednesday.
The MSCI gauge for Latam stocks (.MILA00000PUS) gained 1.3%, led by a 1.4% advance in Brazil's Bovespa
IBOV
.
Foreigners funneled over $22 billion net into emerging market portfolios in June, the largest amount since January, according to data from the Institute of International Finance.
A Guatemalan court ordered the suspension of anti-graft presidential candidate Bernardo Arevalo's political party, threatening his place in a run-off vote and prompting U.S. warnings of a challenge to democracy.
Elsewhere, the International Monetary Fund's executive board has approved an immediate $189 million disbursement to Zambia following its first review of a $1.3 billion loan programme.
Latam FX hits 10-year high on weak dollar as US inflation slows
The index for Latin American currencies touched a 10-year high on Wednesday, led by Brazil's real, as the dollar dwindled after a U.S. inflation reading indicated just one more interest rate hike by the Federal Reserve this year.
The MSCI index for Latam currencies (.MILA00000CUS) jumped 1.6%, hitting its highest level since April 2013.
Most currencies hit multi-year highs against a weakening dollar after June U.S. consumer prices rose at their smallest annual pace in over two years.
Although talks of rate cuts have intensified in Latam of late, bets on the U.S. rate-hiking cycle coming to an end will likely lead to a favorable interest rates differential.
The Mexican peso
USDMXN
jumped 1%, breaking below the psychological barrier of 17 pesos per dollar, touching an eight year high.
Higher crude oil prices also boosted the Mexican peso and top exporter Colombia's peso
USDCOP
by 0.8%.
Copper prices hit 2-1/2-week highs, boosting currencies of main exporters. Chile's peso
USDCLP
added 0.7% and Peru's sol
USDPEN
rose 1.3%, to its highest level since November 2020. Peru's central bank is set to decide on policy rates on Thursday.
Chile's Finance Minister Mario Marcel said the government now expects gross domestic product (GDP) to grow 0.2% in 2023, revising its forecast down from a previous estimate of 0.3%.
The Brazilian real (BRBY)
USDBRL
gained 0.8%, touching a one-week high.
The rapporteur for Brazil's tax reform bill in the Senate, Eduardo Braga, on Tuesday said that he expects the proposal to be voted on in October in the House.
Data showed Brazil's services activity grew by much more than expected in May, paring some losses seen in April despite high interest rates.
"Progress on the structural reform agenda and the (Brazil) government decision to maintain the CPI target at 3% have cleared the way for rate cuts; we expect a 50bps cut on August 2," said Lawrence Brainard, chief EM economist at TS Lombard.
Meanwhile, Argentine polling firms warned of difficulties accurately predicting the upcoming presidential primaries' results due to low turnout and the emergence of surprise candidates, leaving the October election also uncertain.
The MSCI index for Latam stocks (.MILA00000PUS) jumped 2.5%, touching a one-week high, led by a 1.4% advance Brazil's Bovespa
IBOV
.
World's largest meat packer JBS SA
JBSS3
jumped 9% after proposing a New York listing.
Separately, the International Monetary Fund (IMF) approved a $3 billion, nine-month bailout programme for Pakistan.
Comment:
YEN Oil AUD NZD Asian stocks fall on bad chinese data
China Industrial Output Growth Beats Estimates
The Chinese economy advanced 6.3% yoy in Q2 of 2023, faster than a 4.5% growth in Q1 but missing market estimates of 7.3%. The latest figures were distorted by a low base of comparison last year when Shanghai and other big cities were in strict lockdown. During H1, the economy grew by 5.5%. China has set a GDP growth target of around 5% for this year after the economy expanded by 3% in 2022 and missed the government's target of about 5.5%. Beijing has shown reluctance to launch greater stimulus, especially as local government debt has soared. In June alone, indicators showed a mixed picture: retail sales rose the least in 5 months, industrial output growth grew for the 14th month, and the urban jobless rate was unchanged at 5.2% but youth unemployment hit a new high of 21.3%. Data released earlier showed shipments from China fell the most in three years, as high inflation in key markets and geopolitics hit foreign demand. A Politburo meeting is expected later this month.
Asian Stocks Fall on Weak Chinese Data
Asian equity markets fell on Monday as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. The Shanghai Composite led the decline, losing more than 1%. The Shenzhen Component, S&P/ASX 200 and Kospi indexes also tumbled. Meanwhile, Japanese markets are closed for a holiday, while Hong Kong markets will likely be closed for the day due to a typhoon.
China Stocks Drop on Weak GDP Data
The Shanghai Composite dropped 1.1% to around 3,200 while the Shenzhen Component lost 0.8% to 10,990 on Monday, giving back gains from last week as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. Meanwhile, China’s industrial production and fixed asset investments increased more than anticipated, while retail sales missed forecasts. Mainland stocks gained last week amid hopes that a faltering post-pandemic recovery would prompt Beijing to offer more pro-growth policy measures. Commodity-linked and financial stocks led the decline, with notable losses from Yunnan Lincang (-3.5%), Zijin Mining (-1.5%), China Shenhua Energy (-4.5%), ICBC (-6%), Ping An Insurance (-1%) and China Merchants Bank (-1.1%).
China Industrial Output Growth Beats Estimates
The Chinese economy advanced 6.3% yoy in Q2 of 2023, faster than a 4.5% growth in Q1 but missing market estimates of 7.3%. The latest figures were distorted by a low base of comparison last year when Shanghai and other big cities were in strict lockdown. During H1, the economy grew by 5.5%. China has set a GDP growth target of around 5% for this year after the economy expanded by 3% in 2022 and missed the government's target of about 5.5%. Beijing has shown reluctance to launch greater stimulus, especially as local government debt has soared. In June alone, indicators showed a mixed picture: retail sales rose the least in 5 months, industrial output growth grew for the 14th month, and the urban jobless rate was unchanged at 5.2% but youth unemployment hit a new high of 21.3%. Data released earlier showed shipments from China fell the most in three years, as high inflation in key markets and geopolitics hit foreign demand. A Politburo meeting is expected later this month.
Asian Stocks Fall on Weak Chinese Data
Asian equity markets fell on Monday as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. The Shanghai Composite led the decline, losing more than 1%. The Shenzhen Component, S&P/ASX 200 and Kospi indexes also tumbled. Meanwhile, Japanese markets are closed for a holiday, while Hong Kong markets will likely be closed for the day due to a typhoon.
China Stocks Drop on Weak GDP Data
The Shanghai Composite dropped 1.1% to around 3,200 while the Shenzhen Component lost 0.8% to 10,990 on Monday, giving back gains from last week as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. Meanwhile, China’s industrial production and fixed asset investments increased more than anticipated, while retail sales missed forecasts. Mainland stocks gained last week amid hopes that a faltering post-pandemic recovery would prompt Beijing to offer more pro-growth policy measures. Commodity-linked and financial stocks led the decline, with notable losses from Yunnan Lincang (-3.5%), Zijin Mining (-1.5%), China Shenhua Energy (-4.5%), ICBC (-6%), Ping An Insurance (-1%) and China Merchants Bank (-1.1%).
Comment:
YEN Oil AUD NZD Asian stocks fall on bad chinese data
China Industrial Output Growth Beats Estimates
The Chinese economy advanced 6.3% yoy in Q2 of 2023, faster than a 4.5% growth in Q1 but missing market estimates of 7.3%. The latest figures were distorted by a low base of comparison last year when Shanghai and other big cities were in strict lockdown. During H1, the economy grew by 5.5%. China has set a GDP growth target of around 5% for this year after the economy expanded by 3% in 2022 and missed the government's target of about 5.5%. Beijing has shown reluctance to launch greater stimulus, especially as local government debt has soared. In June alone, indicators showed a mixed picture: retail sales rose the least in 5 months, industrial output growth grew for the 14th month, and the urban jobless rate was unchanged at 5.2% but youth unemployment hit a new high of 21.3%. Data released earlier showed shipments from China fell the most in three years, as high inflation in key markets and geopolitics hit foreign demand. A Politburo meeting is expected later this month.
Asian Stocks Fall on Weak Chinese Data
Asian equity markets fell on Monday as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. The Shanghai Composite led the decline, losing more than 1%. The Shenzhen Component, S&P/ASX 200 and Kospi indexes also tumbled. Meanwhile, Japanese markets are closed for a holiday, while Hong Kong markets will likely be closed for the day due to a typhoon.
China Stocks Drop on Weak GDP Data
The Shanghai Composite dropped 1.1% to around 3,200 while the Shenzhen Component lost 0.8% to 10,990 on Monday, giving back gains from last week as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. Meanwhile, China’s industrial production and fixed asset investments increased more than anticipated, while retail sales missed forecasts. Mainland stocks gained last week amid hopes that a faltering post-pandemic recovery would prompt Beijing to offer more pro-growth policy measures. Commodity-linked and financial stocks led the decline, with notable losses from Yunnan Lincang (-3.5%), Zijin Mining (-1.5%), China Shenhua Energy (-4.5%), ICBC (-6%), Ping An Insurance (-1%) and China Merchants Bank (-1.1%).
China Industrial Output Growth Beats Estimates
The Chinese economy advanced 6.3% yoy in Q2 of 2023, faster than a 4.5% growth in Q1 but missing market estimates of 7.3%. The latest figures were distorted by a low base of comparison last year when Shanghai and other big cities were in strict lockdown. During H1, the economy grew by 5.5%. China has set a GDP growth target of around 5% for this year after the economy expanded by 3% in 2022 and missed the government's target of about 5.5%. Beijing has shown reluctance to launch greater stimulus, especially as local government debt has soared. In June alone, indicators showed a mixed picture: retail sales rose the least in 5 months, industrial output growth grew for the 14th month, and the urban jobless rate was unchanged at 5.2% but youth unemployment hit a new high of 21.3%. Data released earlier showed shipments from China fell the most in three years, as high inflation in key markets and geopolitics hit foreign demand. A Politburo meeting is expected later this month.
Asian Stocks Fall on Weak Chinese Data
Asian equity markets fell on Monday as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. The Shanghai Composite led the decline, losing more than 1%. The Shenzhen Component, S&P/ASX 200 and Kospi indexes also tumbled. Meanwhile, Japanese markets are closed for a holiday, while Hong Kong markets will likely be closed for the day due to a typhoon.
China Stocks Drop on Weak GDP Data
The Shanghai Composite dropped 1.1% to around 3,200 while the Shenzhen Component lost 0.8% to 10,990 on Monday, giving back gains from last week as investors reacted to key data showing China’s economy grew 6.3% in the second quarter, lower than the 7.3% expansion expected by analysts. Meanwhile, China’s industrial production and fixed asset investments increased more than anticipated, while retail sales missed forecasts. Mainland stocks gained last week amid hopes that a faltering post-pandemic recovery would prompt Beijing to offer more pro-growth policy measures. Commodity-linked and financial stocks led the decline, with notable losses from Yunnan Lincang (-3.5%), Zijin Mining (-1.5%), China Shenhua Energy (-4.5%), ICBC (-6%), Ping An Insurance (-1%) and China Merchants Bank (-1.1%).
Comment:
This trade is still open and active
Government Bond Yields Fall for 2nd Session
Government bond yields around the world fell for a second day on Tuesday, with the US 10-year Treasury note yield, seen as a proxy for global borrowing costs, retreating to 3.76%, a level not seen since late June. Investors are getting increasingly convinced that major central banks, and specially the Federal Reserve, will soon end their tightening campaign. Bets for a 25bps hike in the fed funds rate next week currently stand at 97% but investors remain divided on the need of further increases, with chances for a September increase currently standing at 12% and for November at 22%. Meanwhile, the ECB is also set to raise rates by 25bps again next week while there is just a 70% chance of a further rate rise in September. The Bank of England will decide on monetary policy in August only, but either a 25bps or a 50bps hike are seen as certain. On the other hand, traders are increasingly speculating the Bank of Japan could adjust its ultra loose monetary policy next week.
The yield on the German 10-year government bond fell to 2.4%, down from the four-month high of 2.679% reached on July 10, as signs of cooling inflation in the US increased speculation that the Federal Reserve is approaching the end of a series of significant interest rate hikes. Nevertheless, the European Central Bank is expected to persist with raising rates throughout the year, aiming for a deposit rate peak of 4% by year-end. However, a recent batch of weak economic data from across the region might prompt the central bank to revise its inflation forecasts in September, possibly leaving the deposit facility rate at 3.75%. Hawkish ECB policymaker Joachim Nagel expressed caution on Monday about further tightening moves in September, stating that "we will see what the data will tell us." In addition, his colleague Klaas Knot said monetary tightening beyond July’s meeting is anything but guaranteed.
Turkish Lira Weakens to Fresh Record Low
The Turkish lira weakened more than 2% to a fresh record low of 26.9 per USD, as both the central bank and state-run banks stopped supporting the currency ahead of the central bank monetary policy decision on Thursday. Most investors expect a 500bps increase in interest rates, although some market participants said the rise could be smaller. On June 22nd, the central bank of Turkey raised interest rates by 650 bps to 15%, marking a reversal from its previous ultra-loose and unorthodox monetary policy although the move fell short of meeting market expectations for a higher rate of 21%
Euro Hits Fresh 17-Month High
The euro strengthened its position above $1.12, reaching its highest level since February 2022, on the back of investor expectations that the European Central Bank will continue its rate-hike cycle to tackle inflation and bring it closer to the 2% target. In the Eurozone, inflation declined to a 17-month low of 5.5% in June, but the core rate remained stubbornly high at 5.4%, still close to the all-time high of 5.7% seen in March. Currently, the interest rates in the bloc stand at 3.5%, but traders anticipate rates peaking at 4% by the end of the year. However, a recent batch of weak economic data from across the region might prompt the central bank to revise its inflation forecasts in September, possibly leaving the deposit facility rate at 3.75%. Simultaneously, the recently released weaker-than-expected US inflation data has fueled speculations that the Federal Reserve is nearing the conclusion of its current policy tightening measures.
Government Bond Yields Fall for 2nd Session
Government bond yields around the world fell for a second day on Tuesday, with the US 10-year Treasury note yield, seen as a proxy for global borrowing costs, retreating to 3.76%, a level not seen since late June. Investors are getting increasingly convinced that major central banks, and specially the Federal Reserve, will soon end their tightening campaign. Bets for a 25bps hike in the fed funds rate next week currently stand at 97% but investors remain divided on the need of further increases, with chances for a September increase currently standing at 12% and for November at 22%. Meanwhile, the ECB is also set to raise rates by 25bps again next week while there is just a 70% chance of a further rate rise in September. The Bank of England will decide on monetary policy in August only, but either a 25bps or a 50bps hike are seen as certain. On the other hand, traders are increasingly speculating the Bank of Japan could adjust its ultra loose monetary policy next week.
The yield on the German 10-year government bond fell to 2.4%, down from the four-month high of 2.679% reached on July 10, as signs of cooling inflation in the US increased speculation that the Federal Reserve is approaching the end of a series of significant interest rate hikes. Nevertheless, the European Central Bank is expected to persist with raising rates throughout the year, aiming for a deposit rate peak of 4% by year-end. However, a recent batch of weak economic data from across the region might prompt the central bank to revise its inflation forecasts in September, possibly leaving the deposit facility rate at 3.75%. Hawkish ECB policymaker Joachim Nagel expressed caution on Monday about further tightening moves in September, stating that "we will see what the data will tell us." In addition, his colleague Klaas Knot said monetary tightening beyond July’s meeting is anything but guaranteed.
Turkish Lira Weakens to Fresh Record Low
The Turkish lira weakened more than 2% to a fresh record low of 26.9 per USD, as both the central bank and state-run banks stopped supporting the currency ahead of the central bank monetary policy decision on Thursday. Most investors expect a 500bps increase in interest rates, although some market participants said the rise could be smaller. On June 22nd, the central bank of Turkey raised interest rates by 650 bps to 15%, marking a reversal from its previous ultra-loose and unorthodox monetary policy although the move fell short of meeting market expectations for a higher rate of 21%
Euro Hits Fresh 17-Month High
The euro strengthened its position above $1.12, reaching its highest level since February 2022, on the back of investor expectations that the European Central Bank will continue its rate-hike cycle to tackle inflation and bring it closer to the 2% target. In the Eurozone, inflation declined to a 17-month low of 5.5% in June, but the core rate remained stubbornly high at 5.4%, still close to the all-time high of 5.7% seen in March. Currently, the interest rates in the bloc stand at 3.5%, but traders anticipate rates peaking at 4% by the end of the year. However, a recent batch of weak economic data from across the region might prompt the central bank to revise its inflation forecasts in September, possibly leaving the deposit facility rate at 3.75%. Simultaneously, the recently released weaker-than-expected US inflation data has fueled speculations that the Federal Reserve is nearing the conclusion of its current policy tightening measures.
Comment:
This trade is stil open and active
relevant market wraps
European Markets Head for Muted Open
European equity markets were headed for a muted open on Thursday as investors braced for the start of the earnings season in the region. Major European firms slated to report earnings today include SAP, EasyJet, Volvo Car, Publicis, ABB and Nokia. Investors also turned cautious after shares of key technology names in the US dropped in post-market trade on disappointing quarterly results. DAX, Stoxx 600 and FTSE 100 futures all fluctuated around the flatline in premarket trade.
Gold Hits 2-Month High on Fed Pause Bets
Japan 10-Year Yield Steadies Around 0.46%
Japan’s 10-year government bond yield steadied around 0.46% as a dovish outlook on Bank of Japan monetary policy kept the benchmark yield below the upper limit of the target range. BOJ Governor Kazuo Ueda recently stated that there was still some distance to sustainably and stably achieve the central bank’s 2% inflation target, indicating the BOJ’s commitment to ultra-easy monetary policy. Last month, the central bank held its short-term interest rate target at -0.1% and that of 10-year bond yields at around 0% by a unanimous vote, in line with expectations. Falling bond yields in other major economies also reduced upward pressure on JGB yields, as easing inflationary pressures raised hopes that the end of the current monetary policy tightening cycle is close.
Japan Raises This Year’s Price View to 2.6% Ahead of BOJ Meet
The Japanese government raised its overall inflation forecast to 2.6% for the current fiscal year ahead of the central bank’s policy decision meeting next week, the Cabinet Office said Thursday. The upward revision from the previous forecast of 1.7% shows stronger-than-expected inflationary pressure. Japan saw that trend holding up even after accounting for government price-relief measures, which the Cabinet Office says shaves 0.5 percentage points off this year’s price reading. For fiscal 2024, the government expects overall inflation to slow to 1.9%.
relevant market wraps
European Markets Head for Muted Open
European equity markets were headed for a muted open on Thursday as investors braced for the start of the earnings season in the region. Major European firms slated to report earnings today include SAP, EasyJet, Volvo Car, Publicis, ABB and Nokia. Investors also turned cautious after shares of key technology names in the US dropped in post-market trade on disappointing quarterly results. DAX, Stoxx 600 and FTSE 100 futures all fluctuated around the flatline in premarket trade.
Gold Hits 2-Month High on Fed Pause Bets
Japan 10-Year Yield Steadies Around 0.46%
Japan’s 10-year government bond yield steadied around 0.46% as a dovish outlook on Bank of Japan monetary policy kept the benchmark yield below the upper limit of the target range. BOJ Governor Kazuo Ueda recently stated that there was still some distance to sustainably and stably achieve the central bank’s 2% inflation target, indicating the BOJ’s commitment to ultra-easy monetary policy. Last month, the central bank held its short-term interest rate target at -0.1% and that of 10-year bond yields at around 0% by a unanimous vote, in line with expectations. Falling bond yields in other major economies also reduced upward pressure on JGB yields, as easing inflationary pressures raised hopes that the end of the current monetary policy tightening cycle is close.
Japan Raises This Year’s Price View to 2.6% Ahead of BOJ Meet
The Japanese government raised its overall inflation forecast to 2.6% for the current fiscal year ahead of the central bank’s policy decision meeting next week, the Cabinet Office said Thursday. The upward revision from the previous forecast of 1.7% shows stronger-than-expected inflationary pressure. Japan saw that trend holding up even after accounting for government price-relief measures, which the Cabinet Office says shaves 0.5 percentage points off this year’s price reading. For fiscal 2024, the government expects overall inflation to slow to 1.9%.
Comment:
trade is open
DXY decreased to a 14-month low of 100.61
Wall Street Rallies after Softer Inflation
US stocks surged on Wednesday after both headline and core inflation fell more than expected in June, reinforcing the view the Federal Reserve may stop the tightening campaign sooner than expected. The Dow Jones gained around 250 points to 34548, the highest level since November last year, with 3M and Goldman Sachs up nearly 2% and among the top performers. The S&P 500 added 0.9% 4477, a level not seen since April of 2022, led by shares in the consumer discretionary, tech and real estate sectors. The Nasdaq was up about 1.2% to 13906, also the highest since April last year. Traders are currently pricing in a 92% chance for a 25bps increase in the fed funds rate this month, while the odds for another quarter-point hike in September fell to 13% from 20% before the CPI release and in November eased to 26% from 34%.
Brazil Business Morale Rises to 8-Month High
The Industrial Entrepreneur Confidence Index (ICEI) in Brazil rose by 0.7 points from the previous month to an eight-month high of 51.1 in July of 2023. This marks the second consecutive month in which the industry has shown confidence, attributed primarily to a more positive evaluation of the current economic conditions (+1.3 points to 45.5). Also, the indicator of future expectations increased (+0.4 points to 53.9), indicating optimism for the next six months.
FTSE MIB Close Rise to 15-Year High
The FTSE MIB index closed 1.8% higher at 28,573 on Wednesday, outperforming other benchmark European indices amid sharp gains for its heavyweight financial sector as markets digested the soft US inflation print. American consumer prices rose by 3% annually in June, below estimates of 3.1%, benefitting from a slowdown in core consumer prices. The development lifted equities amid hopes that the Fed will be able to ease its hawkish pressure. Banks were among the sharpest gainers as BTP yields fell by 15bps, aiding their balance sheet with Banca MPS and Banco BPM both adding more than 2%. In the meantime, STMicroelectronics shares surged 4.8% amid recommendation updates from Jeffries and Citigroup.