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Investor Insights Global

19 Nov 2018   Macro Global

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX caught a bid last week as markets took Fed comments to be on the dovish side. Given how firm the US data have been of late, we do not agree with the newly prevailing view that the Fed will be more cautious. However, we must respect the price action and so this dollar correction will likely extend until the market’s Fed view reverses again.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX has come under renewed pressure as the dollar staged a broad-based recovery after the FOMC meeting. Data this week is likely to show continued robustness in the US economy, cementing a December hike by the Fed. Elsewhere, concerns about China, Italy, and Brexit are likely to weigh on market sentiment. We remain negative on EM.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX got some traction last week as the dollar rally stalled. Still, event risk remains high in many EM countries, notably Brazil, Mexico, South Africa, and Turkey. The FOMC meeting this week is widely expected to see no actions, but the Fed should signal that a December hike is on track. As it is, US yields are marching higher again. We believe the global backdrop for EM remains negative.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX ended last week on a firm note but the week was still a bad one. We think risk-off impulses will continue and likely intensify in the coming weeks. As such, we remain negative on EM as an asset class. China will provide its first glimpse of October with PMI readings, while US jobs report Friday will be the data highlight of the week.

Investor: Turkey Has One of Lowest Debt/GDP Ratio’s in EM, but Inflation Still a Worry

Tevfik Eraslan, the CEO of İş Asset Management, a privately-owned investment manager based in Turkey (which also provides investment advisory services), discusses Q3 prospects for the Turkish economy, inflationary pressures and a diminishing political risk after next year’s elections.

Under Which Conditions are EM Countries Vulnerable to Economic Contagion Via Currency Volatility?

Jan Dehn, Head of Research at Ashmore, explains why there are two conditions that have to be satisfied before currency volatility can morph into major economic malaise.

Between The Spread Podcast: 2008 Financial Crisis - 10 Years On

In the exclusive new Bonds & Loans podcast we chat to Brad Tank, CIO of Neuberger Berman, on the aftermath of the biggest financial crisis the world faced in the past 30 years - and where the global markets are ten years on.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

We saw a significant EM positioning washout last week, with weak longs getting punished. Anyone lulled into jumping aboard the EM train recently is getting crushed by sharply higher US rates. ARS and BRL bucked the trend and gained last week, but all others were weaker and were led by ZAR, CLP, and COP. MSCI fell 4.5%, while EM bond yields surged. With US rates still marching higher, EM is likely to remain under pressure this week.

London Calling

The breadth and depth of London’s financial ecosystem, its broad appeal among investors and borrowers and the growing need for international borrowers to raise their credit profile is evident despite challenging geopolitical and market conditions. The City remains a top debt listing destination.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX ended the week on a mixed note. For whatever reason, the major currencies took the brunt of the dollar’s rebound, with every currency down on the week except for CAD (+0.1%). EM FX was mixed on the week, with TRY, RUB, and ZAR able to carve out gains even as ARS and CZK fell. China is closed all week and so we may not see any trade-related headlines. However, China reported softer than expected PMI readings over the weekend that should keep markets nervous.

 

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