Rate Hikes and Trade Optimism Bring Emerging Markets Risk-Takers Back

(Bloomberg) -- Emerging markets rebounded as central banks including those of Indonesia and Mexico signaled commitment to support their currencies. Signs of progress in resolving U.S.-China trade frictions bolstered riskier assets later in the week.

MSCI EM stocks index+1 percent
MSCI EM FX index+0.4 percent
Bloomberg Barclays Global EM Local Currency bond index+0.7 percent

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Highlights for the week ended Nov. 16:

  • The Shanghai Composite Index posted its best weekly advance since September amid signs of improvement in the U.S.-China trade spat; the two countries have resumed contact “at all levels” before a planned meeting between President Donald Trump and China’s Xi Jinping, White House economic adviser Larry Kudlow said
    • Trump said he’s optimistic about resolving the trade dispute with China after receiving a response from Beijing to his demands
    • U.S. Vice President Mike Pence traded sharp barbs with Xi in back-to-back speeches at a regional summit, showing that neither country appears to be giving ground in an escalating trade war
    • Chinese officials have outlined a series of potential concessions to the Trump administration, according to people familiar with the discussions
    • The U.S. was said to hold off on new tariffs on automobile imports as top officials weigh revisions to a report on the national security implications
  • Federal Reserve Vice Chairman Richard Clarida told CNBC there’s “some evidence” that the world economy is slowing. His comments follow those of Fed Chairman Jerome Powell, who cited the prospect of cooling global demand in a speech
  • The U.S. sanctioned 17 Saudi officials over the death of journalist Jamal Khashoggi
  • The rupiah climbed after the Bank Indonesia unexpectedly raised its benchmark rate to help rein in a widening trade deficit and bolster the currency
  • Mexico’s central bank lifted borrowing costs, saying President-elect Andres Manuel Lopez Obrador’s decision to cancel a $13 billion airport and broader policy uncertainty with the new administration have worsened the inflation outlook
  • The Philippine peso also advanced after central bank boosted its key rate for a fifth straight meeting to curb inflation


  • China’s industrial production and fixed-asset investment gained pace, while retail sales growth slowed, signaling some stabilization for policy makers grappling with the slowest economic growth in nearly a decade
  • The rupee was emerging Asia’s best performer; India’s trade deficit widened to $17.1 billion in October despite global oil prices easing. That was higher than an estimated shortfall of $16 billion and the $14 billion gap in September
    • The Reserve Bank of India board will review rules governing the use of its reserves and transfer the surplus to the federal government, people with knowledge of the matter said
  • South Korean President Moon Jae-in said he will “actively consider” inviting North Korean leader Kim Jong Un to next year’s ASEAN-Korea special summit, Blue House spokesman said
  • The Bank of Thailand’s monetary policy committee voted 4-to-3 in favor of keeping its benchmark rate unchanged, signaling a rate hike is near
    • Commerce Ministry kept 8 percent export-growth target for this year and 2019
    • Finance Ministry is preparing measures to help boost confidence in economy later this year, Deputy Finance Minister Somkid Jatusripitak said
  • Philippine foreign-currency debt has fallen to about 36 percent of outstanding liabilities, providing government room to “temporarily" bolster overseas fundraising while keeping currency risk exposure within tolerable levels, Treasurer Rosalia de Leon said
  • Malaysia’s gross domestic product increased 4.4 percent in the third quarter from a year ago, slower than the 4.6 percent median estimate in a Bloomberg survey of 22 economists and the weakest pace in two years
    • Malaysia Ups Pressure on Goldman With Calls for Full Refund


  • Saudi Arabia said oil producers need to cut 1 million barrels a day from October levels, as OPEC and its allies began laying the groundwork to reduce oil supply in 2019
  • South Africa’s rand had the best week since September; the ruling African National Congress is forging ahead with plans to amend the constitution to make it easier to seize land without paying for it
    • Home Affairs Minister Malusi Gigaba yielded to pressure to quit after a court found he lied under oath and a compromising video of him was circulated on social media. Gigaba’s exit bolsters President Cyril Ramaphosa’s assertion that he’s committed to clamping down on graft and reversing the mismanagement that characterized his predecessor Jacob Zuma’s almost nine-year rule
  • Turkey posted a $1.83 billion current-account surplus in September, smaller than the median estimate of $1.94 billion in a Bloomberg survey
  • Of the six countries that reported an early calculation for third-quarter gross domestic product on Wednesday, growth beat expectations in Poland, the region’s largest economy, as well as Hungary, Slovakia and Romania
  • Russia’s ruble climbed after key U.S. senators said Congress isn’t expected to pass legislation ordering new sanctions on Russia before the end of the year
  • Poland’s central bank is working on “non-standard” alternatives to raising borrowing costs that would help curb inflation without harming the economy, a policy maker said
  • Zimbabwean consumer prices surged at their fastest pace since a hyper-inflationary spiral a decade ago

Latin America:

  • The Ibovespa had its biggest weekly rally in more than a month; Banco Santander’s
    Roberto Campos Neto will take the reins of Brazil’s central bank under incoming President Jair Bolsonaro with the benchmark rate at a record low
    • Vice-President-elect Hamilton Mourao said government wants the pension bill approval by June
    • Retail sales unexpectedly fell in September from the month before as stalled consumer confidence dampened activity at the end of the third quarter
  • Mexican stocks slumped for a seventh straight week; Lopez Obrador said he intends to hold a referendum this month to decide whether to build a new refinery, a tourist train for the Yucatan Peninsula, develop the Isthmus of Tehuantepec, and his proposals for social programs, including pensions for the elderly
    • An increased use of referendums will generate uncertainty in the long run, especially on important issues such as energy reform, Citigroup said
    • A USMCA trade deal will definitely be signed by end of the month, and Mexico is hoping to get U.S. tariffs on the nation’s steel exports removed before then, said Kenneth Smith Ramos, Mexico’s chief Nafta technical negotiator
    • Mexican Officials Bailing Out Spur Concern of AMLO Influence
  • Colombia’s economic growth edged lower in the third quarter amid slowing credit growth and a weak agricultural sector
    • Fitch affirms Colombia at BBB on economic policy continuity
  • Argentina’s central bank may eliminate the floor on its benchmark interest rate in early December if it sees a second consecutive decline in inflation expectations, according to two people with direct knowledge of the plan

Upcoming data & events:

Monday, Nov. 19Thailand, Chile3Q GDP
PolandOct. average gross wages, employment
Tuesday, Nov. 20HungaryMonetary-policy decision
TaiwanOct. export orders, 3Q current-account balance
South AfricaSept. leading indicator
PolandOct. sold industrial output, PPI
RussiaOct. retail sales, unemployment
Wednesday, Nov. 21ThailandOct. customs trade data
South Africa, Morocco, NigeriaOct. consumer price index
Thursday, Nov. 22South Africa, NigeriaMonetary-policy decision
South Korea3Q short-term external debt
TaiwanOct. unemployment rate
PolandOct. retail sales, central-bank minutes
TurkeyNov. consumer confidence
Friday, Nov. 23South AfricaSovereign rating update by S&P
HungarySovereign rating update by Moody’s
BrazilNov. inflation IPCA-15
Mexico3Q GDP, 3Q current-account balance 
TaiwanOct. industrial production

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