SARB Hikes, Fed Outlook, Trump Thanks Saudi on Oil: EM Review

(Bloomberg) -- Emerging-market currencies and bonds defied a stronger dollar on optimism the pace of U.S. interest-rate increases will slow with global growth.

Highlights:

• The U.S. central bank will “be likely raising interest rates somewhat, but it’s really in the context of a very strong economy” and the authority is not on a preset course, said Federal Reserve Bank of New York President John Williams
  • Fed watchers are warming to the view the U.S. central bank is likely to pause or slow its rate hikes next year amid prospects for slowing global growth and as the effects of U.S. tax cuts fade
• The rand rallied after the South African Reserve Bank increased its benchmark interest rate for the first time in more than two years as it sees inflation risks remaining elevated
• The U.S. government is contacting key allies to get them to persuade telecommunications companies in their countries to avoid using equipment from China’s Huawei Technologies Co., the Wall Street Journal reported
  • An Asia-Pacific summit ended in tumult after the U.S. and China failed to agree on language in a final statement, the latest sign that a trade war between the world’s biggest economies won’t end anytime soon
• President Donald Trump said he won’t let the murder of U.S.-based columnist Jamal Khashoggi jeopardize relations with Saudi Arabia, citing the potential impact on oil prices and Iranian influence in the Middle East. He later thanked Saudi Arabia for lower oil prices
  • Saudi Arabian oil production surged to a record after the kingdom received stronger-than-usual demand from clients preparing for a disruption in Iranian supplies, according to industry executives who track Saudi output
• Mexico to hold public consultations Nov. 24-25 decide the fate of 10 infrastructure projects, including a train across five southeastern states and an oil refinery in Tabasco state. The process has roiled local markets

Asia:

• China’s one-year government bond yield dropped to lowest since December 2016 amid ample liquidity even as the central bank skipped open-market operations for a 21st straight day
  • The U.S. accused China of continuing a state-backed campaign of intellectual property and technology theft as the World Trade Organization said it would establish a dispute panel to rule on the complaint
• India’s rupee was the best performer in emerging markets as the central bank signaled a compromise with the government by agreeing to study a demand for sharing a part of its capital -- an issue that had triggered a public spat between the monetary policy makers and their political bosses
• South Korea’s won was among Asia’s worst performers; the central bank said it sees the prospect of rising interest rates in the U.S. as a threat to economic stability in emerging economies and will increase its monitoring of such risks
• Thailand’s economy expanded far less than economists estimated last quarter, with growth easing to a two-year low as exports fell
  • Bank of Thailand Deputy Governor Mathee Supapongse said the central bank may revise down the outlook for economic growth this year
  • Exports climbed 8.7 percent in October from a year earlier, exceeding estimate and rebounding from a contraction of 5.2 percent in September
  • There’s less need for very low interest rates, but Thailand won’t raise rates continually like others, central bank Governor Veerathai Santiprabhob said
• Malaysia has emerged to displace the U.S. as the biggest supplier of ethanol to China in just two months. The shift occurred after President Xi Jinping imposed tariffs on U.S. ethanol imports in retaliation to American counterpart Trump’s duties on Chinese goods
  • Malaysia’s October consumer prices rose 0.6 percent on year, matching estimate
• Philippines’ stock benchmark was among the top EM performers; Bangko Sentral ng Pilipinas Governor Nestor Espenilla is well and limiting public appearances “for the time being” as he recovers from a medical condition
  • China’s President Xi sealed a raft of deals during a trip to Manila as Philippine President Rodrigo Duterte’s administration shrugs off U.S. warnings about accepting Chinese cash
• Click here for upcoming economic and data releases in Asia.

EMEA:

• The International Monetary Fund said South Africa’s public debt was “reaching uncomfortable levels.” The IMF said the country should consider introducing a debt anchor in its budget to signal the government’s commitment to reduce it obligations and help tighten fiscal policy
• Turkey’s real estate market had a jolt in October despite mortgage rates rising to 14-year high during the month. Economy Minister Berat Albayrak said November inflation will present a positive picture and Turkey may post record current-account surplus for October
• Hungary’s central bank left its benchmark rates unchanged, saying loose monetary policy is still needed
• Poland’s WIG20 stock index was among the world’s best performers in the week as concerns about banking-sector liquidity eased
  • The zloty strengthened against the euro after central-bank minutes showed policy makers weighed a rate change for the first time in years
• Nigeria’s central bank held its key interest rate at a record high level of 14 percent as it sees inflationary pressures persisting even as prices are becoming more stable
  • Inflation rate declined for the first time in three months in October
• Israel’s economy grew 2.3 percent in the third quarter, far slower than the strong expansion seen in the second half of 2017. Amir Yaron, a finance professor at University of Pennsylvania’s Wharton school of business, was confirmed as Bank of Israel governor, and will start work Dec. 24
• Click here for upcoming economic and data releases in Eastern Europe, here for the Middle East and Africa and here for Russia.

Latin America:

• Brazil’s Congress indefinitely delayed voting on a bill that would allow the government to hold a giant auction of pre-salt oil reserves, underscoring the difficulties President-elect Jair Bolsonaro may have in pushing key economic reforms through the legislature
• The Mexican peso declined an eighth week, the longest run since June 2016 as Mexico’s President-elect Andres Manuel Lopez Obrador said he wants to amend the nation’s constitution and remove a ban on referendums that would affect public revenue or finances
  • READ: Mexico’s Pemex Feels AMLO Heat as Investors Dump Bonds
  • Mexico’s economy expanded 2.5% y/y in 3Q, less than expected as concerns about the new administration’s policies offsets a pickup in service activity
• Chile’s third-quarter GDP confirmed a moderation in economic growth for the first time in six quarters, while central bank President Mario Marcel reiterated that interest rates will converge to neutral by 2020
• Colombia’s government and lawmakers reached a preliminary agreement to keep the standard value-added tax at 19 percent vs original plan of cutting it to 17 percent
• Click here for upcoming economic and data releases in Latin America.

--With assistance from Philip Sanders and Krystof Chamonikolas.

To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net;George Lei in New York at glei3@bloomberg.net;Alex Nicholson in Moscow at anicholson6@bloomberg.net

To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, ;Dana El Baltaji at delbaltaji@bloomberg.net, ;Rita Nazareth at rnazareth@bloomberg.net, Alex Nicholson

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