Americas markets wrap: Economic data lifts Brazil and Mexico
Upbeat economic data, corporate earnings and easing eurozone debt fears boosted Latin American markets on Wednesday. Stocks gained and currencies strengthened against the dollar as news of Spanish austerity measures shored up investors’ confidence.
Mexico’s two-speed recovery
Mexico’s recovery following the nightmare that was 2009 is uncovering a two-speed economy: the export-oriented one, which is racing; and the domestic one, which is crawling.
The latest evidence to furnish this argument came today when Inegi, the country’s statistics agency, reported that industrial production in March grew 7.6 per cent compared with a year ago. The figure caught analysts off guard; the consensus forecast had been just 5.7 per cent.
China makes its biggest investment in South Africa in two years
South Africa’s top trading partner will announce its largest investment in the country in two years tomorrow, writes Richard Lapper, FT’s South Africa correspondent. The China Africa Development Fund and the Jidong Development Group are set to announce a partnership with two South African companies to build a new cement plant worth at least Rmb1.5bn. To date the largest Chinese investment in South Africa was in October 2007 when Industrial and Commercial Bank of China invested $5.5bn in Standard Bank.
Argentina plays with fire in banning imported food
Argentina’s plan to stop supermarkets from importing food that can be produced at home is playing with fire.
The largely gourmet foodstuffs affected by the order – issued verbally to supermarkets last week by Guillermo Moreno, the internal trade secretary – only make up at most 3 per cent of supermarket sales. But the protectionist move could spark damaging reprisals, especially from neighbour and key trade partner, Brazil.
Hope lies in emerging market demand, says Maersk
It is clear from Maersk’s results that a key factor in the company’s turnaround – its container shipping division made a $2bn net loss in 2009 – has been a slowdown in the growth of ship supply.
Terrified by the collapsing earnings of the existing fleets, container ship owners have scrambled over the last year to delay deliveries of the hundreds of new ships due to flood the market after their over-enthusiastic ordering during the boom. That means the world’s container ship capacity is now likely to grow by only 6 to 9 per cent this year, according to Maersk. That is only a little ahead of the 5 per cent growth expected in cargo volumes.
Gold loses its glister for India’s canny shoppers
The soaring gold price has hit Colaba Causeway, the high street of wealthy southern Mumbai.
Rajendra Gurjar’s family-owned gold shop is usually packed with people ahead of May 16 when the country’s Hindus celebrate the Akshaya Tritiya festival by buying gold. But today as the price of bullion hit fresh highs the store was deserted by even its most faithful customers.
India: capital controls gain ground
The fear of liquidity – too much of it, that is – is intensifying. India is the latest to pave the way for a possible extension of capital controls. In comments published today on the Reserve Bank of India’s website, Duvvuri Subbarao, governor, ruled out – for now – a Tobin tax but was quick to add: “it needs reiterating that no policy instrument is clearly off the table and our choice of instruments will be determined by the context.”
Video: Investors buy up Brazil
Here’s a video of our Brazil correspondent Jonathan Wheatley talking to James Sinclair, managing partner at CFS Partners, an investment bank, about which sectors that are seeing most investment activity in Brazil – and which are looking overheated.
El Niño turns, signifying rains and hurricanes
While the financial storm rages in Europe and elsewhere, emerging countries in Asia are set for some good weather. Literally. The 2009-10 episode of El Niño, the weather-altering Pacific warming which triggered droughts in some regions and pushed up food prices, has officially ended.
The closely-watched Australian Bureau of Meteorology said on today the recurring phenomenon – caused by a rise in the water temperature in the tropical Pacific that affects weather patterns – had dissipated.
The ending is good news for consumers in Asia, who paid higher food prices over the last months due to crop failures linked to some of the worst droughts in decades in the region. But it may be bad news for oil companies and others in the Gulf of Mexico, where the end of El Niño could bring more hurricanes.
Rating agencies have more digging to do
Everyone knows that European sovereign credit ratings are out of whack with those in emerging markets. But this chart from Nomura, based on credit default swap spreads, suggests that the rating agencies have some serious catching up to do.
Take China and Portugal. Both countries are A1/A+ borrowers according to the rating agencies. But buying five-year insurance against a Portuguese default costs about 240 basis points, more than triple the price for China. See Exhibit A …
Central and eastern European markets and currencies responded well to positive first quarter GDP figures from export driven eastern European economies today, with some countries like the Czech Republic showing the first signs of growth in five quarters. The news also helped to boost currencies in morning trading but analysts forewarn that further fiscal tightening is likely later this year and will dampen growth.
CEE: GDP numbers mostly beat forecasts but outlook uncertain
Good news today from eastern Europe, a region buffeted recently by the fallout of the Greece/eurozone crisis. In a round of first quarter GDP announcements, Hungary, Romania, Slovakia did better than expected, while the Czech Republic was in line with forecasts and Bulgaria fared somewhat worse.
The driving force in central Europe was a recovery in exports to western Europe. But domestic demand was often weak, particularly in Romania and Bulgaria and in construction generally. The markets mostly liked what they saw but with so much uncertainty hanging over Europe it was not a day for big calls.
Also, with signs the west European recovery may soon slow and pressure on governments to cut fiscal deficits the outlook is, to put it politely, far from bright.
Bill Gates to turn Rahul Gandhi’s power base into IT hub
Rahul Gandhi, great-grandson of India’s first premier Jawaharlal Nehru and son of Rajiv Gandhi, the assassinated former prime minister, and Sonia Gandhi, at present the de facto leader of India, seems destined to head the world’s biggest democracy.
And now it looks like he can add Bill Gates to the list of people who’ve helped him on his way.
Asia markets wrap: markets mixed
Asia markets were mixed as some equities rose on news of high earnings posted by Hitachi and and Toyota. Property shares helped pull Chinese equities down on concerns that the Chinese government may soon cut inflation. Nouriel Roubini’s comment that China is an “overheating economy” on Bloomberg TV earlier today did not help assuage concerns that rising inflation and housing prices in China will force Beijing to raise interest rates, allowing renminbi to appreciate.
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