Just what are we to read into this? Mainstream and social media in India are abuzz with the revelation that, when Prime Minister Narendra Modi met US President Barack Obama on Sunday, the pinstripes of his suit were not pinstripes at all but his full name, Narendra Damodardas Modi, spelt out in block capitals over and over again. Read more
PIB = GDP, IPCA = CPI. Black lines = 2015, red lines = 2016. Source: central bank
The task facing Brazil’s new economics team came further into focus on Monday morning with inflation expectations rising and the consensus on economic growth falling, both for the fourth consecutive week. The central bank’s latest weekly survey of market economists has GDP rising just 0.13 per cent this year, down from the 0.55 per cent expected four weeks ago, while consumer price inflation is seen ending the year at 6.99 per cent, up from 6.53 per cent four weeks ago and some way beyond the upper limit in the government’s target range of 4.5 per cent plus or minus two percentage points. Read more
Investors are often known to buy on the rumour and sell on the fact but on Thursday, following the announcement of the European Central Bank’s €60bn-a-month asset-buying programme, they carried right on buying.
That’s true, at least, of central and eastern European currencies, if you measure them against the freshly-weakened euro. Read more
After building expectations for so long, it will come as a disappointment today if the Eureopean Central Bank does not promise to buy (or have others buy) €50bn’s worth of assets every month for at least the next year.
Assuming Mario Draghi delivers as hoped, what will it mean for EM? Will ECB QE pick up where the US Federal Reserve’s variety left off, floating EM asset prices once again? Beyondbrics has been asking around. Read more
The gloom continues to darken over the outlook for Brazil’s economy this year but, for the time being, investors are betting that the country’s very high interest rates are worth the risk.
The central bank’s latest weekly survey of market economists shows the consensus on economic growth this year falling yet again, to just 0.38 per cent. Inflation expectations, meanwhile, have crept up again, to 6.67 per cent, beyond the upper limit of the government’s target range. Read more
Those who relish irony will have found much to savour in the Swiss central bank’s actions on Thursday when, as Mohamed El-Erian comments, we were reminded of the dangers of substituting financial engineering for real economic reform.
The choicest item is the way that Hungary’s authorities have emerged, as analysts at Commerzbank put in on Friday morning, looking like “financial experts of the highest calibre” – not an opinion often heard on financial markets. Read more
This is what happened to the Hungarian forint and the Polish zloty, measured against the euro, after the Swiss central bank abandoned its currency peg on Thursday.
Source: Thomson Reuters
Capital flows to emerging markets fell sharply in 2014 and will fall again in 2015 before a modest recovery in 2016, according to estimates by the Institute of International Finance in a report to be published on Thursday. Read more
Investors used to studying Venezuela’s financials for signs of impending default might want to switch their attention to the queues building outside supermarkets across the country, as Venezuelans find it harder and harder to buy the most basic household goods.
The threat of rising social unrest leaves the government in Caracas with a choice: should it use its scarce resources to pay bondholders, or to put groceries on the country’s shelves? Read more
The year is barely under way and already Brazilian analysts are hurriedly revising down their projections for economic growth in 2015. In the central bank’s second weekly survey of market economists of the new year, published on Monday, gross domestic product is seen expanding by just 0.4 per cent, down from 0.5 per cent expected last week and about 0.7 per cent a month ago.
It is an inauspicious way to begin a year that not only will be hugely significant for Brazil but in which Brazil – or so Manoj Pradhan and Patryk Drozdik of Morgan Stanley argue in a note on Monday – will be hugely significant for the rest of EM. Read more
There are few more sure signs of economic meltdown than a run on a country’s banks. In Venezuela, however, the currency is losing its value too quickly to be worth running after. Instead, Venezuelans are going after groceries. The country is seeing a run on its supermarkets that is gathering pace by the hour. Read more
Consumer price inflation in Brazil was 6.4 per cent last year, the country’s statistics office said on Friday. This was in line with expectations but it will nevertheless have provoked sighs of relief in Brasília. While inflation was well above the government’s target of 4.5 per cent, it did at least remain within its tolerance band of 2 percentage points, so the central bank will not have to write to the president to explain its failure to do its job.
It is yet another case, in Brazil, of things being good only because they are not outright bad. Read more
In the long-running battle between contagion and differentiation in emerging markets, contagion currently has the upper hand. That’s hardly surprising when you look at the size of the shock coming out of Russia and the failure of Monday night’s 650 basis point interest rate rise to deal with it. Nothing on this scale has been seen since 1998.
Rouble per US dollar, year to date. Source: Thomson Reuters
But contagion is not absolute and some EM currencies are bucking this month’s sharp falls, at least for now. Below, we present charts that show how the big EM currencies are faring in these times of extreme stress. Read more
With only a couple of weeks left in the year, Brazil watches are still revising downward their view on GDP growth for 2014. The central bank’s latest weekly survey of about 100 market economists has GDP growth coming in at a feeble 0.16 per cent this year, down from 0.18 per cent a week ago and 0.21 per cent a month ago. The consensus for 2015 is also sliding: just 0.69 per cent growth is expected in this week’s report, down from 0.73 per cent last week and 0.8 per cent a month ago.
Those looking for a silver lining to this darkening cloud may argue that it reflects a conviction among analysts that Brazil’s new economics team under Joaquim Levy at the finance ministry (pictured above) is serious about reining in the public deficit and that this, while positive in the long term, will dampen growth in the interim. Read more
Economic growth across emerging markets is expected to reach an annual rate of 3.9 per cent in the final quarter of this year, slightly up on the estimated 3.7 per cent in the third quarter, according to the Institute of International Finance. But the IIF’s Coincident Indicator, based on 41 macroeconomic variables that it says are highly correlated to EM growth, shows growth is still well below the average rate of 4.5 per cent seen in 2012 and 2013.
A reminder for Brazil’s new finance minister, if he needed one, of the task ahead: the country’s manufacturing purchasing managers’ index, prepared by Markit Economics for HSBC, fell from 49.1 to 48.7 in November, its lowest level in 16 months.
November’s PMI followed the central bank’s weekly survey of market economists, also out on Monday, which showed the consensus on GDP growth falling yet again, to 0.19 per cent this year and to 0.77 per cent in 2015. Read more
It was close, but they didn’t make it. The political fixers of Brazil’s government had hoped to push through a bill on Wednesday that would have removed its obligation to meet a target of a primary fiscal surplus (before debt payments) of 1.9 per cent of GDP in this year’s budget.
The hope was that the bill would have been passed in time for the expected announcement on Thursday of a new economics team, widely tipped to be led by Joaquim Levy as finance minister. Success would, in a way, have swept out the old team’s jiggery pokery over public accounts before ushering in the new brooms of team Levy. Now it will just have to be done after the event. Read more
An index of confidence among Brazilian manufacturers suggests things aren’t as grim as all that, after an index of consumer confidence published on Tuesday hit a post-crisis low.
But the uptick in the manufacturing confidence index produced by the Fundação Getulio Vargas – the same academic institution that prepared the consumer index – does not bear close inspection.
Source: FGV/IBRE. Click to enlarge
Portfolio flows to emerging markets rebounded in November after several months of weakness, according to the latest EM Portfolio Flows Tracker from the Institute of International Finance. Flows for the month were estimated at $25.5bn, consisting of $8.8bn to bonds and $16.7bn to equities, the IIF said.
Click to enlarge
Another reminder of the challenges facing Dilma Rousseff as she struggles to put together an economic team for her second term in office: consumer confidence is at its lowest ebb since the depths of the global financial crisis in December 2008.