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Jonathan Wheatley

Jonathan Wheatley is the FT's deputy emerging markets editor. He was Brazil correspondent from 2005 to 2011, when he moved to London. He lived in São Paulo from 1992, writing for the FT, Business Week, the Economist Intelligence Unit and many others. He previously worked in television news, current affairs and documentaries in London.

Another week and yet another contraction in the consensus for GDP growth in Brazil this year. The central bank’s latest weekly survey of market economists has notched up its 14th consecutive week of falling forecasts and now predicts growth of just 0.52 per cent this year – which may even sound optimistic to some after last week’s figures showing the economy was in recession during the first half. Continue reading »

Brazil’s economy is, by the standard definition, in recession. Its GDP contracted 0.6 per cent in the second quarter from the first, while the first quarter figure was revised to a contraction of 0.2 per cent form the previously reported 0.2 per cent growth.

The year on year figures were even worse: a 0.9 per cent contraction compared with the second quarter of 2013. Still, as Joe Leahy reported for fast FT, employment seems to holding up so the performance of the economy may not completely derail President Dilma Rousseff’s chances of re-election in October. Continue reading »

It has been a shocking day in the progress of the crisis in Ukraine. As evidence mounts of yet more direct and duplicitous Russian military activity on Ukrainian soil, Russian assets have taken a hammering. The rouble fell 1.5 per cent against the dollar even after paring earlier losses and the RTS index of Russian stocks was down 3.3 per cent on the day, also after staging a recovery.

President Vladimir Putin denies Russia is involved in Ukraine at all, even as the Russian people hail him as a conquering hero with popularity ratings to match. But the chances that his adventure will be to their benefit are looking increasingly slim. As Neil Shearing of Capital Economics argued in a note on Thursday, “Russia is likely to be the major loser from any further escalation in the conflict.” Continue reading »

A report to be released by the Institute of International Finance on Wednesday will make sobering reading for EM investors: estimated portfolio flows to EM assets fell sharply in August to just $9bn, after a monthly average of $38bn between May and July.

August is always a slow month but this year it has been notably sluggish. EM bond issuance, for example, was just $22bn this month from a monthly average of $62bn over the past year and $44bn in August 2013, the IIF said. Continue reading »

Eduardo Campos, the Brazilian presidential candidate killed in an air crash on Wednesday, paid a visit to the FT in London at the end of last year. He met the editor and a dozen other journalists and left an impression of a man who had a clear view of the challenges facing Brazil and of the means to tackle them. In that respect, he was a rarity among Brazilian politicians. He will be sorely missed. Continue reading »

The weekly survey of market economists by Brazil’s central bank is becoming the economic equivalent of a limbo dance: each time around, just that little bit lower. This week’s edition has GDP growth in 2014 coming it at just 0.81 per cent, making 11 consecutive weeks of contraction. The outlook for 2015, which had been unchanged for five weeks at 1.5 per cent, has also come down, to 1.2 per cent.

Voters, though, don’t seem to be bothered. Continue reading »

How much lower can it go? The consensus on Brazil’s economic growth this year has been revised downwards for nine successive weeks, according to the central bank’s latest survey of market economists, and now stands at a meagre 0.9 per cent.

The consensus on growth next year is not much better, at 1.5 per cent. As our chart shows, estimates of growth this year (the black line) and next have been in decline for the past 12 months. (Longer, in fact. When the bank first asked economists about growth in 2014, they expected it to come in at 3.8 per cent.) Continue reading »

We’ve written recently about the scarcity of liquidity on EM secondary markets caused by regulatory changes and loose monetary policies in developed economies since the crisis of 2008-09. We’ve noted that those developments have also delivered abundant liquidity on primary markets, where bonds and equities are first issued (unlike secondary markets, where they are subsequently traded).

Flush with cash and hungry for yield, many investors have snapped up emerging market bonds and other assets they might well have sniffed at in more ‘normal’ times. Some analysts worry that this is driving a bubble. It may also be causing a related phenomenon: a breakdown in the correlation between risk and reward. If that is confirmed, a lot of EM investors face a nasty surprise. Continue reading »

Brazilian inflation broke the upper bound of the government’s target range in the first half of July, reaching an annual rate of 6.51 per cent according to the statistics office IBGE. It looks set to stay high until the country’s elections in October, putting further pressure on the candidacy of Dilma Rousseff, seeking re-election as president.

The half-monthly figures presented by the IBGE are not seasonally adjusted. But Neil Shearing at Capital Economics reckons they show a clear tendency to take annual inflation to 6.6 per cent for the full month, up from 6.5 per cent in June. Continue reading »

If EM investors were looking for a trigger for volatility, this must surely fit the bill. The downing of flight MH17, whoever is found to be responsible, appears certain to cause an escalation of geopolitical tensions already at a high level over Gaza, Iraq, Syria and Ukraine itself. Investors, whose attention has been focussed almost exclusively on the US Federal Reserve and the prospect of rising interest rates, must surely now put more political risk into their calculations.

But look at the reaction on markets and you have to conclude: not a bit of it. Continue reading »

Are liquidity conditions in emerging markets about to improve? A new report from CrossBorder Capital, which has been monitoring liquidity in DMs and EMs for a quarter of a century, offers cautiously positive evidence suggesting relief may indeed be at hand.

But “cautious” is the word. Mike Howell of CrossBorder Capital told beyondbrics: “It may not be hugely bullish news but it certainly isn’t bearish. It’s at least supportive of better market conditions.”

Given the extent to which market conditions have tightened, however, even limited support will receive an enthusiastic welcome from many market participants. Continue reading »

As Joe Leahy reported at the weekend, the back injury suffered on Friday by Neymar, Brazil’s star striker, is unlikely to hurt President Dilma Rousseff in her bid for re-election in October. She may even benefit, as the nation bonds together in grief or – there is, after all, still a chance – in celebration.

But Rousseff should forget Neymar. Come October, Brazilians will likely be much more worried about the economy. And here, Rousseff has plenty to fear. Continue reading »

The most casual followers of the Argentine debt saga will be familiar with the Latin term pari passu, or “equal footing” – or, in this case, equal payment to all holders of Argentine bonds, whether or not those holders took part in the country’s two restructuring programmes in 2005 and 2010 following its 2001 default.

Now Russ Dallen of Caracas Capital Markets, a veteran commentator on and broker in Latin America’s most exotic bond markets, has introduced another smattering of Latin to the story: pacta sunt servanda, or “contracts are for keeping”. Continue reading »

In an age of abundant liquidity, when financial markets are humming as never before, the idea that trade in emerging market debt could seize up might seem unlikely.

But that is what some analysts are warning is at risk of happening in EM secondary debt markets, where bonds that have already been issued are bought and sold. The result could be a disorderly sell-off across EM assets if – as is widely expected – US interest rates start to rise.

 Continue reading »

Is it the return of the fragile five? The currencies of Indonesia, Turkey, South Africa and India were the worst performing of the world’s 31 major currencies in the month according to Bloomberg, while that of Brazil – the fifth of the fragile five identified by Morgan Stanley last August at the height of the Fed-inspired taper tantrum – is roughly where it started the month after three months of gains. Continue reading »