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An 8.5% fall in the Shanghai Composite Index has sent shockwaves through EM equity markets, but we continue to think that there are few parallels between what is happening now and previous crises. While the differences do not preclude further falls in …
24th August 2015
The recent devaluation of China’s renminbi and the slump in commodity prices were the two key factors behind Vietnam’s decision last week to widen the dong trading band with the dollar and the subsequent move by the Kazakh central bank to scrap its …
This report is only available as a PDF. Click to download. … Has the euro really become a “safe haven”? …
21st August 2015
The Norwegian krone has been the worst-performing G-10 currency since the middle of last year – it has lost more than a quarter of its value against the US dollar. Still, given the prospects for the price of oil, as well as monetary policy in Norway and …
20th August 2015
This report is only available as a PDF. Click to download. … Slump in EM equities seems unlikely to last much longer …
Local currency government bonds have been a port in the emerging market (EM) storm during the past year, as investors have revised down their expectations for policy rates. While they are now generally in agreement with our long-standing dovish views on …
This report is only available as a PDF. Click to download. … Renewed weakness in the yen should boost equities in Japan …
19th August 2015
Although the yen has stayed weak against the US dollar, it has appreciated in trade-weighted terms in response to a slump in some emerging Asian currencies. Still, the yen’s real effective exchange rate remains very low and we think it is likely to fall …
This report is only available as a PDF. Click to download. … Re-run of the Asian Financial Crisis looks unlikely …
18th August 2015
The recent depreciation of the Indonesian rupiah and Malaysian ringgit against the dollar has left both currencies at levels not seen since 1998, but suggestions that this signals a re-run of the Asian Financial Crisis are wide of the mark. If both …
This report is only available as a PDF. Click to download. … Why are US corporate credit spreads creeping up? …
17th August 2015
This report is only available as a PDF. Click to download. … What next for the US stock market? …
14th August 2015
Weak productivity growth and rising wage inflation are likely to put upward pressure on unit labour costs in the US over the coming year, squeeze profit margins and cap the upside for the stock market. … Rising unit labour costs a danger to the US stock …
The renewed plunge in the yield of 10-year US Treasuries over the past month cannot be attributed to a reassessment of investors’ expectations for the path of the federal funds rate, according to the estimates of some Fed staff. On the contrary, the …
13th August 2015
This report is only available as a PDF. Click to download. … On the renminbi and the performance of EM markets …
There have only been three previous occasions in the last decade when the renminbi has depreciated to any meaningful extent against the dollar. On two of those occasions the performance of EM markets was poor. But on the other, it was healthy . This was …
This report is only available as a PDF. Click to download. … Renminbi unlikely to spark a rout in EM markets …
12th August 2015
Financial markets in South Korea, Malaysia and commodity-producing EMs will probably continue to suffer the biggest losses if the renminbi depreciates further against the dollar. But we doubt that the People’s Bank is gearing up for a currency war, …
One factor that purportedly prevented US government bond yields from rising in 2014 was banks’ increased appetite for Treasuries, which has waned this year. While other factors could continue to exert downward pressure on yields, we doubt their combined …
It is tempting to interpret the recent increase in the average spread of US corporate bonds over Treasuries as a sign that the economic recovery is faltering. However, the increase appears to have been at least partly due to the decline in the price of …
11th August 2015
This report is only available as a PDF. Click to download. … Renminbi “devaluation” may be a damp squib …
Today’s reduction in the daily reference rate for the renminbi has been widely interpreted as the first of many moves whose main purpose is to regain competiveness by devaluing the Chinese currency. This has prompted talk of a fresh round of global …
This report is only available as a PDF. Click to download. … How has the lower oil price affected US credit spreads? …
10th August 2015
This report is only available as a PDF. Click to download. … Solid US jobs report leaves Fed on track for September rate hike …
7th August 2015
This report is only available as a PDF. Click to download. … EM equities set to outperform in 2016-17 …
6th August 2015
This report is only available as a PDF. Click to download. … BoE Governor may steal hawks’ limelight on Super Thursday …
5th August 2015
Our bullish view on copper prices suggests that stock markets in Chile and Peru could outperform over the medium-term, but persistently low oil prices look set to be an unwanted headwind for equities in energy exporting emerging markets. … Copper prices …
Emerging market (EM) currencies suffered more heavy losses in the past month and while further big falls are hard to justify over a medium term horizon, there could be more downside in the near term as we approach Fed“lift-off”. … Another bad month for EM …
4th August 2015
This report is only available as a PDF. Click to download. … Will petro-currencies continue to fall? …
This report is only available as a PDF. Click to download. … Recent fall in commodity prices likely to be short-lived …
3rd August 2015
This report is only available as a PDF. Click to download. … Dollar likely to resume appreciation against the euro …
31st July 2015
This report is only available as a PDF. Click to download. … Spike in Brazilian bond yields not on the cards …
30th July 2015
Brazil’s deteriorating fiscal position had already caused foreign currency bond yields to rise by 100bp this year and we do not expect any ratings downgrades in the coming weeks to have much of an immediate impact. That being said, with US Treasury yields …
This report is only available as a PDF. Click to download. … Improving US data point to September “lift-off” …
29th July 2015
We do not expect any fireworks in EM financial markets after today’s FOMC statement, but with policymakers likely to reiterate that the timing of “lift-off” will be data dependent our upbeat view on key releases in the coming days suggests that there …
Emerging market (EM) financial markets have come under stress once again in recent weeks as interest rate hikes in the US loom large on the horizon. Markets in the emerging world feel like a one-way bet at the moment and there may be some further losses …
28th July 2015
This report is only available as a PDF. Click to download. … Differentiation of EM currencies to continue …
This report is only available as a PDF. Click to download. … Treasury yields to rise as relatively aggressive Fed hikes unfold …
27th July 2015
Frontier market currencies are having a difficult time, with only three of the 31 currencies that we follow gaining ground against the US dollar over the past month. The biggest decline has been in Myanmar, where the kyat is down by 10% against the …
Once the US FOMC has begun to raise its target for the federal funds rate, it is widely expected that subsequent increases will be very gradual, as the rate is only slowly returned to a more “normal” level. However, we think the Committee will raise the …
This report is only available as a PDF. Click to download. … Brazil real to find floor at around 3.30/$ …
24th July 2015
Some see tighter monetary policy as the biggest threat to the US stock market. But its onset did not have a major effect during the last three major Fed tightening cycles. What’s more, the fact that the cyclically-adjusted earnings yield is higher today …
23rd July 2015
This report is only available as a PDF. Click to download. … How will the strength of the dollar affect the S&P 500? …
This report is only available as a PDF. Click to download. … Stronger dollar not a big threat to EM foreign currency bonds …
22nd July 2015
We expect the US FOMC to tighten policy faster and further than most envisage and think this will drive both the dollar and US Treasury yields higher. By contrast, we expect the yields of governments bonds in Japan and Germany to remain low against the …
21st July 2015
This report is only available as a PDF. Click to download. … How will tighter Fed policy affect the markets? …
This report is only available as a PDF. Click to download. … We expect the renewed strength of the dollar to continue …
20th July 2015
This report is only available as a PDF. Click to download. … What do Carney’s comments imply about the valuation of UK Gilts? …
17th July 2015
The dollars of Australia, New Zealand and Canada have been three of the worst-performing major currencies so far this year. Despite the fact that they have already fallen a long way, we expect them to weaken further. This is largely due to the adverse …
16th July 2015
This report is only available as a PDF. Click to download. … Australian, New Zealand and Canadian dollars to remain under fire …
