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Susan Mathew

EMERGING MARKETS-Latam stocks up, Argentine peso closes up before Fitch downgrade

16 Aug 2019

(Adds Fitch downgrade on Argentina, other details, updates prices) By Susan Mathew Aug 16 Most Latin American stocks rose on Monday, joining a rebound in global markets on hopes of fiscal and monetary stimulus in major economies, while Argentina was handed a fresh blow as Fitch downgraded its credit rating, pushing it deeper into junk territory. Stocks in the region, besides those in Argentina, gained between 2% and 0.4% as fiscal stimulus hopes from Germany and China to support growth, and rising possibility of an interest rate cut by the European Central Bank, lifted global sentiment plagued by recession worries. Meanwhile, the Argentine peso closed Friday up 4.4% in a second day of strong gains, lifted by the government's attempt to calm markets via relief measures and collaborations with opposition as well as central bank interventions. But after peso trading hours, credit rating agency Fitch downgraded Argentina to 'CCC' from 'B' citing heightened risk of policy discontinuity and greater likelihood of a default should there be a change in administration after October general elections. "I don't think it should have a meaningful nor lasting effect on investors' perception of Argentina's sovereign risk," Alejo Czerwonko, emerging markets strategist at UBS Global Wealth Management's Chief Investment Office. "The market has been reassessing the country's probability of default since the primary elections on Sunday and I don't think the publication provides information that investors didn't have already." The peso lost a around a quarter of its value to the dollar three days after a shock victory by the opposition in presidential primaries raised fears of a return to populist policies under opposition candidate Alberto Fernandez, should he win. A similar move by Moody's and Standard and Poor should not come as a surprise, he said. Argentine stocks steepened losses to hit session lows after the announcement and closed 2.1% lower, taking the week's losses to 31.5% - its worst week ever. Mexico's peso 0.2% to 19.6475 a day after the central bank cut its key interest rate by 25 basis points to 8%. Mexico's President Andres Manuel Lopez Obrador on Friday said the cut will stimulate the sluggish economy. But "we see little upside for MXN in the months to come as Banxico will very likely feel comfortable cutting rates on a potential decline of USDMXN towards 19," said Morgan Stanley analysts in a note. "The shift towards yield curve behaviour and the language around core suggest to us that Banxico will try to avoid being behind the curve, which presents a meaningful change." Brazil's real fell 0.3% after 1.5% surge last session when the central bank announced its decision to sell dollars on the spot market for the first time in a decade. Analysts say this is a sign the bank is finally willing to reduce its $385 billion pile of foreign exchange reserves. Key Latin American stock indexes and currencies at 0830 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 970.27 0.7 MSCI LatAm 2609.83 1.19 Brazil Bovespa 99805.78 0.76 Mexico IPC 39355.74 2.03 Chile IPSA 4799.38 0.38 Argentina MerVal 30402.51 -2.052 Colombia IGBC 12527.47 1.1 Currencies Latest Daily % change Brazil real 4.0028 0.00 Mexico peso 19.6475 -0.23 Chile peso 708.8 0.21 Colombia peso 3427.47 1.21 Peru sol 3.378 0.38 Argentina peso 54.6000 5.13 (interbank) (Reporting by Susan Mathew in Bengaluru and Rodrigo Campos in New York; Editing by Marguerita Choy)

German stimulus hopes pull European shares from six-month lows

16 Aug 2019

European shares rebounded from six-months lows on Friday, ending a tumultuous week on a positive note as hopes of fiscal stimulus from Germany lifted sentiment and sparked a rally in the battered banks sector, helping them post their best day in 4-1/2 months.

EMERGING MARKETS-Argentine peso jumps after heavy losses, Mexico central bank cuts rates

15 Aug 2019

(Updates prices) By Susan Mathew Aug 15 Argentina's peso jumped nearly 5% on Thursday ending a punishing three-day rout, while Mexico's peso rose after the country's central bank cut its key rate for the first time in more than 5 years. The Argentine peso closed at 57.4 pesos per dollar on signs that the country's president and his main opposition rival were determined to control an economic crisis sparked by a shock primary-election result that wiped out around a quarter of the peso's value. Opposition presidential candidate Alberto Fernandez trounced center-right President Mauricio Macri in Sunday's vote, which raised fears of a return to protectionist policies if Fernandez were to win the October general elections. Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman (BBH) pinned the strength in the peso to selling of dollar by some bank's after the central bank established a ceiling for foreign exchange holdings equivalent to 5% of a bank's net worth which is set to take effect on August 20. Buenos Aires' Merval stock index rose 4.2%. In Mexico, the peso rose 0.4% after the country's central bank cut its key rate by 25 basis points to 8%, citing slowing inflation, a sluggish economy, and the recent behavior of the external and domestic yield curves. There was some knee-jerk rise right after the cut, but markets traded back to earlier levels. Analysts had been more or less split between expecting the bank to hold or cut rates. The economic indicators argue for a rate cut, "but it's a risky move given emerging markets remain under pressure; and the yield spread is one that supports EM and this is cutting a little bit into that," BBH's Thin said. Mexican stock, however, fell. In line with a choppy session on Wall Street, most Latam stock markets were mixed, with Colombia stocks rising 0.4%, while those in Brazil stocks slipped more than a percent. Brazil's real climbed 1.6%, lifted by news that the central bank said it would sell dollars outright in the spot currency market this month for the first time in over a decade in response to rising demand for liquidity. While most regional currencies rose, helped also by some trade optimism after China showed some willingness to work out a deal even as it has vowed retaliation against U.S. tariffs, Colombia's peso fell 0.4%. Colombia's gross domestic product grew 3% in the second quarter, the government said on Thursday, buoyed by the retail and financial sectors, but the print came in just below market expectations of 3.1%. Chile markets were closed for a local holiday. Key Latin American stock indexes and currencies at 2019 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 963.52 -0.09 MSCI LatAm 2579.24 -0.66 Brazil Bovespa 99056.91 -1.2 Mexico IPC 38571.73 -0.2 Argentina MerVal 31182.28 4.216 Colombia IGBC 12391.30 0.41 Currencies Latest Daily % change Brazil real 3.9903 1.57 Mexico peso 19.6027 0.37 Colombia peso 3468.8 -0.38 Peru sol 3.391 0.15 Argentina peso 57.1000 5.43 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Sandra Maler)

Trade worries plague European shares, FTSE underperforms

15 Aug 2019

European shares hit six-month lows in a volatile session on Thursday, with London stocks losing more than 1%, as China warned of retaliation against U.S. tariffs, heightening fears of the continued impact of their trade war on global growth.

EMERGING MARKETS-Recession fears plague Latam markets, Argentina peso slides further

14 Aug 2019

(Updates prices) By Susan Mathew Aug 14 Latin American markets were no exception to a slump across markets on Wednesday on rising fears of a looming recession, while Argentina's peso showed no signs of stabilizing despite the president's attempts to calm investors with relief measures. An inversion in the U.S. yield curve for the first time since 2007 - a classic signal for recession, following bleak data out of Germany and China - weighed heavily on investor sentiment as it returned focus to the impact of a bruising trade war on global economic growth. After a day of relief on news that Washington would delay 10% tariffs on some Chinese goods, currencies in Brazil, Mexico, Colombia all fell well more that 1%, while Chile's peso slipped a percent. Regional stocks also slid, with Mexico's main index sinking to its lowest in more than 5 years, while Brazil's main index tumbled 3% and was on track for its worst day in 4-1/2 months. At the bottom of Brazil's main index were shares of education company Kroton SA down nearly 10% after weaker-than-expected quarterly results, followed by planemaker Embraer which reaffirmed it would report a loss for 2019. In Argentina, the peso closed down 7.1% at 60.2 to the dollar in its third straight day of heavy losses, and the Merval stock index skid 2.4%, finding no solace from a package of welfare subsidies and lower taxes for workers unveiled by President Mauricio Macri. The rout in Argentine markets was set-off by Macri's loss by a wide margin to opposition candidate Alberto Fernandez in presidential primaries on Sunday as it raised risks of a return to interventionist policies under Fernandez if he were to win in October general elections. Fernandez on Wednesday said Macri's new economic measures are too late and warned that Argentina could run out of foreign currency reserves as it defends the peso. Including Wednesday's auction, the bank sold $355 million from its own reserve this week. "Markets will pay close attention to the upcoming Treasury-bill maturities as roll-over risks remain high," said Morgan Stanley analysts in a note. Between now and the elections, almost $14.7 billion of T-bills will mature, they say and see this as another potential concern particularly as the debt burden increases with a weaker peso. "With markets already pricing in a very low probability of policy continuity and high uncertainty regarding the path for economic policy, liquidity and solvency issues will be watched closely." IHS Markit's latest estimate prices the probability of a sovereign default within the next five years at 78%. Key Latin American stock indexes and currencies at 1930 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 963.38 -0.57 MSCI LatAm 2583.91 -4.2 Brazil Bovespa 100135.38 -3.06 Mexico IPC 38657.95 -2.07 Chile IPSA 4792.25 -1.1 Argentina MerVal 29604.03 -2.44 Colombia IGBC 12467.37 -1.54 Currencies Latest Daily % change Brazil real 4.0357 -1.74 Mexico peso 19.6971 -1.66 Chile peso 711.2 -0.87 Colombia peso 3455.68 -1.33 Peru sol 3.396 -0.35 Argentina peso 59.7000 -6.37 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Nick Zieminski)

European shares slide to six-month low as recession fears rise

14 Aug 2019

European stocks tumbled to a six-month low on Wednesday, as an inversion in the U.S. yield curve following bleak data out of major economies including Germany and China pointed to a looming recession. | Video

EMERGING MARKETS-Most Latam markets rebound on China relief, Argentine peso extends falls

13 Aug 2019

(Updates prices) By Susan Mathew Aug 13 Most Latin American markets rebounded on Tuesday as fears of further escalation in U.S.-China trade tensions eased slightly after the United States delayed tariffs on certain Chinese goods, while Argentina's peso continued its slide on rising fears of a return to populist policies. Equities and other risk assets across the globe took relief from news that the U.S. administration will delay 10% tariffs on certain Chinese products, including laptops and cell phones, that had been scheduled to start next month. The Brazilian real reversed early losses to trade up 0.4%, while Mexico's peso jumped 1% ahead of a central bank rate decision this week. The bank is expected to hold its benchmark interest rate steady on Thursday, according to a Reuters poll, even as analysts increasingly brace for a possible rate cut to lift the country's misfiring economy. Investors globally have been edge as a recent escalation in the U.S.-China trade dispute, including the weakening of the yuan past the 7-per-dollar mark, raised fears of recession. Shares in Mexico lost 1% in what could be their third straight session of losses. Most other Latam stock markets besides Argentina rose, between 0.4% and 2%. ARGENTINE UNCERTAINTY Argentina's main stock index joined the rally, jumping 10% after having lost nearly 38% the day before when opposition candidate Alberto Fernandez and running mate Cristina Fernandez de Kirchner won a stunning edge over incumbent President Mauricio Macri in presidential primaries. The showing pointed to significantly reduced chances of Macri being re-elected, and investors brace for a possible return to interventionist policies if the opposition were to win elections in October. The peso fell over 4% to 55.9 to the dollar after a near 16% plunge on Monday. The currency had fallen to record low of 65 per dollar in the previous session, sending shockwaves across global financial markets. "Key to watch will be how Fernandez tries to reduce market uncertainty and to quell investor fears with his next statements," wrote the EM team at TS Lombard led by Larry Brainard. The central bank intervened on Monday to curb the peso's free-fall, but the more the central bank spends to stabilize the currency over the next two and a half months, the less it will have to pay off major debt maturities in 2020, TS Lombard analysts say. "This could feed a vicious cycle that could end up punishing both the country and investors during the next government," they said, in a glum outlook for the beleaguered currency. Key Latin American stock indexes and currencies at 2012 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 971.51 -0.3 MSCI LatAm 2695.00 1.56 Brazil Bovespa 103299.47 1.36 Mexico IPC 39448.17 -1.01 Chile IPSA 4845.64 0.38 Argentina MerVal 30308.93 10.091 Colombia IGBC 12709.72 2.08 Currencies Latest Daily % change Brazil real 3.9668 0.42 Mexico peso 19.4117 1.00 Chile peso 705 1.28 Colombia peso 3409.8 0.43 Peru sol 3.384 -0.09 Argentina peso 55.3000 -3.25 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Marguerita Choy)

China tariff delays pull European shares out of doldrums

13 Aug 2019

European shares staged a comeback from early losses on Tuesday as growth sectors led the charge, after Washington's move to delay tariffs on some Chinese goods provided a lift to battered global sentiment.

EMERGING MARKETS-Argentina markets crash as Macri's re-election chances drop

12 Aug 2019

(Updates prices) By Susan Mathew Aug 12 Argentine stocks and the peso plummeted 30% on Monday as fears of a possible return to interventionist policies gripped after conservationist President Mauricio Macri lost by a much wider-than-expected margin to opposition in presidential primaries. The peso recovered some to trade at 52.15 per dollar, after having fallen to an all-time low of 61.99, as the central bank used $50 million in its own reserves to defend the peso. The country's main stocks index posted its worst day ever with all its components well in the red, while the cost of insuring exposure to Argentina's sovereign debt surged almost 1,000 basis points. Stumping expectations, opposition candidate Alberto Fernandez - whose running mate is former President Cristina Fernandez de Kirchner - dominated the primary on Sunday, significantly lessening Macri's chances of being re-elected in October. Concerns among market participant stem from possible policy discontinuity and intervention as experienced earlier under Kirchner's government. "What is unclear is exactly how Fernandez and Kirchner intend to conduct economic policy if they come to power," said Alejo Czerwonko emerging markets strategist at UBS Global Wealth Management's chief investment office. Concerns remain high and have to do with questions such as the composition of the economic team - who will oversee designing and implementing economic policy, what is the relationship that the new administration will have with the IMF, among others, Czerwonko said. Fernandez has said he would seek to rework Argentina's $57 billion standby agreement with the International Monetary Fund. Other worries for investors include the opposition's view that the beleaguered peso is over-valued and its call for lower interest rates on the central bank's short-term notes. While Argentine assets are expected to remain pressured for the near future, UBS's Czerwonko agrees with some analysts who say the fear of contagion to other Latin American markets and broader emerging markets remains low as Argentina's issues are "self-inflicted and very idiosyncratic." Other currencies in Latam fell between 0.5% and 2%, and most regional stocks market fell almost 1%, in line with markets worldwide. A Goldman Sachs warning that reinforced fears of a prolonged U.S.-China trade war tipping the global economy into recession, along with worsening protests in Hong Kong, and the Argentine nosedive made for a strong cocktail, sending markets into a tailspin. Brazil stocks fell 2%. The country's right-wing President Jair Bolsonaro warned on Monday that his country could see a wave of migrants fleeing Argentina if leftists were to return to power in presidential elections. Key Latin American stock indexes and currencies at 0813 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 973.49 -0.78 MSCI LatAm 2,660.51 -3.84 Brazil Bovespa 101,971.29 -2 Mexico IPC 39,842.01 -1.43 Chile IPSA 4,826.66 -1.76 Argentina MerVal 27,539.08 -30 Colombia IGBC 12,453.04 -0.52 Currencies Latest Daily % change Brazil real 3.9791 -1 Mexico peso 19.5824 -0.93 Chile peso 714 -0.41 Colombia peso 3,424.53 -0.92 Peru sol 3.381 -0.03 Argentina peso (interbank) 52.1500 -15.84 (Reporting by Susan Mathew in Bengaluru;)

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