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280 matches for " election":
The U.S. Presidential election will set the tone for LatAm's markets this week. Hillary Clinton's dwindling lead over Donald Trump in recent polls has unleashed pressure on EM assets.
Speculation that another general election is imminent is rarely out of the news. At present, betting markets see about a 35% chance of another election in 2019, broadly the same chance as one in 2022, when it is currently scheduled to be held.
The Prime Minister's refusal last week to reaffirm her party's 2015 election pledge not to raise income tax, National Insurance or VAT has fuelled speculation that taxes will rise if the Conservatives are re-elected on June 8. Admittedly, Mrs. May asserted that her party "believes in lower taxes", and the tax pledge s till might appear in the Conservatives' manifesto, which won't be published for a few weeks.
Legislative and presidential elections in Colombia will be held on March 11 and May 27, respectively, with a run-off presidential election on June 17 if no candidate secures more than half the votes.
India's prime minister, Narendra Modi, yesterday held his last cabinet meeting before the general election.
Earlier this week the New York Times bleakly suggested--see here--that people in Italy are too depressed to care about this weekend's parliamentary elections.
The spectre of a general election relentlessly will haunt the new Prime Minister--due to be announced as Tory party leader today before moving into Downing Street tomorrow--but our base case remains that a poll won't happen this year.
Speculation that another general election is imminent has intensified in recent weeks.
President Nicolás Maduro has "won' another six-year term, as expected, even as millions of Venezuelans boycotted the election.
Spain heads to the polls on Sunday, but unlike the chaos that descended on Europe following Greece's elections earlier this year, we expect a market-friendly outcome. The key political story likely will be the end of the two-party system, as polls indicate neither of the two largest mainstream parties--Partido Popular and PSOE--will be able to form a majority. Markets' fears have been that the fall of the established parties would allow anti-austerity party, Podemos, to lead a confrontation with the EU, but this looks very unlikely.
Prime Minister Theresa May's announcement that Parliament will vote today on holding a general election on June 8 shocked markets and even her own party's MPs. Betting markets were pricing in only a 20% chance of a 2017 election before yesterday's news.
The first round of Brazil's presidential elections will take place this Sunday, followed by a probable runoff on October 28.
Today's local elections are more important than usual, because they will enable investors to assess if the Conservatives really are on track for a landslide victory in the general election, as suggested by the opinion polls and priced-in by the forex market.
Japan returned the ruling LDP coalition to power in an upper house election over the weekend.
On a headline level, last week's European Parliament elections were an excellent occasion for the EU.
The headlines from Catalonia are as confusing as ever, but we are sticking to our view--see here--that regional elections are the only reasonable outcome of the chaos.
The political limbo in Italy currently appears to have three possible solutions, in the short term. The 5SM and Lega can try to form a coalition, again.
The Conservatives' opinion poll lead continued to decline over the last week, suggesting that a landslide victory on Thursday no longer is likely. Indeed, the Tories' average lead over Labour in the 10 most recent opinion polls has fallen to just 6%, down from a peak of nearly 20% a month ago.
The Conservatives are rallying in the opinion polls, as their uncompromising line on leaving the E.U. by October 31, come what may, resonates with Brexit party supporters.
Sterling recovered to $1.23 yesterday, its highest level since late July, in response to the sharp decline in the risk of a no -deal Brexit at the end of October, triggered by MPs' actions.
Brazil's recent data show that inflation is still falling, allowing the central bank to ease further next month, while economic activity is improving, though the rate of growth has slowed.
After last week's drama, the pace of political developments should slow down this week.
Price action in Italian bonds went from hairy to scary yesterday as two-year yields jumped to just under 3.0%.
Brazil's industrial production surprised to the downside in August, suggesting that manufacturing is struggling to gather momentum over the second half of the year.
The German manufacturing sector is showing signs of stabilisation with industrial production rising 0.2% month-on-month in October, equivalent to 0.8% year-over- year. This is consistent with a decent retracement in production this quarter, but growth is still only barely above zero.
Greece goes to the polls this weekend, but unlike the chaos in the summer, we doubt it will be a nail-biting experience for investors. Polls put Syriza and the conservative New Democracy neck-and-neck, but neither party likely will be able to form a majority. Syriza has ruled out a grand coalition, which potentially means tricky negotiations with minority parties. But we are confident that any new government will be committed to euro membership, and a constructive dialogue with the EU and IMF.
The decision by seven MPs to abandon Labour and set up a new centrist grouping--the Independent Group--will not have a significant impact on the outcome of parliamentary Brexit votes.
U.K. Conference Call Charts - June 2017
As we reach our deadline--4pm eastern time--media reports indicate that a debt ceiling agreement is close.
We are going to print two days before the July 1 presidential election in Mexico.
Mauricio Macri, the centre-right candidate of the Cambiemos--Let's Change--coalition won Argentina's weekend presidential election. Mr. Macri, the mayor of Buenos Aires, defeated Daniel Scioli, of the ruling Front for Victory--FpV--coalition on Sunday. His victory marks the end of the 12-year Kirchnerist era, characterized by wild inflation, huge public deficits and unsustainable subsidies. If Mr. Macri lives up to his promises, Argentina, the second-largest economy in South America, will become an orthodox economy on a sustainable path. The recovery will come, we think, but it will be a long and challenging process.
The initial "official estimate" of the French presidential election--released 20.00 CET--suggest that the runoff will be between the centre-right Emmanuel Macron and Front National's Marine Le Pen. This is consistent with opinion polls. The average of five early estimates also suggests that Mr. Macron won the vote with 23.1% of the vote against Mrs. Le Pen's 22.5%.
Brazilian financial assets lately appear to be responding only to developments in the presidential election race and external jitters.
This remains a tumultuous time for EZ bond investors. The twists and turns of the French presidential election campaign continue to shove markets around. Marine Le Pen's steady rise in thepolls has pushed French yields higher this year.
Eurozone bond traders of a bearish persuasion are finding it difficult to make their mark ahead of Italy's parliamentary elections next weekend.
okThe weekend's election result in Spain provided relief for investors anxiously looking for another "surprise." Exit polls on Sunday showed a big majority for the anti-establishment party Podemos, but in the end Spanish voters opted for safety. The incumbent Partido Popular, PP, was the election's big winner compared with the elections six months ago, gaining 15 seats.
Political risks have been making an unwelcome comeback in the Eurozone in the past month. In Germany, last month's parliamentary elections--see here--has left Mrs. Merkel with a tricky coalition- building exercise.
Mexico's survey data have improved significantly over the last few months, reaching levels last since before Donald Trump won the U.S. election in November. This suggest that the economy is in much better shape than feared earlier this year. Consumer confidence, for instance, has continued its recovery.
Ms Keiko Fujimori, the candidate of Peru's conservative Fuerza Popular party, seems on course to win the first round of the presidential election this Sunday, April 10. According to the latest Ipsos poll, the daughter of former President Alberto Fujimori continues to lead the race, with the support or about 34% of voters.
We are not political analysts or psephologists, but we note that each of the nine separate election forecasting models tracked by the New York Times suggests that Hillary Clinton will be president, with odds ranging from 67% to greater than 99%.
The final flurry of opinion polls indicates that voting intentions have changed little over the last few days. The Conservatives have an average lead over Labour of 7.5% in the final p olls conducted by 10 different agencies, only slightly more than their 6.5% lead at the 2015 election.
Since April, the presidential elections in Brazil have dominated local discourse, prompting several market moves.
Sterling jumped last week to its highest level against the dollar since last October in response to news that a general election will be held on June 8. Markets are betting that the Conservative Government will sharply increase its majority, enabling Theresa May to ignore Eurosceptic backbenchers when she strikes a deal with the EU.
The results of Sunday's parliamentary elections in Italy carry two key messages.
A general election this year now looks inevitable, after the defection of Phillip Lee MP from the Tories to the Lib Dems, and the PM's threat to seek an election if MPs take control of the Order Paper on Tuesday evening.
On the face of it, the February consumer spending data, due today, will contradict the upbeat signal from confidence surveys. The dramatic upturn in sentiment since the election is consistent with a rapid surge in real consumption, but we're expecting to see unchanged real spending in February, following a startling 0.3% decline in January.
The prospect of a Greek parliamentary election on January 25th, following Prime Minister Samaras' failure to secure support for his presidential candidate, weighed on Eurozone assets over the holidays. The looming political chaos in Greece will increase market volatility in the first quarter, but it is too early to panic.
Investors in Mexico likely will focus early this week on yesterday's gubernatorial election results in Nayarit, Coahuila and the State of Mexico. The latter is especially important, because it is viewed as a possible guide to the 2018 presidential election.
This weekend will bring closure to an extraordinary presidential election campaign in France. The polls correctly predicted the first result, and assuming they are right in the second round too, Mr. Macron will comfortably beat Ms. Le Pen.
The risk of a snap general election has jumped following Theresa May's resignation and the widespread opposition within the Conservative party to the compromises she proposed last week, which might have paved the way to a soft Brexit.
Predicting which way markets would move in response to potential general election outcomes has been relatively straightforward in the past. But the usual rules of thumb will not apply when the election results filter through after polling stations close on Thursday evening.
Centrist politicians and markets breathed a sigh of relief yesterday as the results of the Dutch parliamentary elections rolled in. The incumbent conservatives, led by PM Mark Rutte, lost ground but emerged as parliament's biggest party with 33 seats out of the total 150.
Small businesses remain extremely positive about the economy, but some of the post-election gloss appears to be wearing off. To be clear, the headline composite index of small business sentiment and activity in February, due this morning, will be much higher than immediately before the election, but a modest correction seems likely after January's 12- year high.
Pedro Kuczynski, the centre-right candidate of the Peruvians for Change party, won the presidential election held in June 5th. Mr. Kuczynski, a former finance minister and World Bank economist, defeated Ms. Keiko Fujimori, the candidate of the conservative Fuerza Popular party, and the daughter of jailed former leader Alberto Fujimori. Mr. Kuczynski's margin of victory over Ms. Fujimori was fewer than 43K votes, or just 0.2%.
The Brazilian presidential election has remained in the spotlight in recent days and is the main driver of asset price volatility.
The French presidential election campaign remains chaotic. Republican candidate François Fillon had to defend himself again yesterday as investigations into his potential misuse of public funds deepened. Mr. Fillon and his wife have now been summoned to court to explain themselves. Markets expected Mr. Fillon to resign as the Republican front-runner. Instead, he used his unscheduled media address to defiantly declare that he is staying in the race.
Iván Duque, the conservative candidate for the Democratic Centre Party, won the presidential election held in Colombia on Sunday.
Sunday 28th will bring closure to an extraordinary presidential election campaign in Brazil.
Economic news in Europe continues to take a back-seat to volatility in politics. Yesterday's announcement by U.K. Prime Minister Theresa May that she is seeking a snap general election on June 8th cast further doubt over what exactly Brexit will look like.
Brazil is back on global investors' radar screens. Financial market metrics capture a relatively robust bullish tone, especially since the presidential election.
Investors will increase their focus on exchange rates as the US presidential election and the Fed's next rate hike approach. Markets are becoming concerned that a surge in the USD could trigger another spike in LatAm currency volatility, depressing the good year- to-date performance of most local market assets.
Politics will be the key factor in LatAm over the coming quarters, as presidential and legislative elections take place throughout the region.
The beginning of the electoral campaign last week in Brazil bodes uncertain results and a very close competition for the presidential elections on October 7.
This weekend's first round of the French presidential election is too close to call. Our first chart indicates that a runoff between Marine Le Pen and Emmanuel Macron remains the best bet. But the statistical uncertainty inherent in the predictions, and the proximity of the two remaining candidates--the centre-right Mr. Fillon and far-left Mr. Melenchon-- mean that this is now effectively a four-horse race.
Note: This updates our initial post-election thoughts, adding more detail to the fiscal policy discussion. Apologies for the density of the text, but there's a lot to say. Our core conclusions have not changed since the election result emerged. The biggest single economic policy change, by far, will be on the fiscal front.
Before last November's election, movements in the headline NFIB index of activity and sentiment among small businesses could be predicted quite reliably from shifts in the key labor market components, which are released in advance of the main survey.
Chief Eurozone Economist Claus Vistesen with the latest on the French Election
Chief U.K. Economist Samuel Tombs discussing the General Election in June
Chief U.K. Economist Samuel Tombs discussing the effect the general election will have on the pound,
It's now four weeks since the Prime Minister called a snap general election, and the Conservatives still are riding high in the opinion polls. The average of the last 10 polls suggests that the Tories are on track to take 47% of the vote, well above Labour's 30%.
A look back on Chief U.K. Economist Samuel Toombs' predictions ahead of the U.K. General Election
Elections will be held on Thursday in two constituencies vacated recently by Labour MPs. Betting markets are pricing-in a 70% chance that the Conservatives will win the by-election in Copeland--even though they trailed Labour there by eight points in the general election in 2015--mainly because around 60% of Copeland's electorate voted to leave the EU last year.
British politics remains a complete mess, with many outcomes, ranging from no-deal Brexit to revoking Article 50, possible in the second half of this year.
India's National Democratic Alliance, led by Prime Minister Narendra Modi's Bharatiya Janata Party,
The chances of our Brexit base case--a soft departure just before the current October 31 deadline--playing out have declined sharply over the last two weeks.
Sterling weakened further yesterday in response to the perception that the odds of the U.K. leaving the E.U. in the June referendum are rising. Cable fell to $1.39, its lowest level since March 2009. It is now $0.12 below the level one would anticipate from markets' expectations for short rates, as our chart of the week on page three shows.
Economic activity in Mexico during the past few months has been resilient, as external and domestic threats, particularly domestic political risks, appear to have diminished.
Korean exports are often a useful gauge of Asian and global trade; the country sits near the beginning of the global supply chain. It also happens to publish early in the data cycle and provides a measure of exports in the first 20 days of the month.
Financial markets in Brazil and Argentina have been under pressure this week, following negative news, both domestic and external. In Brazil, the Ibovespa index tumbled nearly 1.8% on Tuesday after a Senate Committee rejected the Government's labour reform bill.
Yesterday's March retail sales report for Mexico is in line with other recently released hard and survey data, painting an upbeat picture of the economy.
The risk of higher US rates put LatAm currencies under pressure during the first half of the week, before the US FOMC meeting on Wednesday. But they recovered some ground yesterday, following the Fed's decision to leave rates on hold.
Growth appears to have accelerated in the first quarter in Mexico, as NAFTA-related uncertainty abated, inflation started to fall, and the MXN rebounded.
MPs look set to take a decisive step next Tuesday towards removing the risk of a calamitous no-deal Brexit at the end of March.
Mortgage approvals by the main high street banks dropped to a five-month low of 38.5K in September, from 39.2K in August, according to trade body U.K.Finance.
Sterling has appreciated sharply over the last two weeks and yesterday briefly touched its highest level against the euro since May 2017.
The landslide victory by anti-austerity party Syriza in Greece this weekend will increase uncertainty in coming months. The coalition between Syriza and the Independent Greeks will prove a tough negotiating partner for the EU as both parties are strongly in favor of pushing the Troika to significant concessions on any future bailout terms this year.
The strengthening EZ economy increasingly looks like the tide that lifts all boats. The Greek economy is still a laggard, but recent news hints at a brightening outlook. Last week, S&P affirmed the country's debt rating, but revised the outlook to "positive" from "stable."
In yesterday's Monitor, we laid out the prime causes of China's weekend announcement, cutting the reserve requirement ratio.
It's pretty clear now that the President is not a reliable guide to what's actually happening in the China trade war, or what will happen in the future.
In a week of important global events, local factors remained in the spotlight in Brazil, with a more benign data flow and the central bank statement reducing the likelihood of an imminent end to the easing cycle.
Japan's flash PMI numbers for August were a mixed bag.
Nothing is done until it's done, and, in the case of Sino-U.S. trade talks, even if a deal is reached, the new normal is that tensions will be bubbling in the background.
A trade deal with China is in sight. President Trump tweeted Sunday that the planned increase in tariffs on $200B of Chinese imports to 25% from 10%, due March 1, has been deferred--no date was specified-- in light of the "substantial progress" in the talks.
The first exit poll published at 18.00 CET on Sunday evening points to a landslide victory for Syriza, and the real possibility that the party could form a majority government. Counter-intuitively, the prospects for Syriza here depend upon how the smaller parties do.
We expect MPs this week to take a big step towards a soft Brexit, which has been our base case since the referendum.
Inflation pressures in Brazil and Mexico are well under control, with the August mid-month readings falling more than expected, strengthening the case for the BCB and Banxico to cut interest rates in the near term.
The vote in the House of Commons today on whether MPs should effectively take control of Brexit negotiations, if Theresa May can't strike a deal by mid-January, looks finely balanced.
Japan's trade balance deteriorated sharply in May, flipping to a ¥967B deficit from the modest ¥57B surplus in April.
Construction in the EZ stumbled at the start of the year.
As we write, 25 Conservative MPs have confirmed publicly that they have submitted no-confidence letters to the Chairman of the 1922 Committee. That's 23 short of the 48 required to trigger a leadership contest, though some MPs might have submitted letters without making it public.
We now think that Banxico will keep interest rates on hold at 7.50% at its Thursday meeting, as the MXN has stabilized in recent days, despite rising geopolitical risks.
The possibility of a Corbyn-led Labour Government has been highlighted by some analysts as a major economic risk. Mr. Corbyn, however, has little practical chance of being elected soon.
We previewed today's advance EZ Q1 GDP number in our Monitor on April 30--see here--and the data since have not changed our outlook.
Banxico left its benchmark interest rate on hold at 7.0% at last Thursday's policy meeting.
We still think it is a question of when--not if-- MPs will be successful in taking a no -deal Brexit off the table.
Investors have become more concerned about a no-deal Brexit.
Banxico's tightening cycle has totalled 400 basis points, lifting rates to 7.0%. Since late 2015, Banxico has followed the Fed closely, but other external factors also have guided many of its decisions.
We still don't have the complete picture of what happened to the EZ construction sector in Q2, but we have enough evidence to suggest that it rolled over.
It has become pretty clear over the past couple of weeks that Hillary Clinton will be the next president, so it's now worth thinking about how fiscal policy will evolve over the next couple of years.
Long term benchmark yields in the Eurozone almost fell to zero towards the end of the first quarter as investors were carried away in their celebration of QE. The counter-reaction to this move, though, was violent with 10-year yields surging from 0.2% to 0.9% in the space of two months from April to June, and we think a similar tantrum could be waiting in the wings for investors. We are particularly wary that upside surprises in inflation data--mainly in Germany--could push yields up sharply in the next few months.
With Fed officials now in pre-FOMC meeting blackout mode, this week will not bring a repeat of Friday's confusion, when the New York Fed felt obligated to issue a clarification following president William's speech on monetary policy close to the zero bound.
In recent weeks Brazilian central bank officials have reinforced their message that they will continue fighting inflation with "determination and perseverance". CPI inflation is failing to subside, at least at the headline level, where the latest readings are very disappointing, and expectations have remained stubbornly high. And the BRL has fallen 13% year-to-date, posing further inflation threats ahead. All these factors mean that the BCB will increase its main interest rate yet again in July.
Colombia's industrial and retail sectors surprised to the upside in August, suggesting that the domestic economy has been resilient during most of the third quarter, despite the hit from an array of external headwinds. Industrial production increased by a solid 2.6% year-over-year in August, up from an upwardly revised 0.6% expansion in July, and above its recent trend. In the first half of the year, industrial activity fell on average by 1.1%, the worst performance since 2013, due mainly to the oil hit and ex tended works at Reficar, the country's second biggest oil refinery. But Colombia's manufacturers appear to have shrugged off part of the oil pain in recent months.
Reforms to Stamp Duty Land Tax paid by first-time buyers likely will take centre stage in the Budget. At the Conservatives' party conference, Theresa May pledged another £10B to expand the Help to Buy Scheme, which helps first-time buyers obtain a mortgage which just a 5% deposit.
Politics are once again encroaching on the economic story in the Eurozone. At the ECB, this week has so far been a tumultuous one.
Chile's Q1 GDP report, released yesterday, confirmed that the economy weakened sharply at the beginning of the year, due mainly to temporary shocks, including adverse weather conditions.
The chances of the first phase of the Brexit saga concluding soon declined sharply last week.
Incoming data confirm our view that the Chilean economy to rebound steadily in the second half of the year, with real GDP increasing 1.5% quarter-on-quarter in Q3, after a relatively modest 0.9% increase in Q2 and a meagre 0.1% in Q1.
We are happy to report that the laws of gravity have been temporarily suspended in the German survey data.
Today is a busy day in the Eurozone economic calendar, but we suspect that markets mainly will focus on the details of Italy's 2019 budget.
Divergence between central banks and the reach for yield will remain dominant themes for Eurozone fixed income markets next year, but a lot has already been priced in.
Upbeat PMIs, the MPC's abandonment of its easing bias and the High Court ruling that only a parliamentary vote--and not the Prime Minister--can trigger Article 50, all helped sterling to make up some lost ground last week.
The Monetary Policy Committee of the Reserve Bank of India voted yesterday to cut the benchmark repo rate by a further 25 basis points, to 5.75%, a nine-year low.
Both the E.U. and the U.K. government have been keen to emphasise, since the Withdrawal Agreement was provisionally signed off, that March 29 is a hard deadline for Brexit.
Once again, MPs failed to coalesce around any way forward for Brexit in the indicative votes process on Monday.
Friday's consumer sentiment data in the two main Eurozone economies were mixed.
Our core view on the May payroll number remains that the single most likely cause of the unexpectedly modest increase is a seasonal adjustment error, triggered when the survey is conducted early in the month.
Recent polls suggest that Jair Bolsonaro has comfortably beaten Fernando Haddad, to become Brazil's president.
One of the main reasons we expect the Reserve Bank of India to roll back at least one of this year's rate cuts before the end of the year is the likely further rise in food inflation.
Argentina's Recession Has Ended, Supporting Mr. Macri's Odds
Data released last week confirm that the Argentinian economy finally is stabilizing.
The pressure on Theresa May from Brexiteers within her own party intensified yesterday, when 60 Conservative MPs signed a letter arguing that they could not back a proposal for a "customs partnership".
We would sum up the final stages of the Brexit negotiations as follows: Both sides have an interest in a deal with minimal disruptions, but we probably have to get a lot closer to the cliff- edge for the final settlement.
If 2017 really is the year of "reflation", somebody forgot to tell the gilt market. Among the G7 group, 10-year yields have fallen only in the U.K. during the last three months, as our first chart shows.
The deterioration of global risk appetite and, in particular, domestic politics have put the Brazilian real under severe pressure in recent weeks.
We are sticking to our call for a weak first half in Japan, despite likely upgrades to Q1 GDP on Monday.
China's PMIs show no sign of a recovery yet, but the authorities are sticking to the playbook; they've done the bulk of the stimulus and are waiting for the effects to kick in, but are recognising that they need to make some adjustments.
Argentina's financial markets and embattled currency have been under severe pressure in recent weeks, with the ARS hitting a new record low against the USD and government bonds sinking to distress levels.
Colombia's Central Bank is facing a short-term test. The recent fall in inflation was interrupted in August--data due on Thursday will show another increase in September--while economic growth, particularly consumption, is struggling, at least for now.
According to Shadow Chancellor John McDonnell, it is "almost inevitable" that Labour will table a no-confidence motion in the government next month, shortly after MPs return from the summer recess on September 3.
Macroeconomic and financial conditions in Venezuela are deteriorating at an accelerating pace.
Data released on Friday show that the Chilean economy had a weak start to the second half of the year.
The defeat in the House of Lords of the Government's plans to cut spending on tax credits by £4.4B next year is not a barrier to their implementation. But it has prompted speculation that the Chancellor will reduce the size of the fiscal consolidation planned for next year. The plans may be tweaked in the Autumn Statement on 25 November, but we think the economy will still endure a major fiscal tightening next year.
The newly-revised data on capital goods orders, released on Friday, support our view that sustained strength in business capex remains a good bet for this year.
The outlook for Argentina is gradually improving, after a long and painful recession.
Mexico's political panorama seems to be becoming clearer, at least temporarily. This should dispel some of the uncertainty that has been hanging over the economy in recent months.
Argentina's near-term economic outlook remains murky, as recent data has highlighted, hit by tighter financial conditions.
Activity data from Colombia over the past quarter have been strong. Real GDP expanded by a relatively robust 2.8% year-over-year in Q2, and is on track to post a 3.2% increase in Q3.
Rising political risks and NAFTA-related threats have put the MXN under pressure last month, driving it down 4.9% against the USD, as shown in our first chart.
GDP growth in India slowed sharply in the first quarter of the year, as expected--see here--opening the door for the RBI to cut interest rates further at its policy announcement tomorrow.
The fall in the services PMI to 53.8 in May, from 55.8 in April, is a setback for hopes that the slowdown in GDP growth in Q1 will be fleeting. Both business activity and orders rose at their slowest rates since February.
Yesterday's ECB meeting painted a picture of a central bank in wait-and-see mode. The main refinancing and deposit rates were kept at 0.00% and -0.4% respectively, and the marginal lending facility rate also was unchanged at 0.25%.
Retail sales in Mexico plunged at the end of Q4, but we think households' spending will continue to contribute to GDP growth in the first quarter.
In theory, June should be a crunch month for Theresa May's Brexit plans. The Prime Minister will meet EU leaders on June 28 and hopes to have found a consensus in cabinet by then for how the U.K. will trade with the EU outside of the customs union.
The verdict is not yet definitive, but prudence dictates we must now assume victory for Donald Trump. The immediate implication of President Trump is global risk-off, with stocks everywhere falling hard, government bonds rallying, alongside gold and the Swiss franc. The dollar is the outlier; usually the beneficiary when fear is the story in global markets, it has fallen overnight because the risk is a U.S. story.
It probably would be wise to view the increase in the ISM manufacturing index in December with a degree of skepticism. The index is supposed to record only hard activity, but we can't help but wonder if some of the euphoria evident in surveys of consumers' sentiment has leaked into responses to the ISM. That said, the jump in the key new orders index-- which tends to lead the other components--looked to be overdue, relative to the strength of the import component of China's PMI.
The further depreciation of sterling yesterday, to its lowest level against the dollar and euro since March 2017 and September 2017, respectively, signified deepening pessimism among investors about the chances of a no-deal Brexit.
The recovery in small business sentiment since the fourth quarter rollover has been extremely modest, so far.
Japan's monetary base growth slowed to just 4.6% year-over-year in February, from 4.7% in January, well below the 17% rate needed to keep the base expanding at a pace consistent with the BoJ's JGB quantity target.
Consumer sentiment in Mexico continues to improve, consistent with tailwinds from the relatively strong labour market and the president's rising approval ratings.
The Prime Minister will invoke Article 50 today, marking the end of the beginning of the U.K.'s departure from the EU. The move likely will not move markets, as it has been all but certain since MPs backed the Government's European Union Bill on February 1.
Money supply data in the EZ continue to suggest that headline GDP growth will slow soon.
Some analysts argue that sterling won't recover materially even if MPs wave through Brexit legislation, because the threat of a Labour government worries investors more than a messy departure from the EU.
The Mexican economy is recovering gradually, despite many external headwinds. This week, the IGAE economic activity index--a monthly proxy for GDP--rose a solid 2.6% year-over-year in August, up from 2.0% in July. In the first half the economy grew on average 2.4%. The report showed increases in all three sectors, most notably agriculture, up 8.2% year-over-year, followed by services, 3.3%, and industrial activities, with a 1.0% gain.
As it became clear that Donald Trump would beat Hillary Clinton to win the U.S. presidency, EM currencies came under severe pressure, fearing his economic and immigration policies. Some of the initial pressure is easing as markets digest the news and following Mr. Trump's conciliatory tone in his victory speech. But the proposals have been made and the MXN and other key LatAm assets likely will remain very stressed in the near term.
The Mexican inflation rate soared at the start of 2017, but this is yesterday's story; the headline will stabilize soon and will decline slowly towards the year-end. May data yesterday showed that inflation rose to 6.2%, from 5.8% in April. Prices fell 0.1% month-to-month unadjusted in May, driven mainly by lower non-core prices, which dropped by 1.3%, as a result of lower seasonal electricity tariffs.
The last few years have thrown up surprise after surprise for establishment parties. Mr. Abe's Liberal Democrat Party is about as establishment as they come.
The housing market appears to be emerging gradually from the coma induced by Brexit uncertainty at the start of the year.
Mexico has been one of LatAm's highlights in terms of financial markets and currency performance in recent months.
Mexico's February industrial production report was weaker than markets expected. Output expanded by 0.7% year-over-year, below the consensus, 1.2%, and slowing from 0.9% in January.
The euro's spectacular rise against the pound has been the key story in European FX markets recently. But the trade-weighted euro, however, is up "only" 6% year-to-date, as a result of the relatively stable EURUSD.
Yesterday marked President AMLO's first 100 days in office, with skyrocketing approval ratings and improving consumer confidence.
November's inflation data in Mexico, showing a modest increase in the headline rate, have strengthened the case for further monetary tightening. But we stick to our long-standing view that the Board will leave rates at 7.0% on Thursday.
While we were out, most of the action was on the political front, while the economic data mostly were unexciting.
We will be paying special attention to the sentiment surveys for Argentina over the coming weeks.
Data released yesterday in Brazil are consistent with our view that private consumption will continue to drive the recovery over the second half, offsetting the ongoing weakness in private investment.
Many commentators have assumed that the new Chancellor's pledge to "reset" fiscal policy and to stop targeting a budget surplus in this parliament means that fiscal policy will support growth in economic activity next year.
The second presidency of Chile's conservative Sebastián Piñera, a billionaire turned politician, began on Sunday, March 11, in favourable economic circumstances.
We often hear that the large gap between the slowing rising path for interest rates anticipated by the MPC and the flat profile expected by markets is justified because markets have to price-in all of the downside risks to the economic outlook posed by Brexit.
This week's data confirmed Mexico's strong economic performance over the first few months of this year.
Gilt yields have been remarkably stable following their decline in response to the Bank of England's Inflation Report in February. The average 60-day price volatility of gilts with outstanding maturities of greater than one year has fallen back recently to lows last seen in 2014, as our first chart shows.
The ECB made no major policy changes yesterday. The central bank kept its refinancing and deposit rates unchanged at 0.00% and -0.4% respectively, and the scheduled reduction in the pace of QE to €60B per month was confirmed. The core part of the central bank's language retained its dovish bias.
Investors in the gilt market would be wise not to take the new official projections for borrowing and debt issuance at face value. The forecast for the Government's gross financing requirement between 2017/18 and 2021/22 was lowered to £625B in the Budget, from £646B in the Autumn Statement.
Yesterday's first estimate of Q1 GDP in Mexico confirmed that growth was resilient at the start of the year, despite the lingering hit to confidence from domestic and external threats.
The Prime Minister is in a position on Brexit all chess players dread: zugzwang.
Disappointing inflation data remain a critical dark spot in the context of otherwise solid evidence of a firming cyclical recovery. Advance data indicate that inflation was unchanged at a mere 0.2% year-over-year in December, with falling food inflation and a dip in services inflation offsetting easing deflation in energy prices. Headline inflation likely will be volatile in coming months. Base effects will push up the year-over-year rate in energy price inflation further in Q1, but we are wary that continued declines in food inflation could offset this effect.
The French manufacturing sector slowed more than we expected in Q1.
Unsurprisingly, cross-party Brexit talks are not going well.
Political risks in Brazil recently have simmered alongside the modest cyclical recovery, but they are now increasing. President Michel Temer's future remains hard to predict as circumstances change by the day.
Data released yesterday reinforced our forecast of a further rate cut in Brazil next month.
EZ equity futures predictably fell out of bed as the news of the Trump victory gradually became clear overnight yesterday. The reaction was less violent than after the U.K. Brexit referendum, though, and Mr. Trump's balanced victory speech appears to have calmed nerves for now.
As we head to press, investors are holding their breath over whether today's trade talks between the U.S. and China will be enough for Mr. Trump to step back from his pledge to increase tariffs on $200B of Chinese goods to 25%.
Bond yields in Italy remain elevated, but volatility has declined recently; two-year yields have halved to 0.7% and 10-year yields have dipped below 3%.
Today brings a huge wave of data, but most market attention will be on the June CPI, following the run of unexpectedly soft core readings over the past three months.
Polls suggest that Ivan Duque has comfortably beat Gustavo Petro to become Colombia's president.
The imposition of 25% tariffs on $50B-worth of imports from China, announced Friday, had been clearly flagged in media reports over the previous couple of weeks.
Data released yesterday confirmed that economic activity is improving in Brazil.
The EZ manufacturing data have shown signs of a rebound in the auto sector recently.
Most central banks in LatAm have ended the year in a relatively comfortable position; their economies are improving and inflation is under control or even falling.
Mexico's central bank, Banxico, last night capitulated again, reacting to the depreciation of the MXN by increasing interest rates by 50bp--for the fourth time this year--to 5.25%.
Venezuela's fundamentals continue to deteriorate, economic chaos is increasing and the social/political situation remains fragile.
On the face of it, trade negotiations have deteriorated in the last week.
For the record, we think the Fed should raise rates in December, given the long lags in monetary policy and the clear strength in the economy, especially the labor market, evident in the pre-hurricane data.
Brazil's December economic activity index, released last week, showed that the economy ended the year on a relatively soft footing.
Colombia's GDP growth was a poor 1.6% year-over- year in Q4, down from 2.3% in Q3, despite the oil recovery and the COP's rebound since mid-year. GDP rose a modest 0.3% quarter-on-quarter, after a 0.8% increase in Q3.
While we were away, EM growth prospects and risk appetite deteriorated significantly, due mainly to rising geopolitical risks, weaker economic prospects for DM, and, in particular, the most recent chapter of the global trade war.
Markets are becoming more sensitive to rumours about changes in ECB policy. The euro and yields jumped on Friday after a Bloomberg report that the central bank has discussed raising rates before QE ends.
Banxico is one of the few central banks in LatAm to have hiked rates in 2016, and we expect it to remain relatively hawkish in the face of external risks.
Politics remain centre-stage in Brazil, despite positive news on the economic front. President Michel Temer's government continues to advance pension reform, despite the tight calendar and concerns about his political capital. But volatility is on the rise.
Treasury Secretary Mnuchin's five-line letter to House Speaker Pelosi on last Friday--copied to other Congressional leaders--which said that "there is a scenario in which we run out of cash in early September, before Congress reconvenes", introduces a new element of uncertainty to the debt ceiling story.
Consumers' spending in Brazil slowed at the start of Q4, but we don't see this as the start of a downtrend.
Argentina's central bank held interest rates at 60% on Wednesday, as was widely expected.
Leading indicators and survey data in Brazil still suggest a rebound from the relatively soft GDP growth late last year and in Q1.
A bad year is threatening to become a catastrophic one for Eurozone equity investors.
We have been quite bullish on U.S. economic growth this year.
Last week, the Bank of Mexico unanimously voted to leave the main rate on hold, at 7.50%, its highest level since early 2009.
Colombia's Q1 GDP report confirms that the economy is improving. Leading indicators and survey data suggest that the recovery will continue over the second half of the year.
LatAm markets reacted well to the U.S. Fed's decision to increase the funds rate by 25bp, to 1-to-1¼%, on Wednesday. Currencies moved only slightly after the decision and asset markets were relatively stable. Yesterday, some currencies retreated marginally as investors digested the relatively hawkish message from the Fed and Chair Yellen's press conference.
A casual glance at our first chart, which shows the headline and core inflation rates, might lead you to think that our fears for next year are overdone. Core inflation rose rapidly from a low of 1.6% in January 2015 to 2.3% in February this year, but since then it has bounced around a range from 2.1% to 2.3%.
Political uncertainty is never far away in the Eurozone, though the most recent outbreak could easily swing in favour of markets.
We struggle to see how the pro-separatist movement in Catalonia can move forward from here.
Chief U.K. Economist Samuel Tombs on the chances of a second Brexit Referendum
Brazil's economy surprised to the upside in early Q3, despite downbeat data released in recent days.
LatAm markets and central banks have been paying close attention to developments in the U.S. The FOMC left rates on hold on Wednesday, as expected, but underscored its core view that inflation will rise in the medium-term, requiring gradual increases in the fed funds rate.
Political uncertainty in the Eurozone is the story that won't die. Coalition talks in Germany collapsed yesterday when the centre-right FDP walked out of the negotiations.
The Tankan survey powered ahead in Q2, pulling away from Q1 and mostly beating consensus. This confirms our impression of the strength of the recovery ,just as Prime Minister Abe's Liberal Democratic Party is trounced at the polls in Tokyo. The drubbing is understandable as the main benefits of Abenomics have gone to the business sector, at the expense of the household sector.
The Mexican peso and the Mexican stock market were hit this week after a poll showed that the Republican presidential candidate, Mr. Donald Trump, is leading in Ohio, a bellwether state in US presidential elections. After the poll's release, the MXN, which has been trading at about 18.9 to the USD, shot up to around 19.2.
Data released last week in Argentina reaffirm that President Macri remains in a challenging position ahead of the October 27 presidential election.
Selling pressure in LatAm markets after Donald Trump's election victory eased when the dollar rally paused earlier this week. Yesterday, the yield on 10- year Mexican bonds slipped from its cycle high, and rates in other major LatAm economies also dipped slightly.
Political risks have returned to the Eurozone with the decision by Greek Prime Minister Samaras to initiate the election of a president, raising the risk of a Greek parliamentary election early next year.
Former Chancellor George Osborne famously quipped after last year's general election that Theresa May was "a dead woman walking and the only question is how long she remains on death row".
The presidential election in Argentina is only four months away and the race is heating up.
Brazil's President Dilma Rousseff was removed from office on Wednesday, following an impeachment trial triggered by allegations that Ms. Rousseff used "creative" accounting techniques to disguise Brazil's growing budget deficit, ahead of her re-election in 2014. The Senate voted 61-20 to convict Ms. Rousseff; only 54 votes were needed to oust her. For Ms. Rousseff's leftist Workers' Party, her removal marks the end of 13 years in power.
Mexico's election results are not available as we go to press, but we're expecting a comfortable win for the left-wing populist candidate, AMLO.
Fed Chair Yellen's Testimony yesterday pretended the election hadn't happened, and ignored the incoming administration's plans for a huge fiscal stimulus. She did address the issue under questioning, though, pointing out that fiscal stimulus could have inflationary consequences and that the Fed will have to factor-in to its decisions whatever Congress decides to do to taxes and spending.
The combination of unexpectedly strong auto sales and rising gas prices should generate strong-looking headline retail sales numbers for October. We have no idea what to expect for November, with two-thirds of the month coming after the election, but the final pre- election sales report will look good.
The medium-term outlook in most LatAm economies is improving, though economic activity is likely to remain anaemic in the near term. The gradual recovery in commodity prices is supporting resource economies, while the post-election surge in global stock prices has boosted confidence. But country-specific domestic considerations are equally relevant; the growth stories differ across the region.
We have questioned the reliability of the recent consumer confidence numbers, and are very skeptical of their signal that spending is set to accelerate rapidly, but we see no real sign yet of any significant reversal of the post-election spike.
Yesterday's first estimate of full-year 2016 GDP in Mexico indicates that growth gathered momentum over the second half of last year. But risks are now tilted to the downside, following the U.S. election. GDP rose 0.6% quarter-on-quarter in Q4, after a 1.0% increase in Q3. Growth was much slower in the firs t half, as shown in our char t below.
Claus Vistesen on the Greek election results impact on the Eurozone
With the Mexican Elections on July 1st, our Chief Latam Economist Andres Abadia has received many questions about the possible outcomes and how this will affect the Mexican economy going forward.
With less than a month before the first round of votes on October 7 in Brazil's presidential election, markets are dissecting both the polls and speeches of the candidates and their economic advisors.
Britain's general election has led to another major step-up in political uncertainty, which conventional wisdom assumes will harm the economy. Perhaps surprisingly, however, the government's enfeebled state brings with it some major positives for the U.K.'s economic outlook.
Brazil's lower house of Congress on Sunday voted to start impeachment proceedings against President Dilma Rousseff, who is accused of tampering with the public accounts to help secure her re-election in 2014. Ms. Rousseff's opponents obtained 367 votes, exceeding the two-thirds majority, needed to send the motion to the Senate.
External and domestic shocks in Mexico over the last two years, including the "gasolinazo", NAFTA renegotiation and the presidential election, have put the country's financial metrics under severe stress and pushed inflation to cyclical highs.
December's retail sales numbers are the most important of the year for retailers, but they don't necessarily tell us anything about the future prospects for consumers' spending or the broad economy. The December 2016 numbers, however, might be different, because they capture consumers' behavior in the first full month after the election.
Today's MPC meeting and minutes are the first opportunity for Committee members to speak out in over a month, now that election "purdah" rules have lifted.
Consumer confidence surveys have risen since the elections to levels consistent with very rapid growth in real spending.
LatAm investors' concerns about U.S. monetary policy expectations and the broad direction of the USD should on the back burner until the Fed hikes again, likely in September. This will leave room for country-specific drivers to take centre stage. That should support Mexico's MXN, which already has risen 14% year-to-date against the USD, erasing its losses after the US election last November.
Sentiment has been improving gradually in Mexico in recent weeks, reversing some of the severe deterioration immediately after the U.S. presidential election. Year-to-date, the MXN has risen 10.3% against the USD and the stock market is up by almost 8%. We think that less protectionist U.S. trade policy rhetoric than expected immediately after the election explains the turnaround.
The new fiscal year began on April 6, marking the post-election intensification of the fiscal squeeze for many households. The Office for Budget Responsibility estimates net tax and benefit changes will subtract 1.2 percentage points from year-over-year growth in households' disposable incomes in 2016.
We read the same polls, newspapers, and political websites as everyone else, and we're not claiming any special insight into the outcome of the midterm elections today.
Mortgage applications have risen, net, over the past couple of months, despite the 70bp surge in 30-year mortgage rates since the election. Indeed, we'd argue that the increase in applications is a result of the spike in rates, because it likely scared would-be homebuyers, triggering a wave of demand from people seeking to lock-in rates, fearing further increases.
Colombia was one of the fastest growing economies in LatAm in 2018, and prospects for this year have improved significantly following June's presidential election, with the market-friendly candidate, Iván Duque, winning.
Eurozone investors will be looking anxiously across the pond overnight as the results of U.S. elections come in. Our assumption is that Hillary Clinton will be elected president and that risk assets will celebrate accordingly today.
The Prime Minister has argued repeatedly during the general election campaign that Britain will prosper under a "strong and stable" Conservative government with a large majority. "Division in Westminster," she argued when calling the election last month, "...will risk our ability to make a success of Brexit and it will cause damaging uncertainty and instability to the country."
The twists and turns of the French presidential election campaign continue. François Fillon was tipped as favourite after he won the Republican primaries. But Mr. Fillon now is struggling to keep his campaign on track after allegations that he gave high paying "pro-forma" jobs to his wife as an assistant last year. The socialist candidate, Benoit Hamon, has been hampered by the unpopularity of his party's incumbent, François Hollande, and has lost ground to the far-left Jean-Luc Mélenchon.
The meta game between China and Mr. Trump started as soon as he had any possibility of winning the election in 2016.
Predicting which way markets would move in response to potential general election outcomes has been relatively straightforward in the past. But the usual rules of thumb will not apply when the election results filter through after polling stations close on Thursday evening.
Mr. Abe yesterday called a snap general election, to be held on October 22nd; more on this in tomorrow's Monitor. For now, note that the election comes at a reasonably good stage of the economic cycle, hot on the heels of very rapid GDP growth in Q2, while the PMIs indicate that the economy remained healthy in Q3.
With most poll-of-poll measures showing a very narrow margin in the U.K. Brexit referendum, while betting markets show a huge majority for "Remain", today brings a live experiment in the idea that the wisdom of crowds is a better guide to elections than peoples' preferences.
Mr Abe's Liberal Democratic Party took a drubbing at the polls in Tokyo's Assembly election over the weekend. The consequences for fiscal spending probably are minimal but the vote strengthens the case for increased emphasis on the structural reform "arrow" and less focus on monetary policy.
Next July, Mexico will hold presidential elections, an event that will gradually take centre stage as the date approaches. The pre-campaign will start on December 14, but the official campaign opening will take place in late March, when the three main candidates will begin to lay out their platforms.
We have been asked how we can justify raising our growth forecasts but at the same time arguing that the housing market is set to weaken quite dramatically, thanks to the clear downshift in mortgage applications in recent months. Applications peaked back in June, so this is not just a story about the post-election rise in mortgage rates.
The November FOMC meeting was the definitive holding operation; rates were never likely to rise just six days before a very contentious presidential election, especially with the committee split on the degree of inflation risk facing the economy.
While we were out, the data showed that consumers' confidence has risen very sharply since the election, hitting 15-year highs, but actual spending has been less impressive and housing market activity appears poised for a marked slowdown.
The two-year budget deal agreed between the administration and the Republican leadership in Congress will avert a federal debt default and appears to constitute a modest near-term easing of fiscal policy. The debt ceiling will not be raised, but the law imposing the limit will be suspended through March 2017, leaving the Treasury free to borrow as much as necessary to cover the deficit. As a result, the presidential election next year will not be fought against a backdrop of fiscal crisis.
The presumption in markets is that the French presidential election is the last hurdle to be overcome in the EZ economy. As long as Marine Le Pen is kept out of l'Élysée, animal spirits will be released in the economy and financial markets. We concede that a Le Pen victory would result in chaos, at least in the short run. Bond spreads would widen, equities would crash and the euro would plummet. But we also suspect that such volatility would be short-lived, similar to the convulsions after Brexit.
Samuel Tombs has more than a decade of experience covering the U.K. economy for investors. At Pantheon, Samuel's research is rigorous, free of dogma and jargon, and unafraid to challenge consensus views. His work focuses on what matters to professional investors: The links between the real economy, monetary policy and asset prices. He has a strong track record of getting the big calls right. The Sunday Times ranked Samuel as the most accurate forecaster of the U.K. economy in both 2014 and 2018. In addition, Bloomberg consistently has ranked Samuel as one of the top three U.K. forecasters, out of pool of 35 economists, throughout 2018 and 2019. His in-depth knowledge of market-moving data and his forensic forecasting approach explain why he consistently beats the consensus. Samuel's work on Brexit goes beyond simply reporting developments and is always analytical and unbiased, enabling investors to see through the noise of the daily headlines. While his analysis points to a particular path that politicians will take, he acknowledges the inherent uncertainty and draws out the economic and financial market implications of all plausible Brexit scenarios. Samuel holds an MSc in Economics from Birkbeck College, University of London and an undergraduate degree in History and Economics from the University of Oxford. Prior to joining Pantheon in 2015, he was Senior U.K. Economist at Capital Economics. In 2011, Samuel won the Society of Business Economists' prestigious Rybczynski Prize for an article on quantitative easing in the UK. He is based in London but frequently visits our other offices. Recent key calls include: 2018 - Correctly forecast that GDP growth would slow and inflation would undershoot the MPC's initial forecast, prompting the Committee to shock investors and almost other economists by waiting until August to raise Bank Rate, rather than pressing ahead in May. 2017 - Argued that the MPC was wrong to expect CPI inflation to stay below 3% following sterling's depreciation. He also highlighted that economic indicators pointed to the Conservatives losing their outright majority in the snap general election.
Chief U.S. Economist Ian Shepherdson on the recent elections in Argentina
Chief Eurozone Economist Claus Vistesen discussing the potential impact of the French Election Results on the Eurozone
Early results project that Andrés Manuel López Obrador--AMLO--will become the new Mexican president with 53.4% of the votes, against Ricardo Anaya's 22.6%, and José Antonio Meade's 15.7%. AMLO has declared victory and thanked his opponents, who recognized his triumph.
Chief Eurozone Economist Claus Vistesen on Latvia
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