(Bloomberg) -- Emerging markets climbed on mounting speculation that the Federal Reserve will pause rate hikes next year, easing pressure on the dollar and lifting riskier assets. The rally failed to gain traction on Friday ahead of a meeting between the U.S. and China on trade.
Highlights:
- The yuan posted its first monthly advance since March; Donald Trump said he’s very close to “doing something” with China ahead of a meeting with President Xi Jinping over dinner Saturday in Buenos Aires on the sidelines of the Group-of-20 summit
- Earlier in the week, Trump said he’ll probably push forward with plans to increase tariffs on $200 billion of Chinese goods
- Federal Reserve Chairman Jerome Powell said the central bank’s series of rate increases had brought policy to “just below” the range of estimates for the neutral level, where it neither spurs nor restricts the economy
- Fed Vice Chairman Richard Clarida said the bank’s gradual approach to interest-rate hikes is appropriate as U.S. monetary policy gets closer to its optimal long-run setting
- Fed officials signaled they’re adopting a more flexible approach in their gradual interest-rate increases after a likely December hike, according to the minutes of the Nov. 7-8 meeting
- Trump renewed his attack on Powell, telling the Washington Post he’s “not even a little bit happy” with his choice to head the central bank
- Ukraine said Russian warships opened fire on a group of its military vessels in neutral waters that had previously tried to enter the Kerch Strait
- Russia sold 1 billion euros ($1.1 billion) in international bond markets, two days after the nation’s forces fired on the Ukrainian warships near Crimea
- Brazil’s real was among the underperformers for the week; economists lowered their 2019 forecast for the benchmark interest rate for the first time since January as inflation expectations fell further and consumer confidence soared
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Asia:
- China’s Vice Premier Liu He pledged that China would push ahead with opening up its economy and criticized trade wars as counterproductive
- Manufacturing PMI for November dropped to 50, the lowest since July 2016
- Alarmed by a surge in defaults, fraud and investor anger, Chinese authorities are planning to wind down small- and medium-sized P2P lending platforms nationwide, people with knowledge of the matter said
- The Bank of Korea lifted its key interest rate for the first time in a year, to 1.75 percent from 1.5 percent, and said it would maintain an accommodative monetary policy stance as inflationary pressures on the demand side will not be high for the time being
- India’s growth slowed to 7.1 percent last quarter as back-to-back interest rate hikes, a funding squeeze and weaker export demand put a brake on the world’s fastest-expanding economy
- The government will push its central bank to ease lending restrictions for some weak banks and review rules governing its functioning at a board meeting in December, people with knowledge of the matter said
- Government wants to discuss changes to the Reserve Bank of India’s governance structure at a board meeting, including setting up some oversight panels
- Thailand’s ongoing economic expansion, as well as inflation in the target zone, will gradually curb the need for the BOT’s "extra accommodative" stance, according to the minutes of the central bank’s monetary policy committee’s Nov. 14 meeting
- The party linked to ousted former premier Thaksin Shinawatra remains a "dominant force" in Thailand and leads in polling by an opposition party ahead of a general election expected next year
- Current-account surplus was a less-than-expected $1.89 billion in October; the central bank said there are now lower odds of achieving 2018 export growth of 8 percent
- The rupiah was Asia’s best performer for the week, posting its best month since October 2015; Indonesia’s government said the currency is undervalued against the U.S. dollar at the moment, but has the potential to gain
- The central bank said policy makers have ceased to intervene in the currency market in the past couple of weeks and in the onshore bond market since September
- Bank Indonesia Governor Perry Warjiyo pledged to maintain a "preemptive" policy stance into next year
- Malaysia is seeking direct talks with Goldman Sachs Group Inc (NYSE:GS). to recoup more than $600 million the bank earned from raising funds for troubled state fund 1MDB, the country’s leader-in-waiting Anwar Ibrahim has confirmed
- Philippine inflation pressure has “significantly subsided for now,” said Bruce Tolentino, a member of the central bank’s policy-making Monetary Board; the central bank sees November inflation at 5.8 percent to 6.6 percent, slowing for the first time in 2018
- The nation is to proceed with a fuel tax increase next year as oil slumps, said Finance Secretary Carlos Dominguez
- Pakistan’s central bank raised its key interest rate on Friday after it devalued the rupee for the fifth time this year, as the government continues to negotiate an International Monetary Fund bailout
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EMEA:
- South African business confidence fell to the lowest level since the country lost its investment-grade credit rating as political and policy uncertainty continue to weigh on sentiment
- The country’s trade deficit swelled to the biggest in 10 months in October
- The rand’s wild swings whenever there is good or bad news elsewhere in the developing world is due to its status as a proxy for emerging markets, rather than to domestic factors, said Francois Groepe, a deputy governor at the South African Reserve Bank
- Turkey’s trade gap narrowed in October to its lowest since 2001 as households hit by the lira’s slump cut back on increasingly expensive imported goods
- Turkey can’t stand idly by while being menaced by U.S.-backed Kurdish fighters in Syria, President Recep Tayyip Erdogan said earlier in the week as the country’s National Security Council said Turkey would exercise its right to self defense against threats emanating from Syria
- Poland canceled a plan to tap local bond markets for as much as 6 billion zloty ($1.6 billion), fueling a debt rally, and held a switch auction instead
- Egypt is shutting down a mechanism that guarantees that overseas investors can repatriate their foreign-currency earnings, a move that could mean more volatility for the stagnant Egyptian pound
- Egypt won’t ask for further funding from the International Monetary Fund when its $12 billion program expires next year but is open to maintaining a looser relationship with the multilateral lender to reassure investors, Finance Minister Mohamed Maait said
- The Bank of Ghana maintained its benchmark interest rate at 17 percent, the lowest in more than four years, as the currency stabilized and inflation remained within target
- Kenya’s central bank kept its benchmark interest rate at a three-year low for a second time even as concerns mounted about an expected acceleration in inflation
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Latin America:
- Brazil’s central bank held FX line auctions after the real slumped the most in 18 months on Nov. 26
- Foreign direct investment surged during the Brazilian presidential race in October month to the highest for that month since 2011
- Mexican stocks tumbled to a four-and-a-half year low in the beginning of the week, led by financial companies, as concern resurfaced that the incoming administration plans to scrap some bank commissions
- President Trump said the U.S. will close its southern border with Mexico if needed
- Mexicans who participated in a 10-project referendum last weekend voted to approve all the projects of President-elect Andres Manuel Lopez Obrador
- Banxico said the decision by Lopez Obrador to scrap a $13 billion airport project triggered a slump in the peso that’s helping keep inflation high
- Argentina’s peso was among the worst performers for the week; workers at the country’s largest airline went on strike on Monday, adding to a challenging week for President Mauricio Macri as the country hosts leaders from the G-20 nations in Buenos Aires
- Argentina may need need to sell dollar debt in 2020, Economy Minister Nicolas Dujovne said
- Colombia’s government proposed to cut the withholding tax payable by foreign holders of local peso bonds to 5 percent from the current rate of 14 percent