Wednesday, August 21 2019 | ASIA TODAY INTERNATIONAL - Reporting the Business that Matters in Asia
Updated: 7 hours 7 min ago
On May 1, a decree amending various laws that constitute the so-called labor reform was published. In order to fully assess the reform it will be necessary to wait for the secondary regulations to be published and for it to be implemented. However, after analyzing the changes approved, it seems to me that this is a substantial advance in labor legislation.
Risk-off mood resurfaced in financial markets, boosting VIX volatility and safe haven demand, although underlying hopes of an eventual trade resolution contained market losses.
Highlights: BCBS issues Basel III implementation progress report. EU Commission publishes recommendations for the EU’s next strategic agenda of 2019-2024 and a list of priorities for the next BRRD review under the new EU Commission. EMMI applies for authorization from FSMA on hybrid euribor methodology.
Financial markets rattled for the third straight day as US-China trade tensions festered ahead of crucial negotiations between high-level officials in Washington, starting today. Trump’s rebuke that ‘China broke the deal’, accelerated the sell-off in equities. The implied volatility in equity markets (VIX 21) jumped leading investors to seek shelter in government bonds.
The 'risk-off' mood persisted across markets today as global growth concerns mounted in the wake of escalating US-China trade conflict, downbeat China exports data, and a flair-up in geopolitical tensions in the Middle East with Iran poised to breach parts of the nuclear deal.
Caution prevailed across financial markets, as US-China trade tensions ratcheted up further today. The slight downward revision in Eurozone growth forecast by European commission did not help either. Safe-haven bonds continued to attract fresh demand, while equity markets declined.
The end of April was marked by the eruption of the Israel-Palestine dispute, which could enter into a more uncertain phase with renewed heavy clashes between Israel and Hamas. Iran related disputes escalated during the month. The US and China has begun new trade talks. Elections took place in Spain and in Ukraine. Situation in Venezuela is still fragile.
The Government of Mexico presents the National Development Plan 2019-2024, with migration being one of its 12 guiding principles. The Plan seeks to prevent people from migrating due to lack of opportunities or insecurity. In March, 2,897md in remittances (+8.3%) entered Mexico, and during the first quarter of 2019 they accumulated 7,699md, +7.1% compared to 2018.
Risk-off mood in financial markets. Trump’s threat to introduce further tariff barriers against China took a heavy toll on equity markets today, boosting flows towards safe-haven bonds, amid mute inflation pressure.
Eurostat has just confirmed that Spain closed 2018 with a public deficit of 2.5% of GDP, six percentage points less than in 2017. The reduction of the deficit at a time of growth like the present one is good news, particularly because Spain needs to improve its fiscal margin as soon as possible in order to handle less favorable economic conditions in the future.
The Brazilian economy saw a clear slowdown at the end of 2018 and growth in economic activity for the year was only 1.1% — the same rate recorded in 2017. Last year the country continued to recover too slowly from the strong recession that knocked almost seven percentage points off Brazil's GDP between 2015 and 2016.
The recovery of the Spanish economy has been characterized by the sectoral concentration of job creation. Of the 2.5 million jobs created in the country between 2013 and 2018, nearly half have come from the hospitality and commerce sectors as well as the entire public sector, which represent just under 40% of the GDP.
Safe-haven bond yields increased and equity markets retreated from their recent highs, while bond investors searched for an extra-yield, in turn, narrowing peripheral and HY spreads, as Fed Chair Powell guided markets to a neutral stance on interest rates.
Consumer prices increased by 1.69% in April, even lower than the minimum estimate shared in the consensus, leading the annual figure to fall to 19.5% from 19.7% in March. Despite the recent currency depreciation, thanks to the base effects consumer inflation will likely fall rapidly after June, but reverse in the last 2 months of the year and end 2019 at 15.5%.
Activity slowed at the beginning of the year due to the decline in public investment and mining production. Going forward, there will be a better performance .We continue foreseeing GDP will grow by 3.9% in 2019 supported by mining investment. However, in comparison with the previous report, now our forecast has a downward bias.
The Central Bank of Turkey (CBRT) published last Tuesday its latest inflation report. We believe rather than opening the door to a tighter monetary policy, the CBRT is moving to Inflation Forecast Targeting (IFT) framework since the Governor stressed the change of words as a “structural approach” rather than a “short term signal of direction.