Sunday, March 24 2019 | ASIA TODAY INTERNATIONAL - Reporting the Business that Matters in Asia
Updated: 4 hours 29 min ago
Financial markets started the week with mild movements but as the week went by, risk-off mood came back driven by increasing concerns over global growth. The State of the Union address in the US did not bring any insight into the border wall stance issue ahead of the Government funding expiration on February 15th. Moreover, Brexit negotiations remain stalled.
Highlights: FSB issues report on non-bank financial intermediation. ESMA agrees MoUs for no-deal Brexit, and issues statement on the use of UK data in ESMA’s databases. ECB issues statement on liquidity risk analysis, and results for 2018 stress test. Council and EP agree on measures for investment fund market and rules for derivatives. FRB issues CCAR and DFAST scenarios.
FinTech is gaining momentum in financial services due to the important role of technology in reshaping the Financial System. In order to identify the dynamics created by the FinTech ecosystem, we analyse data from the media and social networks.
Banxico did not soften its tone; likely to remain hawkish in the near-term. Banxico unlikely to soften its stance in the near-term but the wording tempered the ready-to-hike disposition of the previous statement. We continue to expect the next move in the monetary policy rate to be down, but not until later in the year.
After many days of calm, financial markets returned to risk-off mood with a significant drop in developed equity markets amid the resurface of fears over a global economic slowdown. The update of the European Commission economic forecast, which signaled a cut in the euro zone economic growth and inflation rate, was one of the main drivers today in financial markets
Firm policies helped to stabilize Turkish Financial Markets and the economy is re-balancing fast. The economic activity adjustment gained momentum at the end of 2018 but there are early signs of bottoming-out. We expect policymakers stick to sound policies.
The balance of risks has deteriorated on the back of growth concerns in the US and China. A global trade war continues to be relevant despite the current truce, while a resurface of debt tensions in the Eurozone should not be ruled out yet due to high political instability. On a positive note, the U-turn in the Fed’s stance reduces the likelihood of overshooting.
Of the remittances received by Mexico in 2018, 94.1% came from the U.S., 97.7% were sent by electronic means and 71.7% were disbursed in non-banking institutions. 7 states accounted for half of the remittances that arrived in the country: Michoacán (US$3,393 millon), Jalisco (3,288), Guanajuato (3,046), Mexico (1,903), Oaxaca (1,731), Puebla (1,699) and Guerrero (1,615).
Fall in inflation along with lower risks takes further hikes in the near-term off the table. Balance of risks to inflation improved in the intermeeting period with the recent rally in the MXN combined with a larger-than-expected fall in inflation in the first half of January. We expect the next move in the monetary policy rate to be a cut, but not until later in the year.
Markets continued to show minor movements as yesterday’s State of the Union address in the US did not bring any insight into the border with Mexico, the main issue to avoid a new shutdown. On another front, the US-China trade relations seems to be evolving positively as he said that a deal is possible while, according to US Treasury Secretary, US-China talks will continue
The currency crisis of 2018 derailed both the gradual fiscal approach and the inflation targets, and drastically changed the 2019 outlook. The key questions are whether there be a turnaround in activity and inflation, and who the next President will be.
Financial markets remained calm with all eyes set on Trump’s State of the Union address later today as investors seek some flexibility over the border wall stance. Also, more details about upcoming meetings for the US with China and North Korea could be hinted at.
Venezuela’s opposition leader Guaidó declared himself as the interim president. U.S. sanctioned Maduro administration and recognized his Presidency as well as some EU members. Meanwhile, geopolitical developments in Asia are positive as China and U.S. are in trade talks. U.S. came with a plan for a safe-zone in northern Syria, but involved parties, have different concerns.
Calm in markets after the past eventful week in which, strong US jobs data, optimism about the US-China trade talks and positive earnings reports added to the Fed’s dovish tone to boost risk assets. After the delay of market expectation for further rate hikes by main Central Banks (especially the FED), the release of fresh economic data will be key from now on.
CPI rose by 1.06% in January parallel to expectations (1%, Market&BBVA Research). Thus, annual inflation stayed at 20.35%. Higher-than-expected minimum wage rise, potential price hike in cigarettes and seasonally higher food prices still play an important role, keeping the likelihood to have the headline above 20% till 2H19. We maintain year-end inflation estimate at 16%.
The political situation in the UK continues to be complicated after the Parliament's firm rejection of the agreement negotiated by Prime Minister May with the European Union. Since then, the Government still does not have sufficient support, especially due to the backstop for Ireland, but it maintains its red lines both in the agreement as well as in the exit strategy.
Financial markets finished this week in relative positive mood despite the bulk of positive events during the whole week. On Monday the US government resumed after the longest shutdown in the US history. As the week went by, the importance of the events (and its impact on financial markets) increased with the vote of May’s plan B, FOMC meeting, and the US-China trade talks
Highlights: ESMA issues statement on the handling of derivative data in a no-deal Brexit. ESRB issues report on macroprudential approaches to deal with NPLs. EBA updates the list of closely correlated currencies for capital requirement purposes. EC issues consultation on market liquidity in forex markets. U.S. Agencies issue results from the SNC Program Review.
Automotive loans slow down their dynamism, but continue to boost consumer loans. Payroll loans recover dynamism after a year of reductions. Personal loans continue their slowdown and record lower portfolio quality. Banxico publishes its annual report on the actions taken to comply with the Transparency Act.
We estimate that GDP advanced around 4.6% yoy in Q4 2018. As a result, GDP growth in 2018 would have been around 3.9%. This year, due to a strong increase in mining investment, but also more restrained public spending and less favourable external conditions, we forecast that GDP will advance 3.9% in 2019, a similar figure to that of our previous report.