Emerging Europe markets will be strong in 2016

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Developing Economies ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Commodity Prices ◽  
Oil Prices ◽  
Content Type ◽  
Central Eastern Europe ◽  
Equity Funds

Subject The prospects for Emerging Europe assets. Significance Despite record levels of outflows from emerging market (EM) bond and equity funds in 2015, the financial markets of Central-Eastern Europe (CEE) have remained remarkably resilient. They are likely to continue to outperform those of Latin America and Emerging Asia next year, because of a combination of relatively strong fundamentals and liquidity support from the ECB. Impacts Investor sentiment towards developing economies is now shaped almost entirely by dramatic declines in commodity prices. US monetary policy will now prove secondary to the plunge in oil prices. Growth in the CEE region picked up significantly this year and is still expected to remain relatively robust in 2016.

ECB may spark rate rises in Central-Eastern Europe

2017 ◽  
Keyword(s):  
Interest Rates ◽  
Eastern Europe ◽  
Emerging Market ◽  
Commodity Prices ◽  
Content Type ◽  
Market Sentiment ◽  
Central Eastern Europe ◽  
The Us ◽  
Equity Funds ◽  
Central Eastern

Significance Inflation rates are rising sharply across Central-Eastern Europe (CEE), mainly thanks to a recovery in commodity prices. A flurry of stronger-than-expected economic data is fuelling speculation in financial markets about the timing of increases in interest rates across the CEE region. Forward markets are already pricing in rate hikes in Romania and Poland within the next twelve months. Impacts Traders are now expecting the US Federal Reserve to achieve its goal of hiking interest rates three times this year. Emerging-market bond and equity funds are enjoying a surge in inflows, market sentiment having improved sharply after the US election. Mounting uncertainty regarding France’s presidential election next month is having a negligible impact on euro-area government bond markets.

Emerging Europe will weather storm from China

2016 ◽  
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Developing Economies ◽  
Investor Sentiment ◽  
Content Type ◽  
Central Eastern Europe ◽  
Downward Pressure ◽  
Inflation Rates ◽  
Bond Funds ◽  
Primary Determinant

Significance The currency and debt markets of Central-Eastern Europe (CEE) are proving resilient to fallout from the turmoil in China's financial markets, now the primary determinant of investor sentiment towards developing economies. Negligible trade linkages with China and liquidity support from the ECB are helping underpin favourable sentiment towards the region. Impacts EM equity and bond funds will continue to suffer outflows, following record bond redemptions in 2015, which continued into early January. The dramatic slide in oil prices is putting further downward pressure on CE inflation rates; there is outright deflation in Poland. Hungary is mulling further cuts in interest rates. Despite Turkey's favourable status as a major oil importer, its currency has plunged by 31% against the dollar over the past year. For CE, the lower the oil price, the greater the likelihood of further ECB stimulus, buoying local bonds and currencies further.

Leading central banks mould investor sentiment

2015 ◽  
Keyword(s):  
Central Bank ◽  
Federal Reserve ◽  
Developing Economies ◽  
Investor Sentiment ◽  
Oil Prices ◽  
Central Banks ◽  
Euro Crisis ◽  
Content Type ◽  
The Us ◽  
Country Specific

Significance In the worst start to a year for US equities since 2008, the benchmark S&P 500 index fell 0.7% during the week ending January 10. December's employment report showed US non-farm payrolls rising by a robust 252,000, but average hourly earnings declined, accentuating deflationary fears. The dollar continued to strengthen against the euro on concerns about a possible euro crisis over Greece and the introduction of sovereign QE by the ECB. With the US Federal Reserve preparing to raise rates, investor sentiment remains fragile. Impacts The tug-of-war between central bank largesse and country-specific, geopolitical and economic risks will become more intense. Markets will focus on renewed fears of 'Grexit' and on concerns about German opposition to an ECB sovereign QE programme. The relentless oil prices slide, exacerbated by the dollar's strength, will put further strain on EM assets. The ruble is likely to weaken further, increasing the scope for contagion to other developing economies.

ECB's QE will buoy EM bond markets

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Developing Economies ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Central Banks ◽  
Capital Inflows ◽  
Bond Markets ◽  
Quantitative Easing ◽  
Content Type ◽  
Large Current

Subject Opposite forces are shaping investor sentiment towards EM assets. Significance Investor sentiment towards emerging market (EM) assets is being shaped by the conflicting forces of a strong dollar and the launch of a sovereign quantitative easing (QE) programme by the ECB. While the latter is likely to encourage investment into higher-yielding assets, such as EM debt, the former will keep the currencies of developing economies under strain, particularly those most sensitive to a rise in US interest rates due to heavier reliance on capital inflows to finance large current account deficits, such as Turkey and South Africa. Impacts EM bonds will benefit from ECB-related inflows, while the strength of the dollar will keep local currencies under strain. Higher-yielding EMs will benefit the most from the ECB's bond-buying scheme since they provide the greatest scope for 'carry trades'. The collapse in oil prices is forcing EM central banks to turn increasingly dovish, putting further strain on local currencies.

Ultra-loose monetary policy will soon run its course

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Markets ◽  
Interest Rates ◽  
Mutual Funds ◽  
Investor Sentiment ◽  
Central Banks ◽  
Target Range ◽  
Content Type ◽  
Equity Mutual Funds

Significance Expectations that the Fed will refrain from hiking its benchmark rates from its target range of 0.25-0.5% and that the Japanese central bank will provide further stimulus are suppressing volatility in financial markets and fuelling demand for risk assets. However, evidence that "overburdened" monetary policy is losing its efficacy triggered a sell-off in bonds and equities on September 9, increasing the scope for sharper price falls as investors worry that central banks have run out of ammunition. Impacts Services expanded in August at their slowest pace since 2010, making it less likely that the Fed will raise interest rates this month. EM bond and equity mutual funds have enjoyed a surge in inflows since the Brexit vote as yield-hungry investors pour money into risk assets Oil, a key determinant of investor sentiment, will stay below 50 dollars/barrel unless major producers agree measures to stabilise prices.

Commodities rout will fuel EM concerns and volatility

2015 ◽  
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Emerging Market ◽  
Commodity Prices ◽  
Content Type ◽  
Bear Market ◽  
Political Crises ◽  
Downward Pressure ◽  
Advanced Economies ◽  
Country Specific

Significance This drop has taken oil into its second bear market in the space of just over a year amid a broader rout in the prices of commodities, notably copper and gold. The commodity sell-off is fuelled by mounting concerns over the economy and financial markets of China, the world's top crude importer and its largest energy user. The sell-off is exacerbated by fears over the fallout from a US interest rates rise, which could come as early as September. Country-specific risks are weighing on emerging market (EM) assets, notably the currencies of large commodity exporters such as Brazil and Russia. Impacts The sharp fall in commodity prices will exert further downward pressure on inflation in both emerging and advanced economies. Re-emerging disinflationary trends will bode ill for the ECB efforts to boost inflation in the euro-area. The commodity sell-off will exacerbate economic and political crises in Brazil and Russia. The EM currencies fall is forcing many central banks to signal an end to monetary easing or to tighten policy.

Another rating upgrade is likely for Hungary soon

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Banking Sector ◽  
Credit Rating ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Central Banks ◽  
The Philippines ◽  
Content Type ◽  
Investment Grade

Significance Hungary thereby regains investment-grade status, albeit at the lowest level, from being downgraded to 'junk' because of doubts about the government's policies and the high public debt burden. Hungary's improving creditworthiness, underpinned by its current account surplus and deleveraging in the banking sector, contrasts with the increasing strain on Poland's credit rating. Political risk has become a major driver of investor sentiment towards emerging markets. Impacts Emerging market assets have become more vulnerable as investors reprice US monetary policy. Futures markets are now assigning a 51% probability to another rise in US interest rates at or before the Federal Reserve's July meeting. Central Europe's government bond markets are being supported by the persistently dovish monetary policy stance of its central banks. This contrasts with Latin America, where inflationary pressures are forcing many central banks to raise rates. Brazil, Turkey, Poland and the Philippines are among several countries where political uncertainty is a key determinant of asset prices.

Relief of looser US monetary policy cannot mask risks

2019 ◽  
Keyword(s):  
Monetary Policy ◽  
Emerging Market ◽  
Futures Market ◽  
Oil Price ◽  
Content Type ◽  
European Elections ◽  
Economic Information ◽  
Equity Funds ◽  
Succession Process ◽  
The Interest Rate

Significance Following the meal, the Fed said Powell did not discuss monetary policy "except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook". The futures market now sees a 75% chance that the interest rate will be unchanged in twelve months’ time, a substantial shift from late last year when at least two rate hikes were widely predicted for 2019. This shift is helping US equities to regain momentum. Impacts The flatter dollar this year is helping net inflows to emerging market bond and equity funds build momentum after large outflows in 2018. Further oil price upside may be limited; Venezuela’s small share of global output means sanctions will not greatly alter market dynamics. Mario Draghi’s ECB presidency ends in October; policy could be disrupted if European elections in May delay the succession process. US economic momentum is firmer than in the euro-area or Japan but less monetary policy divergence between them may help the euro and yen.

Market nerves roil Turkey and Central Europe

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Markets ◽  
Central Europe ◽  
Euro Area ◽  
Inflection Point ◽  
Oil Prices ◽  
Oil Price ◽  
Content Type ◽  
Policy Guidance

Significance Markets have taken badly the Fed's more hawkish policy guidance for 2017, not expecting such a shift in monetary policy so soon. The shift in US monetary policy comes just as the ECB is preparing the ground for the gradual withdrawal of monetary stimulus. While Turkish assets are the most vulnerable partly because of the severe escalation in political risk, the Polish zloty is also at risk thanks mainly to its status as one of the most liquid EM currencies. Impacts Investors see global financial markets at an inflection point as monetary policy gives way to fiscal policy as the main source of stimulus. This monetary-to-fiscal shift will fuel uncertainty about the direction of asset prices. Rising oil prices will allay concerns about deflation in the euro-area. As major Emerging Europe currencies suffer, the ruble is rising against the dollar amid oil price rises and Trump’s Russia-friendly remarks.

Markets are downplaying PiS election risks in Poland

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Interest Rates ◽  
Foreign Currency ◽  
Strong Support ◽  
Commodity Prices ◽  
Wide Margin ◽  
Content Type ◽  
Opinion Polls ◽  
China’S Economy

Significance Despite PiS's costly spending pledges, its nationalist and populist views and its strong support for a controversial, Hungarian-style debt-relief scheme for holders of foreign currency-denominated mortgages, the prospect is causing little anxiety in financial markets. Investors are taking the view that PiS, which is leading the ruling Civic Platform (PO) party by a wide margin in opinion polls, will be forced to renege on many of its campaign promises. Impacts Poland is less vulnerable to the VW scandal, auto manufacture accounting for a much larger share of Czech and Hungarian jobs and GDP. A hard landing for China's economy is now seen as the largest threat to financial markets, as opposed to a rise in US interest rates. Central Europe's economies are better placed to cope with deteriorating sentiment towards EMs. Downside risks to inflation from falling commodity prices and slower EM growth put the NBP under pressure to loosen monetary policy further.

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