OVERNIGHT NEWS
# Dollar/G10 offered, DXY slips below 90.0; core bond yields steady, commodity currencies rally with higher Asian stocks
# EM: HUF among best performers in last 24 hours after MNB’s Virag talks up June rate increase; Hungary 1Q GDP surprises with growth of 1.9% qoq. CLP lags (-2.5%) after defeat of minority government in constituent assembly election
# Japan 1Q GDP contracts 1.3% qoq (-5.1% SAAR), net exports subtracted 0.2%, private consumption fell 1.4% qoq, capital expenditure -1.4% qoq, GDP deflator -0.2% yoy
# UK employment rose 84k in 3 months to March, better than forecast; unemployment rate drops 0.1ppt to 4.8%; average earnings ex-bonus accelerate to 4.6% 3m/yoy
# Nikkei +2.2%, EUR 10y IRS unch at 0.169%, Brent crude +0.3% at $69.70/b, Gold flat at $1,867/oz
EUR/USD revisits 1.2200, will real rates catch up?
In a sign of positivity yesterday which was also a local holiday, President Duque announced that road blockades, put in place to reduce anti-government protests, will be lifted in coordination with mayors and provincial governors. He also announced that the government will subsidise 25% of the minimum wage for workers between 18 and 28 years old for at least a year, in an effort to encourage employers to hire young people.
USDCOP drivers Friday
GLOBAL
Stock futures ruse at the end of a volatile week in which a jump in inflation rattled markets. The S&P500 rises 0.63% and Dow 0.42%. Government bond yields fall, with US 10yr yield on 1.631% and WTI oil prices are rising 0.96%.
In currencies, EURUSD is trading 0.44%, USDMXN -0.86%, USDBRL -0.59% and USDCOP -0.70%.
COLOMBIA
In April, Dian (Directorate of National Taxes and Customs) collected COP 14bn, bringing the total to COP 55.3bn so far this year. By type of taxes, 35% of the total collected was achieved through the withholding tax for income, with a total of COP 4.8bn. The income collection was followed, with a total of COP 4.7 billion and 33.5% participation; and customs collected a total of COP 2.5bn, with 18.5% of the total. Dian also reported that COP 55.37bn have been collected so far this year, which meant an increase of 5% compared to the figure for the same period last year (COP 52.71bn).
Government insisted to the Strike Committee the need to start to negotiate immediately. This was reflected in an official letter that the High Commissioner for Peace, Miguel Ceballos, sent to the Strike Committee. Francisco Maltes, representative for the Committee, has indicated that the government team has not agreed to the terms, whether it is a conversation or negotiation. The document says that the “Government guarantees the right to peaceful protest and there will be zero tolerance for any conduct that exceeds the Constitution or the Law, committed by a member of the Public Force or by citizens against other citizens or against the Public Force.”
Commerce losses go to COP 1.5bn due to national strike. The president of Fenalco, Jaime Alberto Cabal, when analysing the effects of the strike that completes 15 days in the country today, stated this. Fenalco affirmed that the situation that has generated vandalism and looting in some regions of the country and has affected small merchants and shopkeepers. In addition, a call was made to the organizers of the strike to lift the blockades so that the peasants can take the products to the big cities, the entrepreneurs can provide themselves and the consumers have normal access to the products.
Colombia once again exceeded 100,000 active cases of covid-19 in the last 24 hours. The Ministry of Health reported that in the last 24 hours Colombia reached 103,304 active cases of the virus. At the same time, 19,160 new cases of covid-19 were registered in the country, for 3,067,879 confirmed infections of the virus throughout the territory. It was also known that there were 499 deaths related to the virus, so that to date there are 79,760 deaths. On the other hand, the portfolio announced that the number of recovered amounted to 2,874,656 and the number of active cases reached 103,304. At the regional level, Bogotá ranked first with the number of infections in a day with 7,742 cases, followed by Antioquia with 2,289, Santander with 1,233, and Cundinamarca with 1,028.
Signalling across models remain supportive for high-beta EM currencies in the short term as: 1) The cross-sectional portfolio favors high-beta against low-yielders; 2) The directional portfolio reduced long USD/EM allocation further; and 3) EMFX volatility and correlation behaviour favour risk currencies.
LatAm allocation at its highest level since December 2020: After being the least preferred region at the beginning of the year, LatAm allocation is now neutral against short positions in AXJ (Exhibit 1). Such behaviour of the portfolio is consistent with the shift from low-yielding to high-beta currencies after a string of noisy and disappointing data releases in the US. MXN remains as the largest overweight in the portfolio (Exhibit 6) while COP presented the biggest upgrade as the currency is starting to look cheap while our curve factor is now long CLP after a less dovish-than-expected BCCh statement (Exhibit 7).
