OVERNIGHT NEWS
* China April trade surplus widened to $45.3bn, exports surprisingly rose 3.5% yoy, imports fell 14.2%; separately Caixin April services PMI rose less than forecast 44.4 from 43.0, USD/CNY retreats below 7.10
* BoE keeps policy rate unch at 0.10% and APT at £645bn; Haskel, Saunders voted for £100bn increase in APT, MPC forecasts 14% drop in 2020 GDP but 15% increase in 2021, inflation 0.6% in 2020 but on target in 2022, press briefing at 11:00 CET
* Germany March industrial production drops 9.2% m/m, France industrial output drops 16.2%, manufacturing -18.2%
* Norges Bank f/cast to keep depo rate on hold at 0.25% with dovish guidance; Czech CB f/cast to cut 50bp to 0.50%
* Brazil CB cut Selic rate by 75bp to 3.00%, final reduction possible in June; Congress passed BRL700bn stimulus bill and legislation clearing BCB to launch QE; USD/BRL closed at 5.7158, just shy of record low of 5.7458
* Nikkei +0.3%, EUR 10y IRS unch at -0.11%, Brent crude -0.7% at $29.5/b
USD/JPY: scope for rebound as hedged UST yields turn positive
La tracción de las divisas LatAm (o su ausencia) sigue siendo preocupante y la debilidad de
las materias primas añade presión
El apetito por el riesgo global se ha consolidado en la medida en que los inversores evalúan el calendario y el ritmo
del proceso de reapertura económica. La drástica disminución de la producción económica frente a las
inyecciones de liquidez sin precedentes de los bancos centrales de todo el mundo ha constituido fuerzas opuestas
para los mercados. Si bien muchos inversores han mostrado su optimismo en cuanto a la recuperación de la
economía global, es posible que las divisas LatAm sigan rezagadas y tengan un comportamiento asimétrico, dada
la magnitud de la desaceleración y la continua incertidumbre en la región. Las divisas LatAm siguen mostrando
cierta asimetría y se han debilitado al suavizarse el miércoles el repunte de las materias primas, por lo que es
preferible actuar con cautela a medio plazo en vista de la mejora de las valoraciones de la renta variable global.
Con una depreciación de casi el 0,8%, el COP cotizó principalmente en paralelo con sus homólogos LatAm, a los
que la caída de los precios del petróleo no ayudó en absoluto. Dado que el repunte de los precios del petróleo
entra en una fase de pausa lógica y la recuperación del riesgo global se esfuerza por mantener el ritmo, el precio
del COP podría verse presionado de nuevo a corto plazo, ya que la amenaza del coronavirus sigue siendo alta a
nivel nacional. La falta de apoyo externo al riesgo favorable podría ser un lastre para el COP a partir de ahora. En
este sentido, abrimos una posición larga en USDCOP a 3,956 de referencia al contado con un objetivo inicial de
4,100 y un stop-loss en 3,880
Risk sentiment is positive as we go to print. It is difficult to single out the drivers but we highlight (1) US-China headlines could turn positive (2) central bank support and (3) rallying oil prices. Bloomberg sources say that Chinese and US trade negotiators will speak as soon as next week – but because Trump threatened to “terminate” the agreement if Beijing wasn’t adhering to the terms. Looking ahead, another bad (but moderating) US initial jobless claims is likely to be priced in.
Central banks continue to surprise markets – BRL overnight saw a 75bps rate cut and strong guidance that another rate cut was coming in the June meeting. GBP saw a less dovish BoE meeting, with no change in asset purchase target and only soft hints that it could be upsized if conditions warranted. NOK saw another rate cut, taking its benchmark rate to zero but with guidance that it would not go lower. CZK should see a rate cut shortly but PEN should see no rate change.
Beyond central banks, ARS and TRY remain at the top of our minds. TRY underperformance continues, while ZAR benefits from better risk sentiment. Note that London will be out tomorrow to enjoy a long weekend – so positioning unwind may feature into the European close.
Risky assets are trading higher this morning as China’s April export strongly surprised to the
upside (+8.20% vs -14.1% expected) and as the US drafted a rule to allow cooperation
between Huawei and US firms on 5G standards. After the recent escalation of rhetoric, this
helped market sentiment. US and futures are +0.61% and +0.14% higher respectively this
morning while the US10y is edging lower after a 4bp rise yesterday.
In this environment, we continue to think that credit is going to fare better than equities. In
Credit markets, we continue to like IG bonds which are being supported by Central Banks
accommodative measures. We also continue to see value in EM hard currency bonds and in
US BB, two holdings of our Cross-asset portfolio that performed well recently.
Latin America: Regional FX underperformed again on Wednesday, with BRL depreciating by almost 2% ahead of the BCB rates decision where markets were expecting a 50bp cut. In Peru, the central bank sold more FX swaps in an attempt to stem volatility in the currency, bringing the total outstanding amount to $2.1bn ($88m placed today).
GLOBAL
*Top Chinese and U.S. trade negotiators will speak as soon as next week on progress in implementing a phase-one deal a*Norway’s krone pared a gain after Norges Bank surprisingly cut its key policy rate by 25bps to a record low of zero
*Industrial production in the euro area’s two largest economies cratered in March
*French Prime Minister Edouard Philippe is to unveil final details of his plan to end curbs on public life. The country is preparing to go back to work and reopen schools starting on Monday
*The ECB is “more determined than ever” to support the euro-area economy: Vice President Guindos
*Brent Rises Above $31 as Saudi Arabia Hikes Selling Prices
COLOMBIA
*Colombia Cenbank Board Sees 2020 GDP Closer to -2%: Governor
*(CO) April Consumer Confidence Index, prior -23.8