Article / 01 August 2016 at 10:30 GMT

Daily Shot: Weak Brazilian data ahead of Rio Olympics Team / Saxo Bank
  • Ahead of the Rio Olympic games Brazilian data dissappoints
  • Mexican GDP unexpectedly contracted - a reaction to soft US data?
  • In the US a Clinton victory should be good for stock markets
By Walter Kurtz*

Once again, let's begin the week with the latest developments in emerging markets. Friday saw a number of economic releases, some of which were a bit surprising - especially data from Latin America.

1. Ahead of the Olympic games to start on Friday, Brazil's debt-to-GDP ratio disappointed (highest since 2008), even as the fiscal gap was smaller than expected.
Brazil Gdp debt
Brazil's unemployment rate reached the highest level since 2004. The increase, however, was lower than expected. Analysts continue to look for signs of "green shoots".
Brazilian Unemp
2. Chile’s economic data was disappointing and some economists now question the wisdom of hiking rates. Unemployment is approaching 7% again.
3. Mexican GDP unexpectedly contracted (first time in 3 years). Some suggest that this is a reflection of the soft economy in the US.
4. Colombia's central bank hiked its benchmark rate again to fight inflation. The central bank ignored the last minute plea by President Santos to halt rate increases, which is dampening economic growth. 
5. The South African rand rallied 2% Friday on Bank of Japan's "disappointment" (which resulted in weaker USD). 
South African Rand
 Separately, the South African money supply growth has moderated recently. Are the credit markets tightening?
South African money supply
6. The Nigerian naira continues to weaken. There are rumors in the market of significant capital flight and collapsing FX reserves. 
Nigerian naira
The chart below shows Nigeria's latest FX reserves trend. Some, however, suggest that these figures are overstated, and the actual situation is even worse. Further weakness in the currency could destabilize the nation as inflation spirals out of control. The recent rate hike (discussed last week) has not worked.
Nigerian FX rates
7. Indian 10yr government bond yield hit multi-year lows as fixed income money pours into emerging markets. 

 1. In the fixed income markets, treasuries were whipped around on Friday, ending higher (yield lower) after the US GDP report.
2. The US dollar index tumbled 1% on Friday after the BoJ announcement, with Morgan Stanley warning that more dollar weakness is on the way. That's a bullish sign for risk assets (equities, commodities, emerging markets, etc.). 
USD Index
3. Libor continues to grind higher. 
Turning to politics and the equity markets, Wall Street seems to want Hillary Clinton to win. The two charts below show (in part) why. Historically, a leadership change with the same party in place produces the best returns. A Democrat in the White House with a Republican-controlled Congress also produces the best result. 
Wall Street wants Clinton

2. The once-hot online lending ("P2P") market does not seem too attractive anymore.
 3. Ex-US markets sharply outperformed the S&P500 over the past 5 days.
1. In commodities, crude oil remains under pressure as US oil rig count rises again. 
crude and rig count
2. However, according to Bloomberg, "glut in oil supply is set to end amid investment cuts". Indeed, major oil firms show little appetite for CapEx, suggesting that supplies are unlikely to keep up with the rising global demand in the intermediate term. 
Oil Major's Cape
3. Long-silver has become an incredibly crowded trade. 
4. US wheat continues to sell off. The second chart below shows Deere & Company shares over the last couple of months. 
Turning to Food for Thought, we have 4 items today: 
1. Growth in connected devices.
connected devices
2. By and large, Europe isn't much into diversity. 
3. The next chart shows the national poverty line vs. the prosperity of each country. A "poverty line" is the level of income below which a nation would classify one as impoverished. PPP is purchasing power parity (a way to compare incomes across nations).
4. According to Vox, "a single restaurant mixed drink can contain half a day's worth of calories". 
 — Edited by Clemens Bomsdorf

* Walter Kurtz is an alias

**This is an abridged version of the Daily Shot. To subscribe to the full version, link to the Daily Shot and select the appropriate command. E-mail addresses are never shared with anyone.

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