European markets shifted back into “bearish mode” overnight, leading most stock indices to soften -0.8% to -1.5%, which could at least be partly the result of Moody’s comments that the Chinese government could be forced to bail out some local authorities. However, despite the weaker tone in European equities and negative commodity price action (oil -0.4% and copper -0.8%), MXN has clawed back some of the losses we say at the end of yesterday’s trading session as the peso’s stress appears to be subsiding. The recent move in EMFX has highlighted the importance of foreign capital for some EMs, and going forward we believe it will be more important to monitor EM current accounts and the composition of their funding
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Scotiabank