News
HU: Mixed – August IP falls 0.4% (p2)
TK: Negative – CBT Survey of Expectations shows inflation expectations rise to 7.5% from 7.3% for YE2011 (p2)
Today’s Events
BG: August IP and Retail trade / CZ: August IP and Trade balance/ CR: September PPI / HU: September Budget lvl YtD / RO: August IP / SRB: September PPI / RU: 3Q Consumer Confidence / SK: August IP
EEMEA Markets
Global backdrop: the ECB announcement to extend LTRO and restart covered bond purchase program was taken positively by markets. Asian equity markets closed about 2% higher whilst EUR/USD moved to 1.35. Credit spreads tightened about 20bp in the periphery and Sovx CEEMEA tightened by 30bp. Short squeeze remains the name of the game in EM markets today with key focus on US NFP release. UCG expects plus 50k. In the credit space we prefer buying Turkish external debt (Turkey USD30) as it continues to outperform particularly Russia and the broader CEEMEA credit universe and the market now offers better levels.
EM bond fund flows: data released this morning shows that outflows slowed down significantly from last week. EM bond funds saw only USD1.4bn outflow vs. USD3.2bn outflow a week earlier. The composition also shifted to the extent that hard currency EM bond funds saw USD700mn outflow whilst local currency bond funds only USD500mn. We continue to believe that the main driver of the fund flow situation is the USD which significantly hit EM local currency bond performances.
Turkey: another significant FX intervention by the CBT (USD350mn vs. USD1.3bn announced) saw USD/TRY moving about 1% lower again. Later in the day the bank has announced rate cuts on longer RR which will likely add around TRY3.2bn to the market. Although this might partially offsets the impact of FX interventions we continue to favour TRY particularly vs. CEE currencies.
Poland: elections will be held this Sunday. The latest poll shows that PO might win around 40pct of the seats whilst PiS around 30pct. The most likely scenario is the continuation of the current Government with the key focus on post election fiscal policy.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/10/eed_fi_071011_0000.pdf
Gyula Toth
UniCredit Research