Emerging markets week ahead: sentiment swings continue

The coming week may prove relatively light after last week’s volley of meetings and summits. Despite tensions in Russia and a few important CPI reports, the lack of real market movers sets this week up to be particularly slow.

The elections in Russia, where the ruling United Russia party retained power but lost support, have sparked demonstrations and unrest in parts of the country.

Allegations of election fraud have been common in past elections and this instance will probably not lead to an Arab Spring-like event in the country.

Prime Minister Putin is still favored to win the presidential elections in March.

U.S. economic data may take the focus off Europe for the coming week. Retail sales out on Tuesday will show whether Black Friday and Cyber Monday were enough to significantly increase sales for the month.

Consumer prices are due out towards the end of the week and the Fed meets for its last time this year on Tuesday. The three most conservative members — Plosser, Fisher and Kocherlakota — come off voting status next year and will be replaced by significantly more dovish members. This sets the stage for more easing by the central bank.

This week also brings the annual Central Economic Work Conference in China which sets the overall character for policy framework in the coming year.

With growth slowing considerably — some forecasts for GDP in the first half of 2012 are as low as 7% to 7.5% — there is considerable pressure for large scale economic stimulus. Inflation has been moderating recently which grants the government more room for easing.

Monday

Though industrial production in India (INDY, quote) is forecasted to turn negative versus the prior reading of 1.9% growth, this is not expected to persuade the central bank to move rates on Friday due to mixed pressures in inflation.

Turkey (TUR, quote) reports third-quarter GDP on Monday. The second-quarter reading was 8.8% on an annualized basis. While expectations are for continued growth of around 6.0% to 7.0%, a report outside expectations or any guidance going forward will help investors gauge the extent of euro zone weakness spreading to the country.

Mexico (EWW, quote) reports industrial production with the consensus at an increase to 3.9% versus the prior reading of 3.6%. This denotes the closer economic tie to the United States, where economic trends have been more favorable relative to other Latin American markets that are more closely tied toChina.

China Finance Online (JRJC, quote) reports its third-quarter results after the market close on Monday. The company provides online financial and company data through subscription services.

Tuesday

After considerable weakness in the third quarter GDP report, retail sales will be closely watched when reported by Brazil (EWZ, quote) on Tuesday. The 14% depreciation in the real (BZF, quote) and sluggish foreign demand have decreased retail sales significantly this year. As such, September’s reading of 5.3% is expected to slow to 4.9%.

Poland (PLND, quote) reports consumer prices against last month’s reading of 4.3%. Consensus expectations are for an increase to 4.5%, reflecting the weakness in the zloty relative to the euro.

Hungary will be facing the same pressures as it reports CPI numbers against last October’s 3.9%. Estimates are for the weaker forint to push inflation up to 4.2% on an annualized basis. While weaker currencies have generally helped exports within the two countries, higher consumer prices could start to squeeze the populations.

Tuesday will see the “flash” version of the closely watched purchasing manager’s index (PMI) from China (FXI, quote) and has the potential to significantly move the markets. November’s reading showed the nation moving back into contraction and spooked markets around the world. A reading well below 50.0 could set the stage for a quick response by the government.

The Chilean (ECH, quote) central bank will most likely keep its overnight rate at 5.25% as inflation is down to about 4.0% and the economy softens from global pressures.

Wednesday

South Africa (EZA, quote) reports consumer prices against September’s 6%. The consensus view is for inflation increasing to 6.3%, which is above the central bank’s target range of 3-6%. While rate increases are not expected, the higher inflation report means the bank will have less ability to cut rates to spur growth.

Thursday

Singapore (EWS, quote) retail sales are expected to increase to 1.3% compared to a hard contraction of 0.1% in the prior reading.

Russia (RSX, quote) is likely to report no change in the trend in industrial output on Thursday with a consensus of 3.6%.

Friday

Colombia (GXG, quote) will decide on its overnight lending rate, although no change is expected from the current 4.75%. The central bank broke with the global trend in November to raise rates by 0.25% and a total increase of 1.75% this year. Economic growth remains strong and the bank is committed to lower inflation. Industrial production in the country grew by 6% in the third quarter, doubling the second-quarter reading of 3%.

The Reserve Bank of India will meet to decide monetary policy but is expected to keep the repurchase rate at 8.5% due to moderating food inflation and mixed price trends in other areas. Food inflation is now at its lowest since 2008 while trends in fuels are still high.

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