Interesting time in financial markets. They seem to be in search of a new narrative. The old one has run out of steam since economic growth isnt justifying current valuations, and certainly not increased ones. China is surprising on the downside and is being taken as a proxy for EMs. Argentina offers and interesting point of entry into a different discourse, one which could then spread to Brazil, Turkey, Ukraine and Thailand. Lets hope not, but this is one way they could go. Deflation risk on the EU periphery is another potentially lively narrative thread. How far will Draghi go? Lots of interesting trades available there and the idea of a more active ECB ties in with the lower than expected growth idea. We will see where all this is leading, but what I think, listening to all the stuff coming out of Davos, is that Larry Summers idea of secular stagnation is gaining traction. We are not looking at a normal recovery and markets were positioning in the expectation of seeing one. An adjustment of some kind is coming. ******************************************* Turkey’s central bank intervened directly in foreign exchange markets for the first time since 2012 on Thursday, but failed to stop the lira plunging to fresh lows as doubts grew over its ability to prevent a run on the currency. Market participants said the central bank could have sold as much as $3bn over the course of the day, a move that would have left its net foreign exchange reserves at an estimated $34bn-35bn – down from around $40bn at the start of the year.................. Turkey is already viewed as one of the countries most vulnerable to the Federal Reserve’s tapering of stimulus, because of a persistent current account deficit that makes it reliant on short-term capital inflows. Bond investors have not yet turned tail – earlier on Thursday, Turkey’s treasury said there had been strong demand for a $2.5bn sale of 10-year bonds, with a yield of 5.85 per cent. This weeks’ issuance means it has completed half its borrowing for 2014. But there are also signs that Turkey is struggling to attract direct investment in the wake of a corruption scandal, much of it focused on state tenders.
Posted on: Fri, 24 Jan 2014 08:06:53 +0000
Trending Topics
© 2015