13 August 2010

Financial Market Team update (English, 13 Aug 2010)

Since last Friday, stocks around the globe have fallen by about 4%. The next figures represent changes since last Friday. The DJIA fell 3.3%; the S&P, 3.8%. In Europe, UK's FTSE 100 fell 1.1% while the German DAX fell 2.4%. In Asia Japan's Nikkei 225 fell 4% while Hong Kong's Hang Seng fell 2.8%. In Latin America Mexico's IPC fell 2.5% and Brazil's Bovespa fell 2.7%.

The yen and the euro weakened against the dollar.

The European Central Bank revealed today that the number of Spanish banks that borrowed from the ECB grew in July. Investors are being driven to German bonds. German 10-year Bund yields are at 2.39%, their all-time low. US 10-year Treasury yields are also lower, at 2.68%.

(Read more about financial markets in this FT article $)

Patrick Signoret and Georgina Lara

Financial Market Team update (data for 13 Aug 2010)

16:30 ET

DJIA: -0.16% to 10303
S&P 500: -0.4% to 1079
Mexico IPC: +0.18% to 32100
Brazil Bovespa: +0.45% to 66264

FTSE 100: +0.18% to 5275
DAX: -0.4% to 6110

Nikkei 225: +0.44% to 9253
Hang Seng: -0.16% to 21072

US$1.00= 0.78 euros
US$1.00= 12.73 Mexican pesos
US$1.00= 86.2 yen (+0.3%)
EUR$1.00= 1.28 USD (-0.6%)

WTI crude 1m: -0.46% to 75.39 USD/bbl.
Corn 1m: +1.3% to 427 USD/bu.
Wheat 1m (CBT): -1.28% to 734 USD/bu.
Gold 100 oz 1m: -0.01% to 1217 USD/t oz.

Aug 13 (Aug 12)
Ted spread: 21 (22)
T bill 3m: 0.15 (0.16)
USD Libor 3m: 0.37 (0.38)

12 August 2010

Power and Policy Team update (English) , 12 Aug 2010

Korea's monetary policy decision
The Bank of Korea maintained the Base Rate unchanged at 2.25%. A 25bp increase had been expected. (Read the BoK's statement.)

U.S. border security
U.S. Senators approved unanimously a new border security bill which gives the federal administration 600 million dollars which will allow, among other things, to send 1,500 more troops to the southern border. According to this article published by the La Times, lawmakers think that securing the border is the first step to a more comprehensive immigration reform.

Israel and Iran
According to this month’s Atlantic Monthly magazine there is a 50 percent probability that Israel will attack and destroy Iran’s nuclear program by next summer. However, according to The Christian Science Monitor, these allegations are only rhetorical games to pressure Obama to attack Iran.

Patrick Signoret and Isabel Gil

Financial Market Team update (data for 12 Aug 2010)

13:51 ET

DJIA: -0.69% to 10307
S&P 500: -0.69% to 1082
Mexico IPC: +0.06% to 32078
Brazil Bovespa: -0.04% to 65765

FTSE 100: +0.4% to 5266
DAX: -0.31% to 6135

Nikkei 225: -0.86% to 9213
Hang Seng: -0.89% to 21106

US$1.00= 0.78 euros
US$1.00= 12.74 Mexican pesos (-0.07%)
US$1.00= 85.86 yen (+0.63%)
EUR$1.00= 1.28 USD (-0.28%)

WTI crude 1m: -2.24% to 76.27 USD/bbl.
Corn 1m: +3.22% to 424 USD/bu.
Wheat 1m (CBT): +3.86% to 753 USD/bu.
Gold 100 oz 1m: +1.46% to 1217 USD/t oz.

EMBI+Mex: 137
Cetes 28d: 4.5%

Patrick Signoret and Georgina Lara

Financial Market Team update (English, 12 Aug 2010)

13:37 ET

Yesterday, the S&P 500 and the DJIA reached their lowest level since July 23. Today, both have been trading steadily below yesterday's close. At the end of the day, the FTSE100 managed to pare earlier losses. Major American, European and Asian markets fell today, continuing yesterday's trend.

After reaching a 15-year high, the yen is being closely monitored by Japan's central bank although no specific action has been mentioned.

Oil continues to fall for the fifth straight day. Gasoline futures reached a five-week low. Gold continues to rise and has reached its highest for a month. Floods in Pakistan are making sugar prices climb since 200,000 acres of cane were destroyed.

Patrick Signoret and Georgina Lara

11 August 2010

Choices in Economic Policy (USA...)

The IMF's Chief Economist and head of fiscal affairs argue in today's FT that 'measures that improve the long-term fiscal outlook in those countries with high deficits and debt' should receive top priority, and they suggest that reforms of pensions and health are among the politically feasible options. The only economist who has not jumped in to the debate on Stimulus vs. Austerity must be Karl Marx, and he is indisposed. I would like to see a requirement that all writers of Op-Ed pieces on this subject be required to suggest just how their proposals could actually become reality in the current dysfunctional US political system? What sort of crisis that cannot be foreseen (a 'Black Swan Event' ?) will it take to bring about the needed political consensus? A grandes males, grandes remedios?

Financial Market Team update (data for 11 Aug 2010)

16:30 ET

DJIA: -2.49% to 10379
S&P 500: -2.82% to 1089
Mexico IPC: -1.92% to 32059
Brazil Bovespa: -2.13% to 65790

FTSE 100: -2.44% to 5245
DAX: -2.1% to 6154

Nikkei 225: -2.7% to 9293
Hang Seng: -0.83% to 21295

US$1.00= 0.78 euros
US$1.00= 12.75 Mexican pesos (-0.01%)
US$1.00= 85.28 yen (-0.05%)
EUR$1.00= 1.29 USD (-0.02%)

WTI crude 1m: -3.54% to 77.41 USD/bbl.
Corn 1m: +0.49% to 411 USD/bu.
Wheat 1m (CBT): -0.24% to 725 USD/bu.
Gold 100 oz 1m: +0.18% to 1200 USD/t oz.

EMBI+Mex: 134
Cetes 28d: 4.53%

Aug 11 (Aug 10)
Ted spread: 23 (25)
T bill 3m: 0.15 (0.15)
USD Libor 3m: 0.38 (0.4)

Patrick Signoret and Georgina Lara

Financial Market Team update (English)

15:09 ET

Monetary policy statements depress markets
The Bank of England's Mervin King said that "the UK recovery is likely to continue, but the overall outlook is weaker". (Read Mervin King's statement here.) The Fed and the Bank of England determined that quantitative easing would continue but would not be expanded. Major American, European and Asian stock markets fell today by more than 2%.

The euro is at its lowest level for a month. It was down by more than 2%, representing its steepest one-day drop since January 2009. Although the yen reached its lowest level against the dollar earlier today (Y84.79), it is paring losses.

Treasury bonds
2-year, 5-year, 7-year and 10-year Treasuries have been falling; at one point during the day they reached record-low yields.

According to the International Energy Agency's Oil Market Report released today, global demand for 2010 and 2011 is expected to rise as a result of an expected GDP increase. However, because of the BP's oil spill, a supply shortage is expected in 2011. Crude oil continues to fall for the fourth day and is now below US$80. Wheat futures are slightly down while corn futures are rising. After sugar rose yesterday on speculation that Russia's production of beets would be affected by the drought, it fell today on expectations of Indian exports.

(Read more about global markets in FT $ )

Patrick Signoret and Georgina Lara

Power and Policy Team Update (Español)

Recortes presupuestales en Europa
Los recortes presupuestales se han convertido en estrategia común entre los países afectados por la crisis bancaria reciente de acuerdo al artículo publicado hoy en Le Monde. Los “planes de ajuste” han implicado la disminución del gasto en diversos sectores de las economías nacionales. En España, por ejemplo, se han congelado cerca de 200 proyectos que incluyen carreteras y ferrocarriles; en Gran Bretaña, los proyectos afectados son principalmente cárceles, colegios y hospitales. (Le Monde)

México: Lucha contra el narcotráfico
El ex presidente Vicente Fox publicó su carta “Momento de reflexión y propuestas” en la que critica la estrategia de Calderón en la lucha contra el narco. Bajo reserva del Universal habla de las críticas del ex mandatario a la estrategia del actual y de las posibles fracturas dentro del PAN.

Ley Antiinmigrante en Florida
Bill McCollum, fiscal general de Florida, propuso una ley contra la inmigración ilegal en su estado. De acuerdo con su despacho, la ley va un paso más allá que la propuesta en Arizona. (Más de esto en Reforma.)

Patrick Signoret e Isabel Gil

Power and Policy Team Update (English)

U.S. Mid-term elections
Several states held primary elections. There was no clear trend in the results: incumbent candidates, candidates backed by party establishment, Tea Party candidates, outsiders, candidates endorsed by Obama...all kinds of candidates won. Read about the mixed results in the Washington Post. On the other hand, Politico says it was a good night for Democrats, because their big establishment candidates won, while the Republican's winning candidates were mostly outsiders who don't look strong for the general election (November 2).

In other election analysis, The Economist warns that the ethics trials of two senior Democrats could spell trouble for the party in November. Congressmembers Charles Rangel and Maxine Waters' districts are safely Democratic, but other districts are not.

Turkey: emergency security summit
Days before the upcoming referendum, Turkey’s Prime Minister convened an emergency security summit in response to information received by the government about plans to create chaos in 30 districts prior to the September 12th referendum. More about the summit and the events leading to it in this Sabah article.

Iraq’s new government
In its Weekly Geopolitical Update, Barclays discusses the absence of a new government in Iraq as the withdrawal of U.S. troops approaches. No alliances have been made, violence has risen, and relationships between Iraq and its neighbors are growing more and more tense.

Patrick Signoret and Isabel Gil

10 August 2010

Global indicators published 10 Aug 2010

Click on the table to enlarge it.

Power and Policy Team Update (español)

Venezuela y Colombia restablecen relaciones
Hugo Chávez viajó a Colombia para reunirse con el nuevo presidente de Colombia, Juan Manuel Santos. Acordaron restablecer las relaciones diplomáticas. Entre otros acuerdos, Chávez dijo que no tolerará a las FARC en su territorio. Habían cortado las relaciones cuando Colombia acusó formalmente a Venezuela de apoyar a los guerrilleros colombianos, hace menos de un mes. (Vea las declaraciones de Santos, y las declaraciones de Chávez.)

Patrick Signoret e Isabel Gil

Power and Policy Team Update (English)

Monetary policy decisions
The Bank of Japan agreed unanimously to leave its rates unchanged. (See the bank's statement.)
The Federal Reserve maintained the federal funds rate at 0-0.25%. The FT, among others, interpreted the decision and the statement as a) a downgrade in the Fed's economic outlook; b) a move towards monetary easing by "reinvesting proceeds from expiring mortgage-backed securities in longer-term Treasuries, thereby preventing a natural shrinking" of the central bank's balance sheet. (Read the Fed's statement.)

Afghanistan civilian deaths
The first six months of 2010 have seen an increase of 31% in conflict-related civilian deaths compared to the same period in 2009, according to a United Nations report published today. According to the report, two critical developments increased harm against civilians: anti-government elements (AGEs) "used a greater number of larger and more sophisticated improvised explosive devices (IEDs) throughout the country; and, the number of civilians assassinated and executed by AGEs rose by more than 95 per cent and included public executions of children." (Hat tip: NYT)

The World Health Organization declared on Tuesday that the H1N1 influenza pandemic is officially over. The H1N1 virus killed 18, 499 people. (We read this in this LA Times article.)

Colombia and Venezuela restore diplomatic ties
Hugo Chávez went to Colombia, met with Juan Manuel Santos, Colombia's new president, and they restored diplomatic relations. Chávez had broken ties with Colombia when the latter formally accused Venezuela of supporting leftist Colombian guerrillas, less than a month ago. (See the video of Santos' statement.)

Patrick Signoret and Isabel Gil

Financial Market Team update (data for 10 Aug 2010)

14:06 ET

DJIA: -0.88% to 10605
S&P 500: -1.01% to 1116
Mexico IPC: -0.82% to 32568
Brazil Bovespa: -1.05% to 67151

FTSE 100: -0.63% to 5376
DAX: -1.03% to 6286

Nikkei 225: -0.22% to 9551
Hang Seng: -1.5% to 21474

US$1.00= 0.76 euros
US$1.00= 12.67 Mexican pesos (+0.36%)
US$1.00= 85.8 yen (-0.16%)
EUR$1.00= 1.31 USD (-0.82%)

WTI crude 1m: -1.98% to 79.87 USD/bbl.
Corn 1m: -1.61% to 411 USD/bu.
Wheat 1m (CBT): -1.85% to 730 USD/bu.
Gold 100 oz 1m: -0.36% to 1198 USD/t oz.

Patrick Signoret and Georgina Lara

Financial Market Team update (English)

Commodities are falling. Gold prices fell for the second straight day. Copper prices are down, reaching a one-week low. Russia's drought has affected beet production and beets are used to make sugar, so sugar prices are rising. However, wheat and corn prices are down about 1.5%. A wheat producing region in Australia, the world's fifth exporter of wheat, is forecast to receive much needed rains. Read about Australia's wheat situation, in this FT article ($).

WTI prices fell the most in five weeks, despite a storm forming in the Gulf of Mexico which made drilling on a BP relief well stop.

The dollar is rallying against the euro and the pound, although it is weaker against the yen.

Fixed income and credit
5-year and 10-year Treasuries are reaching their lowest yields for the year.

(Read more about today's financial data in this FT$ article, and in this Bloomberg webpage)

Patrick Signoret and Georgina Lara

09 August 2010

Financial Market Team update (data for 9 Aug 2010)

16:03 ET

Aug 9 (Aug 6)
Ted spread: 25 (26)
T bill 3m: 0.15 (0.15)
USD Libor 3m: 0.40 (0.41)

DJIA: +0.42% to 10698
S&P 500: +0.55% to 1127
Mexico IPC: -0.24% to 32837
Brazil Bovespa: -0.34% to 67862

FTSE 100: +1.47% to 5410
DAX: +1.47% to 6351

Nikkei 225: -0.72% to 9572
Hang Seng: +0.57% to 21801

US$1.00= 0.76 euros (+0.36%)
US$1.00= 12.62 Mexican pesos (-0.57%)
US$1.00= 85.88 yen (+0.43%)
EUR$1.00= 1.32 USD (-0.36%)

WTI crude 1m: +0.98% to 81.49 USD/bbl.
Corn 1m: -0.48% to 418 USD/bu.
Wheat 1m (CBT): +0.1% to 734 USD/bu.
Gold 100 oz 1m: -0.15% to 1203.5 USD t/oz.

Patrick Signoret and Georgina Lara

Financial Market Team update (English)

The Federal Reserve will announce its monetary policy decision tomorrow. Markets are expecting the Fed to keep interest rates at their current level, 0-0.25. However, FT and Bloomberg report that they anticipate some kind of measure to release more cash into the economy to provide a stimulus. Bloomberg believes this is the reason both American and European stocks advanced today.

Crude oil remains near $81 as it went up in today's trading session. Grain prices continue to rise after the export ban in Russia. This has not only affected wheat but other grains as well. (Read about the grain prices in FT$.)

Patrick Signoret and Georgina Lara

Power and Policy Team Update (English)

UK budget cuts
Budget cuts in Great Britain, $130 billion over the next five years, have been labeled by a UK think tank as the “longest, deepest sustained period of cuts to public services spending since World War II.” (Hat tip: NYT.)

North Korea
Tensions escalated between North and South Korea as the North fired more than 100 rounds of artillery in response to war drills performed by the South last week. (Read about it in the LA Times.)

This LA Times article describes how China, Russia, India and Turkey are seizing opportunities in Iran and are undermining the sanctions imposed on Iran by the West. “Efforts by the United States and its European allies to build a united front to halt Iran's nuclear program are facing increasingly bold resistance from China, Russia, India and Turkey…”. Sanctions took effect on July 1st.

Patrick Signoret and Isabel Gil

06 August 2010

Lengua incógnita


Parece castellano, pero no lo es. Y de existir, existe. La gracia es descubrir qué idioma o dialecto es sin seguir ningún enlace revelador en la página propiamente tal.

Financial Market Team update (data for 6 Aug 2010)

17:07 ET

DJIA: -0.2% to 10654
S&P 500: -0.37% to 1122
Mexico IPC: +0.03% to 32918
Brazil Bovespa: -0.46% to 68095

FTSE 100: -0.62% to 5332
DAX: -1.17% to 6260

Nikkei 225: -0.12% to 9642
Hang Seng: +0.59% to 21679

US$1.00= 0.75 euros
US$1.00= 12.69 Mexican pesos (+1.02%)
US$1.00= 85.51 yen (-0.36%)
EUR$1.00= 1.33 USD (+0.69%)

WTI crude 1m: -1.34% to 80.91 USD/bbl.
Corn 1m: +0.48% to 420 USD/bbl.
Wheat 1m (CBT): -7.36% to 755.25 USD/bbl.
Gold 100 oz 1m: +0.67% to 1207.3 USD/bbl.

Aug 6 (Aug 5)
Ted spread: 26 (27)
T bill 3m: 0.15 (0.15)
USD Libor 3m: 0.41 (0.42)

Patrick Signoret and Georgina Lara

Financial Market Team update (English)

U.S. unemployment was higher than expected, and German industrial production fell in June. Markets fell in America and Europe. (Read about this in Bloomberg.)

The dollar reached its lowest point of the year against the yen, and is approaching a 15-year low against the Japanese currency.

WTI oil prices fell along with the Western markets, but remained near their highest level since May.
Gold continued to rise, reaching its highest price in a month.
Russia banned wheat exports, making wheat prices reach their highest level in two years. The move “caught traders and food producers by surprise”, says FT ($).

Patrick Signoret and Georgina Lara

Power and Policy Team Update (English)

Global Report on Terrorism: Mexico section
The U.S. Department of State published its Country Reports on Terrorism. It states that there is no reason to believe there are terrorist organizations operating in Mexican territory. However, it warns that rising violence in Mexico, especially along the U.S. border, could give terrorists opportunities to slip into the U.S. among the chaos, confusion and vacuum of power. (Hat tip: Reforma.)

Patrick Signoret and Isabel Gil

Power and Policy Team Update (español)

Seguridad en la frontera México- EUA
Un proyecto de ley que contempla 600 millones de dólares para mejorar la seguridad en la frontera de México fue aprobado por unanimidad en el Senado de Estados Unidos. (Hat tip: Reforma)

México: Narcotráfico
A demás de reconocer la colaboración de México con Estados Unidos en la lucha contra el crimen organizado y el terrorismo; el Reporte Anual de Terrorismo en el Mundo, publicado por el Departamento de Estado de los Estados Unidos, afirma que no hay indicios de que en México existan organizaciones terroristas. Sin embargo, resalta la creciente tendencia de los cárteles mexicanos a recurrir a tácticas terroristas. (Leer sobre el reporte en El Reforma $.)

El día de ayer concluyó la sesión anual del Consejo Supremo Militar turco. Lo que normalmente era considerado un trámite meramente burocrático y militar se convirtió en un suceso político importante para el gobierno de Erdogan. Este consejo es para decidir la renovación de la cúpula militar de acuerdo con los valores heredados del fundador de la República de Turquía, Mustafá Kemal Atatürk. El primer ministro logró que el general Hasan Igsiz, acusado de la trama golpista Ergenekon, no subiera al poder. (Leer sobre esto en El País.)

Patrick Signoret and Isabel Gil

05 August 2010

Indicadores globales publicados 5 agosto 2010

Hacer click en la tabla para ampliarla.

Power and Policy Team update (English)

U.S. midterm elections polls
These New York Times Senate Race Ratings and House Race Ratings suggest that the Senate will remain Democratic and the House will be divided. In the Senate, 51 seats are solid or leaning Democratic, 39 seats are solid or leaning Republican, and 10 are tossups. RealClearPolitics’s poll average gives a similar picture. In the Senate: 49 seats are likely/leaning Democratic, 43 seats are likely/leaning Republican, and 8 seats are tossups. In the House: 202 seats are at least leaning Democratic, 201 seats are at least leaning Republican, and 32 seats are tossups. A party needs 218 seats in the House to have the majority.

Monetary policy decisions in Europe
Both the Bank of England and the European Central Bank maintained their monetary policy rates (0.5% and 1%, respectively). No rate change had been expected. See the UK decision and the ECB decision. In his speech today, Jean Claude Trichet said that economic forecasts for the third quarter of 2010 look better than expected.

Greek crisis
According to the report released today by the EC, ECB and IMF, Greece has made impressive progress in reducing its deficit. The first part of the program, the strong cuts in public spending and the structural reforms made it possible for Greece to reduce the first-half deficit by 45%. (Read about it in FT $.)

Israel and Lebanon
Fears of a bloodier and more destructive conflict between Israel and Lebanon had kept both countries relatively calm, says this International Crisis Group report, which was published the day before last week’s violent clash. Read about the conflict in this LA Times blog.

Patrick Signoret and Isabel Gil

04 August 2010

Conferencia de Prensa IMSS: Estabilidad en el cálculo de pensiones

Mi parte favorita viene al final, cuando Daniel Karam nos desea "Muchísimas tardes y que tengan muy buena tarde".

A ver quién me explica por qué entonces hace apenas unos días parecía que este resultado no se podría dar sin una reforma legal.

Why is deflation bad? (¿Por qué es mala la deflación?)

This is the question I am most often asked at my presentations. In the latest round, we increased the probability of our deflation scenario for advanced economies to 40%.

Krugman answers it here. I quote:

There are actually three different reasons to worry about deflation, two on the demand side and one on the supply side.

So first of all: when people expect falling prices, they become less willing to spend, and in particular less willing to borrow. After all, when prices are falling, just sitting on cash becomes an investment with a positive real yield – Japanese bank deposits are a really good deal compared with those in America — and anyone considering borrowing, even for a productive investment, has to take account of the fact that the loan will have to repaid in dollars that are worth more than the dollars you borrowed. If the economy is doing well, all this can be offset by just keeping interest rates low; but if the economy isn’t doing well, even a zero rate may not be low enough to achieve full employment.

And when that happens, the economy may stay depressed because people expect deflation, and deflation may continue because the economy remains depressed. That’s the deflationary trap we keep worrying about.

A second effect: even aside from expectations of future deflation, falling prices worsen the position of debtors, by increasing the real burden of their debts. Now, you might think this is a zero-sum affair, since creditors experience a corresponding gain. But as Irving Fisher pointed out long ago (pdf), debtors are likely to be forced to cut their spending when their debt burden rises, while creditors aren’t likely to increase their spending by the same amount. So deflation exerts a depressing effect on spending by raising debt burdens – which, as Fisher also points out, can lead to another kind of vicious circle, in which depressed spending because of rising real debt leads to further deflation.

Finally, in a deflationary economy, wages as well as prices often have to fall – and it’s a fact of life that it’s very hard to cut nominal wages — there’s downward nominal wage rigidity. What this means is that in general economies don’t manage to have falling wages unless they also have mass unemployment, so that workers are desperate enough to accept those wage declines. See Estonia and Latvia, cases of.

Obama's update on BP spill

Tabla de avances (prueba)

Power and Policy Team update (English)

Iraq’s neighbors
This Los Angeles Times article describes the struggle between some of Iraq’s neighbors to fill the void that the United States might leave. “Iran, Saudi Arabia, Syria and Turkey are all pursuing their agendas and taking sides along a Sunni-Shiite divide. That could become dangerous as U.S. troops withdraw.”

Raza Haider, the leader of the Muttahida Quami Movement (MQM), was assassinated on Monday. His death set off a wave of violence that has left at least 47 people dead the southern port of Karachi, Pakistan’s largest city. (See NYT report.)

BP Oil Spill
According to the White House 75% percent of the oil spill has been “captured, burned off, evaporated or broken down”. (Source: The Guardian.)

U.S. Supreme Court
Debate on Elena Kagan’s nomination started in the Senate. She has the support of all Democrats and some Republicans, and is expected to be confirmed by the end of the week. (More in NYT.)

Health care reform setback
Voters in Missouri approved a measure “intended to invalidate a crucial element of President Obama's health care law — namely, that most people be required to get health insurance or pay a tax penalty.” The effect of the vote remains uncertain, since the insurance requirement does not take effect until 2014 and since by then the courts “are likely to weigh in on the provision”. (See NYT report.)

Israel and Lebanon
Israeli and Lebanese forces exchanged fire among the border. At least four people were killed, the deadliest incident in the border since 2006. Lebanon and Israel traded accusations, but neither seemed interested in escalating the conflict. (Seen in FT$.)

Patrick Signoret and Isabel Gil

Financial Market Team update (data for 4 August 2010)

16:30 ET

DJIA: +0.41% to 10680
S&P 500: +0.61% to 1127
Mexico IPC: +0.40% to 32900
Brazil Bovespa: +0.40% to 68272

FTSE 100: -0.19% to 5386
DAX: +0.37% to 6331

Nikkei 225: -2.11% to 9489
Hang Seng: +0.43% to 21549

US$1.00= 0.76 euros
US$1.00= 12.53 Mexican pesos (-0,41%)
US$1.00= 86.28 Yen (+0,58%)
EUR$1.00= 1.32 US$ (-0,56%)

WTI crude 1m: -0.01% to 82,54 US$/bbl
Corn 1m: +2.72% to 415,00 US$/bbl
Wheat 1m+6.45% to 755,50 US$/bbl
Gold 100 oz 1m: +0.76% to 1196.50 US$/bbl

Aug 04
Ted spread: 26
T bill 3m: 0.16
USD Libor 3m: 0.42

Patrick Signoret and Georgina Lara

FDI in Mexico in 2009 drops by 50% from 2008: What to do?

FT's Adam Thompson cites a UN study showing that Mexico has dropped out of the top 20 destinations for foreign direct investment.

With the safety valve of emigration closing month-by-month, what can Mexico's federal and state governments do to attract more investment? Bombardier's happen once in a generation (viz Queretaro). It is the medium-size foreign enterprises that struggle with bureaucratic jungles and CFE.

The one industry that offers seemingly unlimited job opportunities is the one that Mexico is trying to shut down: the narco-cartels.

Financial Market Team update (English)

Mexicana files for bankruptcy in Mexico and U.S.
Mexico’s airline filed for insolvency proceedings in Mexico and for bankruptcy protection in U.S. to avoid (more of) its airplanes to be seized by its creditors. It’s struggling to restructure its liabilities and to come to an agreement with its employees’ unions. The Mexican government is not planning on bailing the company out.
(El Financiero, Wall Street Journal)

U.S. stocks advanced today after unexpected growth in the jobs and service industries.
Brazil's Bovespa started to rise again, after yesterday's fall had ended an 11-day winning streak.
European markets closed with mixed results and minor changes.
Asian stock markets, fell on yesterday's disappointing home sales and factory orders releases.
(FT$, Bloomberg)

After crude oil rose 7.2% in four days, today it remains almost unchanged. U.S. gasoline inventories increased more than expected, but U.S. economic indicator releases were positive.
Gold rose for the sixth straight day.
(FT$, Bloomberg)

Patrick Signoret and Georgina Lara

Power and Policy Team update (español)

IMSS no modificará pensiones
"El monto para calcular sus pensiones seguirá aplicándose al límite general de 25 salarios mínimos". Así lo dijo Daniel Karam, director del IMSS.
(El Economista)

México: Narco violencia
De acuerdo con Calderón el 90% de las muertes violentas del país corresponde a miembros de grupos criminales, el 6% a autoridades y el 1% por ciento a víctimas inocentes. Afirmó que no cederá en la lucha contra el narco y no dejará de enfrentarse a los criminales, aún si parte de la opinión pública cree que es la única manera de que disminuya la violencia. Ayer el CISEN confirmó que, en la administración actual, han habido 28 mil muertes relacionadas con el narco. (Reforma $)

Patrick Signoret e Isabel Gil

Financial Market Team update (español)

Crisis de Mexicana
Ayer (martes 2 de agosto) Mexicana de Aviación “solicitó acogerse al concurso mercantil en México y su equivalente en Estados Unidos. La aerolínea enfrenta un fuerte pasivo con sus acreedores, en particular con arrendadores de aviones”, y la acción buscó evitar que más de sus aviones fueran confiscados a solicitud de sus acreedores. Sólo 9 de sus 64 aviones son propios. El gobierno mexicano ha rechazado rescatar a la aerolínea.
(El Financiero, Wall Street Journal)

Patrick Signoret y Georgina Lara

Business Cycle Team update (English)

Brazil’s industrial production and Selic rate
The lower than expected level of industrial production in June (released on Tuesday) makes Credit Suisse reinforce its expectation that Brazil’s monetary policy rate will not be raised again in September.
(Credit Suisse)

U.S. non-manufacturing PMI
The Institute of Supply Management’s non-manufacturing PMI rose to 54.3 from 53.8 in June. It had been expected to fall.

European PMIs
July’s final services and composite PMIs were published today. Although the Euro Area, Germany and France indices all improved compared to June, they were all below the flash estimates published July 22. The services PMIs fell in Spain and Italy. Italy’s services PMI, at 49.6, is the only index below the neutral level of 50.
(Markit Economics)

Patrick Signoret and Mariana Bulos

03 August 2010

Financial Market Team update (English)

16:02 ET

DJIA: -0.36% to 10636.38 (Close)
S&P 500: -0.48% to 1120.46 (Close)
Mexico IPC: -0.15% to 32768.08 (Close)
Brazil Bovespa: -0.76% to 67997.36 (Close)
FTSE 100: -0.01% to 5396.48 (Close)
DAX: +0.25% to 6307.91 (Close)

Nikkei 225: +1.29% to 9694.01 (Close)
Hang Seng: +0.21% to 21457.66 (Close)

USD-EUR: 0.7557
USD-MXN: -0.0018% to 12.582
USD-JPY: -0.7428% to 85.857
EUR-USD: +0.3949% to 1.3232

EMBI+Mex: 140
Cetes 28d: +0.009% to 4.61%

Aug 02 Aug 03
Ted spread 28 27
T bill 3m 0.16 0.16
USD Libor 3m 0.44 0.43


US stocks fell and traded below yesterday's levels all day today on disappointing reports on home sales, factory orders, and consumer spending.

Bovespa, having advanced for 11 days straight (+9.9%), fell today after investors learned that industrial output had fallen in June by 1% from its May level.

European stocks changed little during the day. FTSE 100 fell by 0.01%, while the German DAX climbed 0.25%. DAX reached its highest level since April 26 despite the below-forecast results for U.S. home sales and factory orders.

Asian stocks rose after yesterday's better-than-expected reports on US manufacturing.

(FT, Bloomberg)


Oil prices continue to move up on news that a tropical depression was approaching the Gulf of Mexico. After having risen by 3% yesterday, the WTI forward-month oil contract again advanced, by 1%, to $82.38. This is its highest level since last May.

Wheat prices declined after Russia reported that not all crops had been lost in the recent drought and that export volumes would hold stable. Analysts, however, warn that if Russian producers meet their export quotas, domestic shortages may ensue. Calls for a pause in grain exports have grown louder. We will continue to monitor the Russian wheat situation.

(FT, Bloomberg)

Patrick Signoret and Georgina Lara

Power and Policy Team update (español)

El presidente Iraní Mahmud Ahmadineyad propuso a Obama un encuentro “cara a cara” para discutir las sanciones impuestas a Irán por su programa nuclear. El presidente afirmó que ninguna iniciativa ha logrado detener el programa nuclear iraní, que sigue argumentando que no tiene fines bélicos sino objetivos civiles. (El País)

Narcoviolencia en México
El titular del CISEN, Guillermo Valdés, afirmó que este gobierno no ha logrado reducir la violencia derivada del narcotráfico y reveló que en el periodo presidencial de Calderón se reportan ya 28 mil muertes. (Reforma)
Por otro lado, el presidente Calderón argumenta que su gobierno no ha sabido explicar la lucha contra el narcotráfico. Afirmó que a pesar de que el gobierno federal no desea ocultar información, no tiene control sobre la información de los estados. (El Universal)

Se plantea limitar depósitos en pesos
La Asocación de Bancos de México propuso limitar los depósitos a un máximo de 50 mil pesos en efectivo, para combatir el lavado de dinero. (Reforma)

Efectos de derrame de petróleo en México
México ha gastado 35 millones de dólares en monitoreo, sobrevuelos y recorridos para tener la información necesaria para combatir el derrame de petróleo. Hasta ahora no se ha detectado presencia de crudo en territorio mexicano (se había previsto que llegara a finales del año). El Secretario de Medio Ambiente aseguró que el gobierno mexicano pedirá al de Estados Unidos por los gastos. (Reforma)

EUA: acción del gobierno federal frena más leyes antiimigrantes
Otros estados que habían considerado adoptar leyes como la de Arizona han decidido no hacerlo todavía, después de que el gobierno federal haya intentado exitosamente de bloquear las partes más controversiales de la Ley Arizona. (Reforma)

Patrick Signoret e Isabel Gil

Power and Policy Team update (English)

Italy no-confidence vote on Wednesday
The vote will be a test to see if Berlusconi’s ruling coalition can survive the defection a breakaway faction of 33 members (Gianfranco Fini and his new Future and Liberty group). It’s not clear what the result will be. The motion was brought by opposition parties, not by the breakaway faction, and the Future and Liberty group considers itself center-right (same as ruling government coalition).

U.S. Fed considers “symbolic shift”

The Wall Street Journal reports that the Fed is considering a “modest but symbolically important change in the management of their massive securities portfolio “ in a meeting next week, in the wake of a slowdown in growth. It might use the cash it receives fom mature mortgage-bond holdings to buy new mortgage or Treasury bonds, instead of allowing its portfolio to slowly shrink. Here is the complete article.

North Korea continues to threaten the South with retaliation, in response to a series of war drills planned by the South to start on Thursday. These exercises are considered by the North as a direct military invasion. (NYT)

Pakistan and Afghanistan
According to the Pakistani president, the war against the Taliban is being lost. The international community, he said, has failed to win hearts and minds. These declarations were made just before his visit to the UK, with whom relations are tense after the accusations following the document leaks, which accused Pakistan of playing a double game in the Afghan war, and David Cameron’s cozy visit to India. (The Guardian)

Patrick Signoret and Isabel Gil

Business Cycle Team update (English)

Mariana Bulos and Patrick Signoret

PMIs: China’s falls, India’s rises
China’s PMI for July fell below 50, reporting a final 49.4. Employment was the only index that improved. But the non-manufacturing PMI stays at 57.8 for July. In India, manufacturing PMI for July rose 0.6% to 57.6. PMI and exports data reinforce the JPMorgan view that there will be a new 25bp raise in the policy rates on September 16.
(Credit Suisse, JPMorgan)

Mexico’s Banxico survey

Inflation expectations for the end of 2010 (4.59%), end 2011 (3.90%), average for 2011-2014 (3.69%) and average for 2015-2018 (3.53%) were all slightly lower than in the June survey.
The survey’s median expectation for GDP growth was 4.5% in 2010 and 3.6% in 2011.
(Banxico, Credit Suisse)

Euro Area producer price index
Producer prices grew a 12m 3.0% in June, after a rate of 3.1% in May. Barclays notes that this increase in producer prices has still not been passed on to core consumer prices.

Income and spending in United States
June personal income and consumer spending had zero growth in June, while the consensus forecast was 0.2% and 0.1%). This was in line with the softer than expected GDP growth rate published last Friday.

Power and Policy Team update (Español)

Isabel Gil y Patrick Signoret

Frontera México-EUA

El dispositivo de 1,200 soldados que el presidente Obama envió a reforzar la seguridad en la frontera estará funcionando plenamente a finales de septiembre.
(El País)

Estados donde estaba “Nacho” habían sido más violentos
En los meses previos a la muerte de “Nacho” Coronel (líder de cártel de drogas muerto la semana pasada en operativo militar), los tres estados que controlaba habían tenido un alza enorme en la violencia según Reforma. Estos estados son Jalisco, Nayarit y Colima. Seguir el número de muertes por estado podría ser una forma interesante de ver los efectos de los cambios de líderes y conflictos entre los cárteles de drogas.

Patrimonio gigantesco del SME
El líder de los disidentes del SME, Alejandro Muñoz, pide repartir los bienes del sindicato equitativamente entre los trabajadores. Estima que cada trabajador podría recibir 300 mil pesos. Él y sus seguidores se oponen al liderazgo de Martín Esparza.

Amenazas a sheriff de Arizona
Fox News difundió imágenes y sonido de mensajes de texto y voz ofreciendo dinero a quien asesine al sheriff Joe Arpaio, quien es conocido por ser duro contra los imigrantes ilegales. Los mensajes ofrecen 1 millón de dólares y proveen un número de teléfono para conseguir instrucciones. Sin embargo, esta noticia no parece haber sido importante en los grandes diarios de EUA.

Power and Policy Team update (English)

Isabel Gil y Patrick Signoret

War in Iraq

By August 31st America´s mission in Iraq will end, said president Obama. According to the promises made during his campaign, by the end of this month there will only be 50,000 troops in Iraq, which will be in charge of supporting and training Iraqi security forces. These troops will leave Iraq at the end of 2011. Meanwhile, Iraq is in political deadlock, five months after the parliamentary elections. Here’s a link to Obama's full speech: http://tinyurl.com/24w3j95 (NYT, FT, White House)

Ban Ki-moon formally announced the creation of a commission to investigate the incident of the Gaza flotilla. Israel, who had previously been reluctant, announced its cooperation on Monday.

Bernanke speech
One week before the next interest rate setting meeting, Bernanke gave a speech in South California where he argued that even though the financial crisis seems to have passed, the U.S. has still a long way to go in order to achieve full economic recovery. “A long way to go” and “caution” were the main words that stuck in markets and newspapers.

Financial Market Team update

Georgina Lara y Patrick Signoret

13:07 ET

DJIA: +1.75% to 10649.1
S&P 500: +1.93% to 1122.88
Mexico IPC: +1.14% to 32676.39
Brazil Bovespa: +1.59% to 68587.32

FTSE 100: +2.65% to 5397.11 c
DAX: +2.34% to 6292.13 c

Nikkei 225: +0.35% to 9570.31 c
Hang Seng: +1.82% to 21412.79 c

USD-EUR: 0.759
EUR-USD: +0.9539% to 1.3176
USD-JPY: +0.0174% to 86.485
USD-MXN: -0.5749% to 12.573

Corn 1m: 0% to 406.75
WTI future 1m: +3.14% to 81.43
Gold spot 1m: +0.08% to 1184.8

U.S. stocks are climbing after last week's fall after today’s release of positive construction spending and manufacturing reports. Both surpassed market expectations. Better-than-estimated earnings at companies may also have increased confidence in the economic recovery.

European stocks advanced in general after HSBC and BNP Paribas rallied. Production indices in the Euro Area showed mainly increases. Germany's situation as the biggest economy in Europe and the one leading the pace to economic recovery in the zone may have boosted investors’ optimism. UK stocks reached the highest level in two and a half months.

Asian stocks advanced following PMI reports that made investors confident that the region is growing.

(FT, Bloomberg)

U.S. crude oil continues last week’s trend and has risen more than 3%. The rise in oil prices may be due to the controlled supply by OPEC countries and the growing demand by some emerging markets like China.

Gold also continues to rise after several days of falling.

Soybean and corn prices rose again reaching the highest level since January after the drought in Russia, and other parts of Europe, harmed crops. The demand is now being satisfied by U.S. production.