(Bloomberg) -- Emerging-market equities and currencies posted their biggest weekly gains since June last week as the prospect of renewed U.S.-China trade talks, expectations of a September Fed rate cut and easing tensions in Hong Kong bolstered risk sentiment. Central banks in Chile, China and Russia eased monetary policies by cutting interest rates or the required reserve ratio.
The following is a roundup of emerging-markets news and highlights for the week ending Sept. 8.
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Federal Reserve Chairman Jerome Powell said policymakers will act “as appropriate” to sustain the U.S. expansion after August non-farm payrolls grew less than expected; the developments reinforced bets that the Fed will lower interest rate by 25bps at its Sept. 17-18 meetingFederal Reserve Bank of Boston President Eric Rosengren said the U.S. economy remains “relatively strong” despite clearly heightened risks, leaving him unconvinced the central bank needs to cut rates at its meeting this monthA key U.S. factory gauge unexpectedly contracted for the first time since 2016. The Institute for Supply Management’s purchasing managers index fell to 49.1 in AugustStill, data Thursday showed the services sector is expanding, hiring continues apace and durable goods are being boughtOn Friday, weak August job gains signaled the U.S. labor market’s slowdown is deepening as the trade war with China takes a toll on the economyPresident Donald Trump sought to prod China into doing a trade deal before the U.S. presidential election in November 2020, or face even more difficult negotiations during his potential second termChina and the U.S. announced that face-to-face negotiations aimed at ending their tariff war will be held in Washington in the coming weeks, amid skepticism on both sides that any substantive progress can be madeChina hasn’t requested a delay in tariffs set for Oct. 1 and there are no conditions ahead of upcoming trade talks, White House economic adviser Larry Kudlow told BloombergChina shrugged off Trump’s latest escalation of the tariff war, with state media signaling the government is ready to weather the economic turbulence as no progress to resolve the standoff is in sight. The Trump administration slapped tariffs on roughly $110 billion of Chinese imports on Sept. 1China’s central bank reduced the required reserve ratio by 50bps to the lowest level since 2007, injecting liquidity into an economy facing both a domestic slowdown and trade-war headwinds; the new ratio will take effect on Sept. 16China is filing a complaint at the WTO against U.S. tariffs under the dispute settlement mechanism, the Ministry of Commerce saidChina’s exports unexpectedly contracted in August, with sales to the U.S. tumblingExports decreased 1% in dollar terms from a year earlier, while imports declined 5.6%, leaving a trade surplus of $34.84 billion, the customs administration said Sept. 8. Economists had forecast that exports would grow 2.2%, while imports would shrink by 6.4%. Shipments to the U.S. fell 16% from a year earlierHong Kong’s embattled leader, Carrie Lam, formally withdrew legislation to allow extraditions to ChinaHong Kong cut to AA from AA+ as months of persistent conflict and violence are testing the perimeters and pliability of the “one country, two systems” framework that governs its relationship with China, Fitch says in statementSouth Africa averted a second recession in as many years after economic growth rebounded in the second quarterJPMorgan Chase & Co. will start a phased inclusion of Chinese government debt into its benchmark emerging-market indexes, potentially ushering in a fresh overseas influx into the world’s second-largest bond marketSaudi Arabia removed Energy Minister Khalid Al-Falih from his position as Chairman of Saudi Aramco, the second time his role has been scaled back in less than a week, as the government prepares to sell shares in the state-owned oil companyKing Salman replaced him with his son, Prince Abdulaziz bin Salman, a longtime top Energy Ministry official
China’s foreign-currency holdings rose in August, signaling the pressures from capital outflow remain muted despite the yuan’s rapid depreciationReserves climbed to $3.107 trillion from $3.104 trillion in July, the People’s Bank of ChinaThe outlook for China’s manufacturing sector deteriorated further in August, underlining the weakness in the domestic economy just as a new round of tariffs kicks in. Separate data showed Caixin manufacturing PMI came in at 50.4 in August, above estimate 49.8Economists are downgrading their forecasts for economic growth in China again, to below a level seen as necessary for the Communist Party to meet its own goals in time for its centenary in 2021More Chinese companies are defaulting on private bonds this year as the slowing economy weighs on weaker companiesSouth Korea’s inflation fell to zero for the first time ever and economic growth was revised slightly lower. But the Bank of Korea said inflation will rebound around the end of this year as base effect from agricultural and oil products continues for a whileExports extended their slump in August as an escalating feud with Japan adds to uncertainties for the economy already elevated amid the U.S.-China trade warIndonesia plans to cut the corporate tax rate and scrap a levy on dividends to help companies attract more foreign investment amid a global slowdownThe nation will promote its manufacturing sector to accelerate economic growth and rein in a persistently high current account deficitThere is room for interest-rate cuts aimed at fueling growth in key sectors of the economy, especially manufacturing, according to Bank Indonesia Deputy Governor Dody Budi WaluyoData showed inflation accelerated to a 20-month high of 3.49%, though still within the central bank’s 2.5%-4.5% targetThailand’s Cabinet approves 518.8 billion baht ($17 billion) central budget for fiscal year 2020, starting Oct. 1Finance Minister Uttama Savanayana said the government isn’t worried about the level of household debt but central bank and finance ministry are closely watching the situationThai inflation may fall below a target of 1%-4% this year on low energy prices, Bank of Thailand Assistant Governor Titanun Mallikamas said; August inflation slowed to seven-month low on oil pricesFinance Minister Nirmala Sitharaman is counting on a record $24 billion windfall from the Reserve Bank of India and a budgeted 1.05 trillion-rupee ($15 billion) income from asset sales to fund the fiscal deficit of 3.3% of gross domestic product in the year through March 2020India will gradually consider increasing access to foreign investors to the rupee debt market in the cash as well as derivative segments, Reserve Bank of India Deputy Governor Bibhu Prasad KanungoAn Indian state-owned refiner has swooped in to buy American oil that was en route to China but due to arrive after new tariffs kicked inEconomists cut their forecasts for India’s economic growth and predicted deeper interest-rate cuts after data showed a sharper-than-expected slump in outputIndia raised duty on Malaysia refined palm oil imports to 50%Malaysia’s exports unexpectedly increased in July, up 1.7% on the year compared with estimate 2.5% declinePhilippine’s inflation cooled to a near 3-year low in August and central bank Governor Benjamin Diokno said easing price-gains will be a factor at its rate meeting in SeptemberThe economy is likely to recover in the second half of the year, allowing the central bank to differentiate its policy from peers that are also cutting interest rates, a deputy governor saidTaiwan’s cabinet approved a special budget bill for purchase of new advanced fighter jets, with maximum limit set at NT$250 billion ($8 billion), Ministry of National Defense saidTaiwan continues anti-dumping tariff on China, Korea steel
The pieces are falling into place for Turkey’s central bank to follow its record interest-rate cut with more monetary easing as inflation heads for lows not seen since last year’s currency crashPresident Recep Tayyip Erdogan repeated his expectations that lower borrowing costs would give a boost to Turkey’s sluggish economy, a clear signal to the nation’s central bank a week before it decides on the level of the benchmark interest rateThe nation’s economy fared better than forecast in the second quarter, but growth will likely fall far short of the government’s expectations for the full yearFormer economy czar Ali Babacan is planning to establish his own political party by the end of this year to challenge Erdogan’s 16-year rule, a person close to Babacan saidSouth Africa’s central bank is “comfortable” with its forecast that the economy will grow 0.6% this year, Governor Lesetja Kganyago saidThe nation’s current-account deficit widened in the second quarter to the highest level in more than a year as the trade balance swung to a deficit for the first time since the first quarter of 2018Russia’s central bank lowered its key policy rate by 25bps to 7%, in line with market expectations; policymakers said more monetary easing is possible as inflation fell closer to a 4% targetRobert Mugabe, who ruled Zimbabwe for 37 years and plunged the southern African nation into political and economic chaos as he violently clung to power, has died. He was 95Nigeria wants to offer naira futures of as long as 10 years to help cushion against foreign-exchange risks and attract longer-term funding to Africa’s top oil producerGhana’s central bank has additional space to loosen policy thanks to the global move toward lower interest rates, as long as inflation slows, according to Governor Ernest AddisonLebanon bought itself some time with the market and won a reprieve from a downgrade deeper into junk by S&P Global RatingsA group of international funds including BlueBay Asset Management are clubbing together with Middle Eastern investors, seeking to force Etihad Airways into paying back bonds that funded its overseas affiliatesDubai will set up a committee to balance property supply and demand as a slump in prices weighs on developers in the Middle East’s business hubThe U.S. placed new sanctions on Iran, and a top American official signaled more measures are coming while deflecting questions about French diplomatic efforts meant to help Tehran restart oil salesA senior U.S. Treasury official is in the United Arab Emirates to meet with the chiefs of the country’s banks and shipping companies as the Trump administration seeks to further tighten sanctions against the Iranian regimeEgypt’s stock exchange aims to introduce short selling by December, part of a broader effort to boost liquidity in a market that’s also anticipating a wave of initial public offerings and stake sales by public-sector companiesThe Kuwait Capital Market Authority will start next month a public offering of its 50% stake in the local stock exchange
Argentinians and investors alike are assessing the impact of President Mauricio Macri’s decision to impose capital controls -- a blunt policy reversal aimed at containing the country’s escalating financial crisisThe leftist front-runner for the the country’s presidency said that the country will honor its debts, “as it always has”; the debt problems needed to be resolved without hurting ordinary Argentinians, he saidInternational Monetary Fund is expected to distribute the next tranche of its loan accord after the country fulfilled all the lender’s requirements, Macri saidMSCI says it’s analyzing the impact of capital controls on the accessibility of Argentina’s equity marketsA $15 billion pile of provincial bonds is lurking below the surface of Argentina’s already imposing sovereign debt loadOil- and gas-rich Neuquen province won’t seek to restructure outstanding dollar debt, according to Daniel Marx, a financial adviser to the provinceEscalating financial crisis is prompting economists to replace forecasts for a rebound in growth in 2020 with predictions of a third year of contractionREAD: Here Are the Argentine Notes Affected by the Debt ReprofilingBrazil’s industrial production fell for the third consecutive month in July, frustrating an expected pickup in activity at the start of the third quarter; August inflation slowed from the month before, increasing the chances that the central bank will cut rates further at its Sept. 18 meetingLawmakers introduced a separate bill that will expand the reach of the pension reform proposal and ensure savings of up to 1.4 trillion reais ($340 billion) over a decadeSenate’s Constitution and Justice Committee approved the pension reform bill on WednesdayBrazil is worried that “setbacks” to the Mercosur trade bloc could harm its economic recovery should Argentina’s opposition win the presidency in October, according to Foreign Minister Ernesto AraujoPresident Jair Bolsonaro’s government saw its disapproval rating increase after a number of controversies, including the Amazon fires and the appointment of his son as ambassador to the U.S.Chile’s central bank lowered its benchmark interest rate by 50 basis points to 2%, a nine-year low, and hinted on more reductions to come as it looks to stimulate an economy that has been caught between a global trade war and weakening domestic demandPolicy makers cut their 2019 growth forecast and reiterated the dovish outlook for rates in its quarterly monetary policy reportMain fiscal risk to Mexico comes from state-owned oil company Pemex, which will require much more support than was reflected in government plans, according to Moody’s sovereign analyst Ariane OrtizMexico’s growth will be key for its credit rating, according to OrtizPresident Andres Manuel Lopez Obrador sent Congress a 2020 budget plan on Sunday that assumes a growth scenario many economists see as too optimistic. Mexico’s economy will expand 1.5% to 2.5% in 2020, according to the proposal submitted by Finance Minister Arturo Herrera
--With assistance from Philip Sanders.
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