Emerging Markets Daily - April 28
Dollar Surges to Two Decade High, Looming Debt Crisis Haunts World, Putin Threatens Countries that Help Ukraine, Global Airlines Rising, Copper Bears Circle
The Top 5 Stories Shaping Emerging Markets from Global Media - April 28
Dollar Surges to Highest Level in 20 Years
Financial Times
“The US dollar surged to its highest level in two decades on Thursday as investors ramped up bets that aggressive interest rate rises from the Federal Reserve will leave other big central banks trailing far in its wake.”
“…Thursday’s move brings the dollar’s gains to more than 8 per cent this year, as markets position for a growing gulf in monetary policy between the US and other major economies. The immediate catalyst for the move came from the Bank of Japan, which on Thursday underlined its determination to buck the global trend towards tighter monetary policy by sticking with its promise to keep bond yields close to zero.”
“The euro and sterling have also suffered as investors have increasingly begun to question whether the European Central Bank and Bank of England will be able to lift interest rates very far this year, with the eurozone’s energy-importing economy threatened by high oil prices and the fallout from Russia’s invasion of Ukraine.” The FT reports.
The Looming Debt Crisis About to Make Everything Worse
Bloomberg
“It’s hard to imagine a more chaotic world than the one we’re in right now—what with Russia’s war on Ukraine, a Covid-19 pandemic that won’t quit and the lockdowns spreading across China as a result. Now, add to the mix a debt crisis that’s threatening to cripple emerging markets. In the words of a former International Monetary Fund official earlier this month, ‘We can see this train wreck coming towards us.’”
“In this week’s episode of Stephanomics, Washington-based reporter Eric Martin explores a burgeoning economic crisis in the developing world, one exacerbated by the debt loads assumed by low-income nations as they try to cope with the coronavirus.”
“In Tunis, a mother of two children relates how she comes away empty-handed when out searching for sugar and oil; and in Rio de Janeiro, a market vendor shares his struggle to buy vegetables in a nation with 12% inflation. All told, 60% of low-income countries are in debt distress or at high risk of it, according to the World Bank.”
“In a follow-up discussion on the crisis, Tim Adams, chief executive of the Institute of International Finance, tells host Stephanie Flanders about the particular risks facing Turkey and Egypt, both heavily dependent on food imports and reeling from fallout from the war. Finally, in a dispatch from France, reporters share why President Emmanuel Macron has precious little time to celebrate his victory over far-right opponent Marine Le Pen.” Bloomberg reports.
Putin Threatens ‘Lightning Fast’ Response to Nations that Intervene in its War on on Ukraine. Biden Asks Congress for $33 B in New Funding for Ukraine.
CNBC
“Russia’s President Vladimir Putin has warned the West of a ‘lightning fast’ response to any country that intervenes in its war against Ukraine war and creates what he called ‘strategic threats for Russia.’”
“‘We have all the instruments [to respond] that no one can boast of ... we’re going to use them if we have to,’ he said, in what has widely been seen as an allusion to Russia’s arsenal of intercontinental ballistic missiles and nuclear weapons.”
“Russia shocked the European community by halting gas supplies to Poland and Bulgaria on Wednesday because they had refused to pay for the gas in Russian rubles, as Moscow demanded.”
“The move comes as tensions remain high between Western allies and Russia after Foreign Minister Sergey Lavrov on Monday said the threat of a nuclear war is very significant and the risks should not be underestimated.”
“U.S. President Joe Biden has asked Congress to approve $33 billion in additional money for the Ukraine war, which includes funding for U.S. military support to the embattled nation and a mix of direct cash and supplies for Ukraine.” CNBC reports.
Global Airline Capacity Rises to its Highest In 2022, Inching Back Toward Pre-Pandemic Levels
The National
“Global airlines’ capacity rose 3 per cent to 88.5 million this week, the highest level in 2022, as the Chinese domestic demand rebounds despite continued lockdowns in Asia’s largest travel market, aviation data provider OAG said.”
“Planned capacity over the next three months continues to edge closer to the 2019 mark, reflecting airlines’ confidence in the air travel rebound, the firm said in a report.”
“‘We still have a long and increasingly harder journey back to the 109 million seats per week in 2019; if, indeed, we ever reach back to that point. But compared to last year, things are looking a lot better in most markets,’ John Grant, OAG chief analyst, wrote in a blog post on the firm’s website.”
“Airlines around the world are ramping up operations as demand rebounds on the back of easing travel restrictions. Airlines globally added 2.5 million seats in the week to Monday, almost half of which are in China, OAG data revealed.” Deena Kamel reports.
Bears Circling Copper Market as Demand Fears Grow
Hellenic Shipping News
“Copper prices were under pressure Monday morning, with London Metal Exchange (LME) three-month metal falling below the $10,000 per tonne level for the first time in a month.”
“Copper has spent the last few weeks hanging in suspended animation, the price too high for buyers to chase the market, supply too tight for sellers to risk shorting it. The risk equilibrium appears to be shifting, however, with signs that funds are starting to raise bear bets on the CME copper contract.”
“Supply concerns haven’t gone away. Far from it. Protests at two big copper mines in Peru knocked out a fifth of the country’s production capacity last week before the government imposed a state of emergency to regain control of the Cuajone mine.”
“However, the market focus is rapidly turning to the demand side of the copper equation, particularly in China, where lockdowns are already braking growth sharply in the world’s largest metals user. Fund managers have been lifting bearish bets on the CME copper contract over the last couple of weeks.” Hellenic Shipping News reports.
"The only lies for which we are truly punished are those we tell ourselves."
— V.S. Naipaul (In a Free State)