› News for April 16.

News for April 16.

[justify]Emerging markets are hot these days as the speculative carry-trade flows hit record-high levels. However, not all of the regions are attractive to foreign investors. For Example, Russia appeared among leaders in the capital outflow from the local equity market among BRICS countries. According to Sberbank CIB agency, non-residential funds sold out Russian shares for a total amount of $167 million last week. At the same time, the Russian central bank reported a large volume of capital inflow in government bonds. One of the largest US exchange fund - VanEck Vectors Russia ETF - received orders to withdraw funds from Russian equities for a total amount of $66 million in one single day, while the overall amount of capital outflow exceeded $163 million since the beginning of the month. Analysts explain that divergence by the fact that investors are worried about an upcoming sanctions package by the United States. Russian equities market remains one of the cheapest markets among BRICS countries as investors kept decreasing the number of investments in the country, lowering the portfolio percentage by 0.29%. Economists noted that despite an attractive yearly yield of 7%, the Russian equities market is 50% cheaper than other emerging markets.

Meantime, the US Federal Reserve tries to keep its independence despite political pressure. US President Donald Trump twitted several times that he wants to see a lower level of the interest rates in the leading world’s economy. In Trumps’ opinion, that might bring another support for the local economy, as well as gain an additional competitive advantage in the external markets. However, FOMC officials do not agree with that assumption. Several Fed members spoke last week, stating that it’s too early to talk about a rate cut in such robust economic growth.
Moreover, some of the hawks were talking about a rate hike instead. The main concern of policymakers is that the inflationary pressure hasn’t gone anywhere, and the latest macroeconomic data confirmed that - CPI and PPI grew faster than economists were predicting in March. Trump does not want to give up, and he’s trying to fulfil two vacant positions in the FOMC with loyal people, who would be ready to support Trump’s policy, even though it might hurt the economic growth at the end of the day. For instance, Stephen Moore is one of such candidates; he used to talk about a rate cut several times before. Nevertheless, the US Federal Reserve remains one of the most independent central banks of the world.

European Union failed to implement any real measures to avoid US sanctions against Iran, despite lots of talks and activity limitations. Iranian officials blamed EU policymakers that they did not gather the political will to withstand ‘sanctionary terrorism’ by the United States. EU was preparing a mechanism to avoid oil embargo against Iran for 9 months, and lots of headlines were dedicated to that topic. However, none of the EU countries was brave enough to go against US political pressure, as everyone refused to host such a fund. There is an INSTEX system (Instrument in Support of Trade Exchanges) located in Paris, but it does not suggest transferring funds to Iran to buy oil. The only option is to make a change of oil to food and medicine, but no cash flows to be sent.

The largest European Investor is about to leave Russian Rouble tumbling. Norge pension fund, which is the reaches sovereign fund across the globe, is going to get rid of savings in emerging markets currencies including rouble. The fund is getting filled by revenue from oil exports since 1998, and it’s already saved $125 thousand for every Norge citizen. However, the country’s finance ministry decided to impose a portfolio reform, which was discussed since 2017. The plan is to cancel savings in EM countries’ government bonds but to keep investing in bonds nominated in reserve currencies such as US dollar, Euro, British Pound and Japanese Yen. Several minor coins will also remain in the portfolio. FOre example, the fund is considering to save investments in Australian and Canadian dollars, as well as Korean Won and Swedish Krone. Bonds nominated in 15 EM currencies will be sold off - Brasile Real, Mexican Peso, Russian Rouble and so on. Norge Pension Fund used to be the second largest holder of Russian government debt with a total amount of $1.3 billion. The only fund with more significant investments in Russian government debt was US-based BlackRock with a total amount of $2.526 billion.

Bitcoin printed an enormous spike in the price, and some of the analysts started talking about a bearish retracement. The main problem for the technical analysis was that the bullish rally was too fast, even for traditional cryptocurrencies’ volatility. Prudence point to an extremely overbought sentiment noticed in last week, underlining that a healthy retracement is needed before continuing the upside run. The same picture was seen in December 2017, when the Bitcoin price reached $20000 in the crypto rush. However, a whole bloodbath happened in January 2018 when crypto investors decided to get rid of the investments and turn cryptocurrencies into hard cash. The problem was that even automated trading platforms failed to find any selling price as quotes were changing so fast. In April 2019, Bitcoin price grew by 20% in two days, while some of the observers noted an algorithmic mistake as one of the reasons for such price spike.

Source: Ethereum World News

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