Markets around the globe rebounded Friday on comments from Fed
Chairman Bernanke but still finished lower for the week. The
iShares MSCI Emerging Markets ETF (
) matched the performance in the S&P500 with a loss of about
0.4% while Brazilian markets lagged with the iShares MSCI Brazil (
) losing 1.5% on the week.
[caption id="attachment_64470" align="alignright" width="300"
caption="Gazprom drilling rig in the Yamburg gas and condensate
field, West Siberia"]
The Russian market continued to outperform on higher crude
prices and better than expected industrial production. The Market
Vectors Russia ETF (
) finished the week up more than 2.0%.
Emerging markets investors will turn to Brazil this week as the
country's struggling economy is further outlined by important GDP
and trade reports. The central bank meets on Wednesday, with
markets fully expecting another cut in rates to historic lows.
Inflation data out on Thursday, expected higher, may restrain the
government's ability for further stimulus. With growth slowing to
2.8% in 2011 and 2%, at best this year, many emerging markets
investors are questioning the country's status as an 'emerging'
Catalysts from developed markets this week include the German
IFO Index on Monday, GDP in the United States on Wednesday and
factory orders on Friday. Monetary authorities hold their annual
retreat at Jackson Hole and both Fed President Bernanke and ECB
President Draghi are scheduled to talk towards the end of the week.
The market has been bid up lately, largely on hopes of further
stimulus putting the risk to a disappointment if central banks
deliver less than expected.
Monday, August 27
Brazil reports its weekly trade balance and the Central Bank's
survey of market expectations on Monday to open a strong week of
reports. The monetary authorities reported last week that
foreign direct investment in the country jumped to
last month, the highest since December 2010. A weaker real helped
to increase the trade surplus to $2.88 billion on an increase in
exports. While a lower currency has helped exporters, it may start
showing through in higher inflation numbers as well.
Reporting earnings on Monday are Le Gaga Holdings (
) and Perfect World (
Tuesday, August 28
South Africa reports GDP on Tuesday with expectations for growth
to increase at a 2.7% annual rate against 2.1% reported last
IMF warned last week that growth would slow
unless the emerging markets nation passed labor reform aimed at
decreasing unemployment, now around 25%. Inflation has been fairly
manageable and between the central bank's target of 3% to 6%,
leaving room for monetary easing.
Wednesday, August 29
Brazil's central bank is expected to cut its target for the
benchmark SELIC rate to 7.5% from an already historic low of 8.0%.
The government recently
stepped up its stimulus efforts
with another package aimed at increasing private investment in
infrastructure. Previous measures and reduced rates may have
started to work through the economy with the monthly growth report
rising by 0.75% in June, the fastest rate of growth since March
2011. Emerging markets investors may look to a short-term rebound
in equity shares though longer-term risk of runaway inflation and
policy risk still threatens the market.
Reporting earnings are JA Solar Holdings (
) and Yingli Green Energy (
Thursday, August 30
Poland is expected to report a slowdown in second quarter growth
with consensus estimates at 2.9% versus growth of 3.5% in the first
three months of the year. The only country in the Eurozone to raise
rates this year saw job growth slow to zero in July helping to
lower inflation to 4%. While the central bank may not lower rates
at its September meeting, a cut before the end of the year is
likely and should help to boost equities. While growth of 2.9%
seems little to get excited about, the economy is one of the
healthiest in the region and equities are relatively cheap due to
regional weakness. The iShares MSCI Poland ETF (
) trades for about 12 times trailing earnings of stocks in the
emerging markets fund.
The Getulio Vargas Foundation, a private research group in
Brazil, will release its inflation report for the country on
Thursday with expectations of an increase to 7.7% annualized,
compared to 6.67% last month.
Brazil will also report credit growth and loan defaults after
delinquencies fell slightly to 5.8% in June against a record 6.0%
recorded in May. The government has been putting pressure on banks
to lower rates even as defaults in consumer and commercial loans
Chile reports copper production and its manufacturing index on
Thursday with emerging markets investors eyeing the market after an
agreement was reached last week to end
10-months of negotiations
between state-owned Codelco and mining behemoth Anglo American.
Last week, the country reported robust growth of 5.5% for the
second quarter with domestic demand carrying the economy through
weaker global growth. Copper production represents about 10% of the
economy and about a third of world production.
China Sunergy (
) is expected to report earnings on Thursday.
Friday, August 31
India is expected to report second quarter GDP growth of 5.3%,
matching a decade low reported in the previous quarter. Risk is
firmly to a downside surprise off a number of factors. The recent
monsoon season was significantly drier than expected, threatening
rice and other agricultural harvests. Power outages last month left
up to 50% of the country without electricity and could affect
growth. The rupee has been one of the worst performing currencies
in emerging markets this year and has helped to keep inflation too
high for significant stimulus measures by monetary authorities.
Brazil's statistics agency, the IBGE, will release official
second quarter GDP growth with expectations for just 0.7% on a year
over year basis.