July was a great month for virtually all asset classes (at least those tracked by Deutsche Bank) with the notable exception of what, which tumbled after surging previously. As DB's Jim Reid writes, there was strong performance for most assets in the bank's sample as various market volatility measures trended lower over the past month to touch new all-time lows. 33 out of 39 assets posted positive total returns in local currency terms while all assets except for one (wheat) saw positive returns in USD terms after a tough month for the Greenback (-2.9%). In summary commodities and equities make up the top of both the local currency and USD performance tables while European assets (equities and government bonds) crowd at the bottom of the LC performance table. However the strong performance of the Euro (and USD weakness more generally) lifted most European assets into more positive territory in USD terms. Thus in USD terms the worst performers were mostly US credit and treasuries, rounded out by two relatively underperforming agricultural commodities in Corn (+0.1%) and Wheat (-7%). In terms of the key movers on the month, oil was one of the strongest performers as it led all assets in local currency terms (WTI +9%; Brent: +8%). It should be noted that nearly all of the gains came at the tail end of the month following news of Saudi Arabia’s pledge to reduce crude exports in August. Elsewhere the Bovespa (+11%) and FTSE MIB (+8%) matched gains in oil to top the USD table following a rally in the underlying equities (Bovespa LC: +5%; FTSE MIB LC: +5%) and strong performance in their respective currencies (BRL +6%; EUR +3%). Broader EM equities also saw strong performance in general (MSCI EM: +6%). An important dynamic to note is the fact that despite the poor performance of broader European assets in LC terms (and middling performance in USD terms), European banks actually saw strong returns on the month with gains of +3% in LC terms and over +6% in USD terms as Euro area economic momentum continues to hold strong and Eurozone government bond yields have risen following Draghi’s speech at Sintra. Now taking a look at the other end of the performance table. US Dollar weakness in July in general weighed on non-US equities with the DAX (-2%), Greece Athex (-1%), Nikkei (-0.5%) and STOXX 600 (-0.3%) making up four out of only six assets that saw negative total returns in LC terms. European government bonds (Bunds 0.0%; BTPs +0.6%) also underperformed other assets in LC terms as they remained mostly flat on the month. However as noted above, much of their poor performance in LC terms was mitigated in USD terms as most currencies advanced against the dollar. The main losers on the month in USD terms were US credit and treasuries that broadly saw limited LC returns and were dragged further down the table by USD weakness that propelled other assets. Corn (+0.1%) and wheat (-7%) were the worst performers on the month in USD terms however as weather conditions were reported to boost supply. Now a quick look at YTD returns. In USD terms the top of the leaderboard is dominated by European equities with Greek equities (+43%), Spanish equities (+29%) and Italian equities (+28%) making up the top 3. Broader European equities are up +20% on the year with European banks outperforming with YTD gains of +27%. In comparison the S&P 500 has posted returns of 12% and is actually the second worst performing DM equity market this year with only the Nikkei trailing it by a small margin. EM equities are also broadly delivering strong performance YTD with the MSCI EM index posting gains of +26% in USD terms. Over in bond markets European fixed income has broadly outperformed relative to the US. European government bonds have broadly posted returns of 10-13% in USD terms in comparison to Treasury returns of only 2%, while European credit has posted returns of between 13-19% in comparison to US credit returns ranging between 4-7% YTD. However it should be noted that much of the gains in European assets can be attributed to the strong performance of the Euro which is now up 12% YTD. Finally over in commodity markets wheat remains the top performer (+16%) despite its poor performance in July, while oil (WTI -7%; Brent -10% YTD) remains the worst performing commodity and at the bottom of YTD performance table in general despite its late rally in the past month. Source: DB
With Brazilian Bovespa futures already halted for trading earlier after crashing 10% at the open... ... the circuit breakers has moved to the cash market, where moments ago the Bovespa was similarly halted after crashing 10% at the open. For those asking, here are the Brazilian circuit breaker mechanics: Cash: Rule 1: IBOV down 10% (60,786) triggers 30 minutes pause Rule 2: IBOV down 15% (57,409) triggers 1 hour pause Rule 3: IBOV down 20% (54,032) will be subject to Stock Exchange evaluation, likely it shuts down for the day And this is how Brazil just erased all of the year's gains in an instant (and per the EWZ which is down -15%, more pain is coming once the circuit breaker unlocks). Just before the circuit breaker was triggered, state controlled companies Cemig, Banco do Brasil and Petrobras fell 42%, 25% and 19%, respectively according to BBG. Banks Itau and Bradesco fell 18% and 19%, respectively, and JBS fell 15% as the Brazilian Bdloobath continued.. And even more dramatic chart is the 3x Levered Brazil ETF, BRZU, which was down 50% moments ago: At the same time Brazil's default risk is soaring, as shown by the country's CDS> So what now? According to the Citi EM Strategy team there will be a quick enough resolution of this issue to take the other side of those large moves in the short term and would stay on the sidelines for now. We expect joint intervention by the National Treasury in the form of bond buybacks and BCB through FX swaps, similar to actions taken during the peak of the political crisis in September 2015. However, they will not be enough to stop the sell-off, in our view. And some additional thoughts from Citi FX: EM FX is closely watching BRL, with the FX open ahead at 08:00 EDT / 13:00 BST. This is no surprise after we explained What happened to BRL here. Since that update, there’s more headlines coming out with talk of impeachment calls, and Senator Neves being suspended. However nothing confirmed yet. A full blown political crisis may just be unfolding. There are concerns about the circuit breaker. Note that the Brazil circuit breaker allows only trading on the exchange at the limit price for the day (6% on the day). It can trade lower than that but not higher, for the rest of the day. In the meantime, Brazilian assets continue to suffer. Check out the chart below from Bloomberg on Brazil’s EUR bonds. Meanwhile Brazil CDS is absolutely soaring even as we type, with the 10y spiking to 356, after staying around the 299 level earlier today. And for the BRL market open, it’s hard to say. USDBRL closed at 3.1395 and we’re certainly in for a wild ride. Our trader notes that on the first future, 3.30/3.33 is being eyed. As a reminder of what our local trader said overnight: “I would expect a round of stops at the opening, can imagine little initial fading appetite from investors who still have ammo (mostly foreigners, I would guess) and a potential joint intervention by BCB and NT (in case price action is as bad as some people are saying).”
Бразильская биржа BM&F Bovespa объявила об изменениях в формуле расчета основного фондового индекса Ibovespa. Изменение будет первым с 1968 г., что должно позволить более эффективно отражать изменение стоимости акций.
Бразильская биржа BM&F Bovespa объявила об изменениях в формуле расчета основного фондового индекса Ibovespa. Изменение будет первым с 1968 г., что должно позволить более эффективно отражать изменение стоимости акций. Согласно плану акции будут взвешены по новой формуле, которая учитывает рыночную капитализацию и ликвидность акций. Ликвидность будет рассчитываться на основе так называемого "индекса обращаемости", одна треть которого будет основана на общем количестве сделок по акции, а две трети основаны на общем объеме сделок по акции. Индекс Ibovespa включает в себя самые торгуемые бразильские акции, но его формула не менялась с 1968 г. Изменения в индексе будут осуществляться поэтапно в течение двух ребалансировок портфеля начиная со следующего года. В течение первого периода, который будет длиться с января по конец апреля, веса индекса будут рассчитываться с использованием средних значений, полученных с помощью старой и новой формул, а новый метод будет полностью реализован с мая 2014 г.
"I will not invest in Brazil because of government`s mistakes." - in 6º Congresso Internacional dos Mercados Financeiros e de Capitais da BM&F Bovespa Related ETFs: iShares Brazil ETF (EWZ), iShares MSCI Emerging Markets (EEM) Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.
Will they or won't they raise interest rates in Brazil Wednesday night? That is the question on the minds of emerging market bond traders and the interest rate futures traders in the pits at the BM&F Bovespa exchange in São Paulo.