The emerging markets crisis continues apace:
“In the past six months, some of the world’s fastest-growing economies have found themselves flat on the floor, gasping for breath and, in one case, seeking help from the global financial rescue centre otherwise known as the International Monetary Fund.
“Argentina’s $50bn bailout by the Washington-based lender of last resort is the most extreme event so far, but it sits alongside the dramatic collapse of the Turkish lira, a recession in South Africa and dire economic predictions for the Philippines, Indonesia and Mexico.
“Making matters worse, the US is poised to slap tariffs as high as 25% on as much as $200bn worth of Chinese goods. If the US goes ahead, Beijing has already threatened to retaliate, which would only incense President Donald Trump further. This tit-for-tat might only end when tariffs are applied to the entire $500bn of Chinese goods imported by America each year.
“In response, the stock markets of many developing nations have slumped in value, leaving investors to ask themselves whether they are witnessing an emerging-markets meltdown akin to the Asian crisis of 1997: a panic that wrecked the finances of several hedge funds and proved to be an hors d’oeuvre before the dotcom crash of 1999 and the global financial crisis of 2008.”
“A sell-off in Chinese shares pulled Asian equities to a 14-month trough on Monday as investors braced for a potentially damaging escalation in the Sino-U.S. tariff row after U.S. President Donald Trump raised the stakes in the dispute with Beijing.”
“The economic policies being pursued by the U.S. and China could bring about a massive slowdown in global growth, according to Britain’s top former bank regulator. Economic growth in the U.S. remains robust in 2018, yet in much of the rest of the world signs of deteriorating momentum have emerged since the start of the year.”
“The rupee weakened further to hit a fresh low of 72.48 against the US currency, falling 75 paise in late morning deals Monday on rising crude oil prices, strengthening dollar and a widened current account deficit… The domestic unit witnessed intense volatility and traded between 72.07 and hit all-time low of 72.48 during morning deals.”
“Pakistan’s central bank is dangerously low on foreign currency… the country’s imports are still outpacing it’s exports. That is making it difficult to maintain foreign debt repayments.”
“The financial crisis affecting developing countries arrived in full-scale fashion in our region last week when the Indonesian economy experienced shocks reminiscent of the Asian crisis 20 years ago. With the crisis coming so close to home, it is time to contemplate what may unfold in the near future and list measures to respond to each scenario, so that we are not taken by surprise.”
“Egypt’s total foreign debt rose by 17.2 percent to 92.64 billion U.S. dollars by the end of June from 79.02 billion dollars at the same time last year, said Egyptian Prime Minister Mostafa Madbouly on Sunday. The country’s external debt marked an over 10-billion-dollar rise in three months, from 88.2 billion dollars at the end of March, the Prime Minister told Al-Watan, an independent daily newspaper.”
“President Omar al-Bashir dissolved the Sudanese government on Sunday in a bid to fix its crisis-hit economy. The announcement included a cut in the number of ministries to 21 from 31, a presidential statement said late on Sunday. The shake-up comes as Khartoum looks to cut back expenditure to tackle a severe hard currency shortage and economic downturn.”
“Hundreds of Venezuelan migrants have crossed back over the border with Brazil in the last few days after a violent incident in Boa Vista, the capital of Roraima state. Most said they were leaving because they feared for their lives after a young man was lynched, accused of killing a local man during a robbery. They were picked up by buses sent by the Venezuelan government.”
“Representative Jair Bolsonaro, one of the frontrunners in October’s presidential election, was stabbed on Thursday while on the campaign trail… Sympathy generated by it, and the likely withdrawal of Lula, who though leading in the polls, is expected to give up his own campaign bid, means that Bolsonaro will probably advance to a run-off and victory.”
“With unemployment around 9 per cent and consumer prices surging, some Argentines are again turning to barter clubs, which first emerged during the collapse nearly two decades ago. The tumbling peso has pushed up prices for fuel and, in turn, transportation costs. That has affected food prices in a country where most grains and other goods are transported in trucks. Inflation is expected to reach an annual rate of more than 40 per cent this year, the Central Bank says.”
“The Conservatives face a “catastrophic split” if Theresa May relies on Labour votes to push her Chequers plan through parliament, one of the prime minister’s most persistent critics has warned, as the conflict within the party over Brexit intensified.”
“Sweden’s ruling centre-left party is leading in preliminary results but achieved its worst ever share of the ballot in a general election, as nearly a fifth of voters backed the far-right Sweden Democrats. As the count neared completion on Monday morning, all indications are that it will be a hung parliament…”
“Italy’s economy is in such a fragile state that even a minor recession could be very dangerous, according to a former director at the International Monetary Fund (IMF). Italy’s coalition government is poised to present its 2019 budget next month, setting out its economic and financial plans for the coming year.”
“Governments and central banks may also lack the firepower to mount a response to a future crisis on the scale of 2008, having lowered interest rates and injected trillions into the economy.
“Didier Borowski, head of macroeconomic research at asset manager Amundi, argues risks are now being shouldered by investors, not banks.
““Central banks won’t act as a buyer of last resort forever, so at the end of the day investors may underestimate the level of risk to which they are exposed,” he says. “We are not well equipped to survive the next crisis, we’ve already used the tools for this fight – fiscal and monetary policy.””