Espresso for April 26th
QUOTE OF THE DAY
“The biggest bear risk to the oil market right now is that Iran’s ramp-up accelerates and then Saudi Arabia does the same,” Citibank analysts.
WHAT MARKETS ARE TALKING ABOUT
MEXICAN AUTOPARTS STOCKS SHOW SOLID EARNINGS
The party continues. Autoparts manufacturers in Mexico are posting solid 1Q16 results. Automotive divisions within ALFA, KUO, RASSINI, and GISSA benefited from the depreciation of the MXN vs. the USD (+7.8% QoQ) and continued to impress analysts. Automotive production during the first two months of the year grew 4.5% YoY in NAFTA, mainly driven by US growth, as Mexican production declined during the quarter, given that technical shutdowns related to maintenance and the Easter holidays took place during the quarter. Sales remain strong (+3.9% YoY during 1Q16), production should follow in the coming quarters.
COLOMBIA’S NEW LINE-UP
President Juan Manuel Santos named a new cabinet, “a cabinet of peace”, to strengthen his government as peace talks with FARC rebels enter their final phase and as the economy struggles with declining oil revenue and mounting inflation. The entire cabinet resigned last week, standard procedure before the president shuffles his cabinet. Finance Minister Mauricio Cardenas kept his post in the cabinet, as did Defense Minister Luis Carlos and Foreign Minister Maria Angela Holguin. New appointments are Jorge Londono as justice minister, Clara Lopez as labor minister, and Maria Claudia Lacouture as trade and tourism minister. Santos named German Arce as the new mines and energy minister last week. The cabinet shuffle comes as the center-right Santos’ approval ratings remain depressed and talks with the FARC failed to meet a self-imposed March 23 deadline.
According to Bloomberg, Argentina is considering submitting a bill to congress that would allow the state pension manager to sell as much as 70.6 billion pesos ($5 billion) of shares in publicly traded companies. President Macri’s government may submit the proposal before July or issue a decree to modify the pension fund’s rules. The fund owns stakes of more than 20% in companies including Banco Macro, Banco de Galicia y Buenos Aires and Grupo Clarin. (Check our heat map to see how some of these stocks have performed recently.) The Fondo de Garantia de Sustentabilidad, Anses’ investment fund, had 612.2 billion pesos of assets at the end of October, mostly Argentine government bonds.
BRAZIL ANALYSTS FORECAST RECESSION DEEPENING
Brazil economists for the first time forecast the recession will deepen from 2015. The latest survey by the Central Bank showed that the private sector cut its 2016 GDP growth forecasts to -3.88% YoY from -3.8% previously, according to the weekly Focus survey conducted April 22. As for 2017, analysts expect the Brazilian economy to grow 0.3% (10 bps above last week’s survey). Economists now forecast inflation to end this year at a lower level (from 7.08 to 6.98%), before slowing down to 5.80% in 2017—13 bps below last week’s survey. As for the Selic rate, analysts see it ending the year at 13.25% (vs. 13.38% in the previous survey).