Espresso for May 4th
QUOTE OF THE DAY
“May the 4th be with you,” LATAM PM Staff.
WHAT MARKETS ARE TALKING ABOUT
TRUMP BECOMES PRESUMPTIVE REPUBLICAN NOMINEE
Donald Trump became the presumptive Republican presidential nominee on Tuesday after driving his top rival, Texas Senator Ted Cruz, from the race with a comfortable Indiana primary win. Trump’s Indiana win will presumably allow him to secure the 1,237 delegates needed to win the nomination outright next month and avoid a fight at the party’s national convention in July. His larger hurdle will be trying to mend a deeply fractured party following a brutal primary fight. Cruz announced that he’d halt his presidential campaign after Trump’s victory became apparent. Trump’s nomination (but still unlikely presidency) means trouble for Mexico. We wrote a note on that (here).
MEXICO’S CENTRAL BANK DECISION TOMORROW
Mexico’s central bank is expected to hold its key lending rate steady on Thursday, as central bankers will announced their decision at 13:00 local time. All 25 analysts surveyed by Reuters said they expect the Banco de Mexico to keep the benchmark interest rate at 3.75%. Despite the massive depreciation of the MXN against the USD (32% in 2 years), annual inflation (3.1% through March) and the key interest rate-recently lifted by 50bps to 3.75%-are slightly above all-time lows. Before the first quarter’s uptick, consumer prices had been declining in 2015 to a rate as low as 2.13% year-on-year. This was a major achievement for the central bank, which has a 3% ±1% target, which failed to meet in 2014.
PETROBRAS SELLS ASSETS
Brazil’s state-run oil firm PETROBRAS concluded the sale of a 67.2 percent stake in Petrobras Argentina SA to Argentina’s Pampa Energia for $892 million, according to a securities filing. PETROBRAS (PBR) also sold all of Petrobras Chile Distribucion Ltda to Southern Cross Group for about $490 million, the company said. As per the political front, Aldemir Bendine, PETROBRAS’s CEO, will remain if Temer succeeds Dilma Rousseff. Michel Temer would not immediately replace PETROBRAS’s CEO, Aldemir Bendine, if President Dilma Rousseff is removed from office.
BRAZIL’S INDUSTRIAL PRODUCTION PLUMMETS
Brazil’s industrial production dropped in March for the 25th consecutive month (‐11.4% YoY) to an 11.6% YOY decline in 1Q16–its sharpest post-Lehman contraction. After posting a 7.5% YoY gain during the first 9 months of 2015, somewhat preventing the overall industries from a steeper decline, the extractive industries showed a negative performance for the 6th consecutive month, falling 16.6% YOY in March to a 1Q16 retreat of ‐15.2%. As for manufacturing, it has been unable to post a positive reading since February 2014, falling 10.6% YoY in March. uring 1Q16, the activity fell 11.0% YoY (versus ‐9.8% YoY in 2015).