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27 Aug 2013
Flash: Resolution between commodity indicators and EM due - RBS
FXstreet.com (Barcelona) - A resolution in the diverging trends between commodity indicators and EM market assets in the next few months is due, according to Greg Gibbs, FX Trading Strategist at RBS.
Key Quotes
"Either EM stabilises, perhaps on a view that Chinese growth momentum is more assured, growth in major economies is improved and the Fed is likely to move slowly with QE tapering, pushing down US long term yields. Ongoing QE policy in Japan, improving external demand, supporting EM export markets, might help EM capital markets improve."
"On the other hand, the fundamental position on some large EM markets continues to see capital exit, China’s renewed growth
stability may falter and just the knowledge that the Fed is moving towards an end to QE purchases may extend a deeper slide in EM that pulls commodity markets, commodity currencies, and potentially global equities to some extent down."
"At this point the market prefers the later scenario and remains deeply sceptical on China. Reports yesterday from the Chinese government that it plans to speed up infrastructure spending in the country’s west this year, and comments from the Chinese Statistics offices spokesperson saying growth indicators had improved and growth is on target to reach 7.5% this year were essentially ignored by the market."
Key Quotes
"Either EM stabilises, perhaps on a view that Chinese growth momentum is more assured, growth in major economies is improved and the Fed is likely to move slowly with QE tapering, pushing down US long term yields. Ongoing QE policy in Japan, improving external demand, supporting EM export markets, might help EM capital markets improve."
"On the other hand, the fundamental position on some large EM markets continues to see capital exit, China’s renewed growth
stability may falter and just the knowledge that the Fed is moving towards an end to QE purchases may extend a deeper slide in EM that pulls commodity markets, commodity currencies, and potentially global equities to some extent down."
"At this point the market prefers the later scenario and remains deeply sceptical on China. Reports yesterday from the Chinese government that it plans to speed up infrastructure spending in the country’s west this year, and comments from the Chinese Statistics offices spokesperson saying growth indicators had improved and growth is on target to reach 7.5% this year were essentially ignored by the market."