Morning Commentary: FOMC, oil prices remain in focus; Turkey under pressure; African banks stable

By Christine Van Dusen

Atlanta, Dec. 13 – Emerging markets investors kept their eye on oil prices and the Federal Open Market Committee on a calmer Tuesday for the asset class.

“We’re starting on a calmer note, but all eyes are on the FOMC that will gather later today for its two-day meeting,” a London-based analyst said. “With the recent rate moves on our mind, the key focus will be on the FOMC’s interpretation of the recent events and economic outlook.”

Oil prices retreated from their recent peak, he said, “but Brent remains above $55 per barrel. Oil markets are likely to move into a deficit in the first half of 2017.”

Bonds from Turkey remained under pressure on Tuesday, following the release of surprisingly weak economic data for the third quarter. Turkey was also eyed as several E.U. members pushed for a freeze on the sovereign’s membership.

“The bid is unlikely to be successful when E.U. leaders are scheduled to meet on Thursday,” according to a report from Schildershoven Finance BV.

Looking to Brazil, the corruption scandal continued with headlines saying that the president was mentioned in Odebrecht SA’s leniency agreement “many times,” Schildershoven said.

“This announcement negatively affects the political climate in the country,” the report said. “Opposition leaders are seeking different ways to impeach Michel Temer.”

This came as Brazilian senators began their final debate on Temer’s proposed 20-year public spending cap, which is expected to be implemented.

“Coalition among lawmakers is strong,” the report said.

African banks eyed

From Africa, Moody’s Investors Service reported that the outlook for the banking sector looks stable for 2017.

“Rising credit risk is a major concern, and loan quality pressures are likely to persist in 2017. However, Moody's notes that high asset risks will be partly mitigated by banks' broadly stable profitability and capital metrics,” Schildershoven said in a report.

“We remain neutral on African banks’ eurobonds, as they are fairly priced at the moment with some risk of investment climate deterioration in the region in near future,” the report said.

© 2015 Prospect News.
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