EM debt pares early gains as growth and trade worries overshadow OPEC supply cut

By Rebecca Melvin

New York, Dec. 7 – Emerging markets debt closed out the week at its lows of the session after a stronger opening on Friday. Investors were initially sanguine about Friday’s U.S. jobs report and the OPEC and Russia agreement to cut production. But later renewed worries about global growth and U.S.-China trade pulled markets lower.

For the week, EM debt was down in tandem with equities, which were torpedoed by growth and trade concerns.

The slide in equities “definitely had an impact on general sentiment, which obviously feeds through to EM credit,” the source said about the past week’s market action. “But I think people continue to have their own independent concerns on EM credit, so it’s not always correlated to equity.”

The trade war is of particular concern for EM markets, said David Woo, Bank of America Merrill Lynch’s head of global rates, FX, and emerging markets fixed income strategy & economics.

He explained that the U.S. dollar might not perform so well in 2019 but that won’t mean an improved picture for EM debt, which was hurt by the strengthening dollar starting last spring. China and its currency and broader currency moves are also of concern.

A change in the decoupling is expected, because the U.S. midterm election results are likely to results in

Meanwhile the Organization of Petroleum Exporting Countries and Russia on Friday agreed to cut production by 1.2 million barrels per day, a significant reduction.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.