There’s no overarching theme driving sentiment this morning as pockets of news pitch in to keep markets awake ahead of a sleepy session in the Americas. The somewhat surprising RBA hike was the top trading catalyst overnight and a report on Chinese authorities asking state-owned banks to lower deposit rates triggered some slight moves in markets.
At writing, US equity futures are little changed, the USD is mixed but again weaker against the MXN and CAD (up 0.1/2%). Global rates markets are generally firmer, helped by a ~2% decline in oil prices as WTI trades at its lowest point since Friday morning, i.e. more than erasing the spike on the Saudi supply cut announced on Sunday.
Off-calendar developments and headlines (especially in Colombia, see below) will be the main driver of trading sentiment in the continent with no major data of note in the US or Latam; we’re waiting for Brazilian and Colombian inflation data out tomorrow.
The results of the latest Citibanamex survey of economists out later today may be worth a look for possible changes to Banxico rate expectations after last week’s inflation report and meeting minutes (though economists are probably content with their latest projections). Chile’s lower house will again discuss a pension fund withdrawals bill that looks unlikely to pass.
In Colombia, the scandal regarding the sources of financing for President Petro's 2022 presidential has surfaced as an important headwind for the government. Yesterday, in response to these developments, the president of the house of representatives announced that the legislative process of the government’s social reforms will be suspended.
The government insists that the government’s projects will continue, and lawmakers are still scheduled to have a debate on the health reform today at 15ET. Note that the health reform has passed only through one of four debates. Meanwhile, the labour and pension reforms haven’t started the debate process. The suspension of discussion would delay Petro’s reform push even more, again demonstrating the checks and balances that are in place in Colombia.
Additionally, these developments reduce the risk of having significant changes in economic policy. Regional elections on October 29 are an important event on the horizon for the government. Were the government’s party to lose support, its will become even more difficult to negotiate reforms in Congress.
—Juan Manuel Herrera
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.