Emerging market encounters its worst three months since 2015. Currencies, stocks, and bonds are facing risks from the threats of trade wars, tightening U.S. monetary policy, elections in Latin America, and an overall weaker global growth outlook. Whether the emerging markets are set for a rebound or a deeper sell-off, in the short term, the asset classes are at the mercy of trade headlines.
Many emerging markets’ central banks have responded to currency depreciation. Argentina increased monetary policy rate by 675 basis points to 40 percent, Turkey increased its interest rates by 125 basis points to 17.75 percent, other emerging market countries such as India, Indonesia, and the Philippines also tightened their monetary policies.
Stocks for emerging markets are suffering from a significant sell-off, the market value of 24 emerging markets (tracked by MSCI) has fallen by more than $2 trillion this year. Exchange-traded funds also turned pessimistic as withdrawals from iShares MSCI Emerging Markets EFT exceeded $5 trillion in the second quarter. Short sellers are moving in as they added more than $1.8 trillion also in the last quarter.
The EU Council has canceled the press conference at the end of the 1st day of the EU summit after the Italian Prime Minister Giuseppe Conte threatens to veto the final statement if Italy doesn’t get what it wants.
The Italians want an end to the Dublin rules which dictate asylum seekers must make their request in the first EU state they set foot in. Italians also demand that migrants arriving by boat are distributed among EU countries before they disembark.
The veto would pose a serious issue as it would nullify not just all aspects of migration policy reached by the 28 leaders, but also their conclusions on matters in other topics such as security and defence, economy and finance, innovation and digital, external relations, and even Brexit.
The veto would, more importantly, leave Angela Merkel to return empty-handed, forcing a showdown with the Bavarian party that is threatening to defy her and potentially split the coalition, potentially ending her political career.
As of writing this, the European members just came to an agreement regarding migration. The member states agreed to increase border security, set up holding centers to handle asylum seekers, and speed up the process of determining whether people have the right to asylum and expelling those who don't.
Make sure to keep an eye on the rest of the EU Summit.
►On 28 June, Reserve Bank of New Zealand announced to leave interest rates at 1.75 percent. The New Zealand Dollar fell to a 2 year low on the comment that the RBNZ is prepared to cut rates from if growth continues to slow.
►On Wednesday, commercial crime investigation department's director, Amar Singh told reporters the Malaysian police seized about 1.1 billion ringgits ($273 million) of items in raids linked to former Prime Minister, Najib Razak, surrounding the 1MDB investigation.
► The bilateral summit between president Trump and Vladimir Putin will be held on July 16, in Helsinki, Finland. Vice President Mike Pence said Wednesday that he expects Trump to discuss Russian interference in U.S. elections, the Kremlin’s military incursions into Ukraine and Syria and other touchy subjects when he meets with Putin.
►$30 billion worth of Federal Reserve notes/bonds are maturing on 30th June. The large bond maturity might significantly influence the price of S&P500.
►Reserve Bank of Australia is set to release their interest rate decision on 3 July, the current rate sits at 1.5%.
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