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Let the flares not deceive, investors remain attentive

Let the flares not deceive, investors remain attentive
Let the flares not deceive, investors remain attentive

Celebration (moderate) in markets, after the first law

“Applause, medal and hug”, but they say in the market that now the best is coming, or the worst?, we will see, the truth is that as was foreseeable after the approval of the first law that the Government achieves in the Senate, although it remains to be seen what will happen in the Deputies , investors moderately celebrated the official victory in Congress. Without a doubt a great step, the first with signs of ending well, but the tenor of the country’s economic, financial and social numbers do not allow for relaxation or anything like that. On trading desks, both local and those oriented to emerging markets, a climate of prudence prevails. There is still no widespread air of FOMO feeling (fear of missing out), in financial jargon a kind of fear of missing out. It could be said that, from what is heard at the tables and among professional analysts, the prevailing feeling is to be attentive. Of course, isolating the idiosyncratic context, the consensus is to be “long” with Argentina, but the buts are so many that the thermal sensation is that of an attentive market. The Government received a good hand of cards, we will have to see how it plays them, especially if Deputies pave the way for it.

Discounting the good CPI data for May, warnings are already echoing that June would come above last month’s private projections. Attention remains on how the Central Bank will continue to gain reserves after the last few days of oblivion. Now the Government and the economic team must focus on showing and communicating how this libertarian experiment continues, especially in fiscal and monetary-exchange matters. The thing is that in fiscal matters, the market wants to know who manages it, because the sanction of the pension indexation project in Deputies injected a lot of uncertainty in that sense. There is talk of country risk levels of about 1,000 points at the end of the year and 700 points by the middle of next year, as the aspirational goals that the Government should achieve, with a view to the debt maturities of 2025. This in relation to the current country risk premium that remains at 1,400 points. There is still a long way to go, it’s not about uncorking champagne.

In terms of economic activity, the question remains: does it start or not? Economists from various backgrounds, although more or less close to the ruling party, report that there seem to be signs that a bottom was reached in April-May, where they highlight that industry and construction stopped their declines in April after months in the red and marked tenuous monthly rebounds, which together with the harvest could be a stepping stone to begin the recovery. But When it comes to hard numbers, they highlight the impact of the recession on the labor market, which lost 120,000 net jobs between December 2023 and March 2024.where public employees (-96,000) and private employees (-69,000) registered a loss of almost 165,000 positions while the self-employed added some 40,000 jobs, moderating the fall in aggregate employment.

What international markets are looking at and Sturzenegger’s little story

In what was a week full of events, of greater or lesser magnitude – although not yet at the level to which the ’90s badly accustomed market men or some of the happy days of Cambiemos – libertarian conclaves such as the of Cato Institute and that of the traditional EFI Expo, a kind of the emblematic summits of ADEBA, FIEL, or the IAEF of the ’80s/’90s, but updated. Many comments about the Fed and its boss, Jerome Powellwho after one of the best inflation reports of the year in the US, his press conference was a bucket of cold water, especially for Biden’s electoral aspirations, maintaining a cautious tone regarding optimism with the decline in inflation. inflation and pointing out that a rate cut will only be seen in 2024 since the Committee does not have the necessary confidence to begin a more aggressive path of reduction. Now everyone expects the cut in September.

These meetings, especially Cato’s at the Hilton, were attended by visitors from the first world who, in addition to debating the speed of the Fed, also commented on the coffee break that Markets are also attentive to the risks of a trade war between the EU and China, loans to Ukraine and the G7 and the failed peace agreements between Israel and Hamas. They also look at the Japanese central bank (BoJ) meeting on Friday and the talks on reducing stimulus that hurt Japanese stocks. Of course, the most frequently mentioned new topic was the extent to which other central bankers can distance themselves from the Fed. Comments on the neutral mood despite the rallies on Wall Street and data on negative stock flows in the US. , Turkey and Poland, while purchases were concentrated in Mexico, Korea and Malaysia, on the stock side, but In the world of fixed income, the sale of Korean bonds, the sale of Canada and the purchase of Chile and Argentina stood out.

The meeting between Cato and the Libertad y Progreso Foundation obviously brought together international and local libertarian figures, in what was almost a party celebrating the arrival of Javier Mileias the beachhead in the region, just when the 80th anniversary of D-Day was celebrated. At the local level, legislators such as Luciano Laspina and others, together with the director of the foundation, Aldo Abramand obviously to the President’s mentor, Benegas Lynchfather, he even hung around the former Menemist official Jorge Pereyra from Olazábal. In addition to the Government’s senior staff (Javier Milei, Luis Caputo, Diana Mondino) also participated Federico Sturzeneggerthe Nobel Prize in Economics James Heckman and Cato researchers. There was color like the closing of Marian Tupyin perfect Spanish, shouting “Long live freedom, damn it!”

FEDERICO STURZENEGGER.jpg

The minister without portfolio was enthusiastic with his presentation at the meeting between Cato and the Libertad y Progreso Foundation.

Telam

Undoubtedly, the Minister’s presentation without portfolio, Sturzenegger, was the most interesting. He took the Denmarkhic case as a lighthouse and blamed the Argentine decay to concentrated groups of interests contrary to deregulation. He spoke of “Bermuda Triangle” that has the country tied up and whose vertices are the business corporations, unionism and the PJ (manager of the caste, the conservative party of Argentina, which in 2023 endorsed Sergio Massa). Another to follow is the Chilean Axel Kaiser who explained that the defenders of freedom have focused too much on the economic and have forgotten the soul of classical liberalism. In the Argentine case, UCeDé, CEMA, and others only provided an economic discourse with almost no moral argument in defense of liberalism or freedom. There was a story from the former president of the BCRA that resonated in the audience when he went to Australia to study how they had gone from a closed, regulated and stagnant economy to an open, flexible and thriving one: Fede got together with Paul Keating (former Prime Minister and former Minister of Economy) who explained to him that from a distance it seemed that the reforms of the ’80s/’90s were very well planned and implemented like Swiss clockwork, however, nothing could be further from the truth, because every night I came home feeling like I had spent the day skiing on one ski.

Doubts with the BCRA and ironies about the “crawling peg”

In La Rural, where economists, financiers and public men of all generations met, they talked about everything, but more about the domestic side. Many doubts about the sayings of the BCRA that now, after the last tender of Lecaps the process of negative real rate was over. But as two managers explained at a lunch close to the event, the market operates with two rates in the short section, that of Passes and that of Lecaps. The pass rate is clearly below the current and expected inflation rate, so the Government would refer to that of the Lecaps, which also raises doubts. One of the diners recalled that the real positive rates were a request from the IMF so when the Staff Report is known there will be more details.

In another meeting, he was ironic that the Government maintains its monthly devaluation scheme of 2% of the nominal exchange rate but the ROFEX futures contracts anticipate an acceleration in the “crawling peg”, with an increase rate of around 4% monthly until December. In this regard, an economist with ties to Washington commented that at the IIF, the alma mater Robin Brooks, came out to warn that Argentina and Egypt were trapped in the same vicious circle, they devalue and then immediately after, they re-peg to the dollar and then high inflation causes the real exchange rate to rise again. Argentina is already there. Egypt is getting to that point. And again. While for him, Mexico is an enigma and he questioned why the April trade deficit was the worst in history: there are many things that do not add up in Mexico, to which the markets are now waking up. And regarding Turkey, he maintained that it was the largest “carry trade” of the moment, because the 12-month rate differential is well above the rest of the emerging markets and also well above the levels after the crisis of the crisis. 2018 balance of payments.

Pass of the year and color

At the Cato gala dinner, the pass, perhaps, of the year was also discussed: Michael Krautzberger leaves BlackRock to go to Allianz Global Investors as new Global Fixed Income CIO, replacing Franck Dixmier who completed 30 years at the firm, and will supervise the management of a bond portfolio of 171,000 million euros. There was also time for colorful data provided by a visitor, based in California, where Democrats do not know how to prevent the theft of firefighter’s water hydrants that are sold on the black market as scrap metal. He said that since 2023, more than 300 fire hydrants have been stolen and this year they continue to increase, and that each hydrant costs approximately $3,500.

Source: Ambito

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