The bond market shows traders predict only an 8 percent chance the Federal Reserve will hike interest rates in October following a drastically weaker-than-expected U.S. jobs data. The December probability now stands at 31 percent, down from 44 percent before the release of the jobs report. Traders have been pushing back forecasts for the move this year, underscoring the lack of consensus over when officials will shift policy. The likelihood of a Fed rate increase is currently about 40 percent for the January meeting and 55 percent for the March gathering.
Developing-country stocks rose for a fourth day on Monday, gearing for their longest winning streak in five months, with benchmark stock indexes in Brazil, India, and Russia leading the rally. The MSCI Emerging Market Index gained 2 percent, trimming this year’s drop to 14 percent. A gauge tracking emerging-market currencies climbed 0.6 percent in the second day of gains with the Russian ruble leading the advance as commodities gained. The risk premium investors demand to buy developing-country debt over U.S. Treasuries fell 4 basis points (bps) to 429 bps.
High Income Economies
The U.S., Japan and 10 other countries on the Pacific Rim reached agreement on the Trans-Pacific Partnership. The pact is the largest trade agreement in two decades, bringing together two of the three largest economies of the world and covering about 40 percent of the global economy. The agreement breaks new ground in several areas, including enforceable provisions on environmental and labor standards.
The Eurozone services purchasing manager’s index was revised down for September to 53.7 from 54 (Markit), bringing down the composite index to 53.6 in September, compared with 54.3 in August. The index points to continued expansion, but economic dynamism in September appears to be easing, with retail sales also flat in August.
Inflation in Russia was slightly lower at 15.7 percent in September (y/y), compared with 15.8 percent in August. The cost of food, housing and transportation is increasing at a slower pace. Core inflation was unchanged at 16.6 percent.
Europe and Central Asia
Bulgarian government revised this year’s economic growth forecast to 2 percent from 1.4 percent on improved exports. GDP is forecasted to expand 2.3 percent in 2016, 2.5 percent in 2017, and 2.7 percent in 2018. This year’s average annual inflation was revised to -0.7 percent from -0.6 percent.
Ghana has postponed a Eurobond issue of up to $1.5 billion it had expected to launch last Friday amid challenging market conditions. Investors were demanding a high premium despite a guarantee by the International Development Association, a member of the World Bank group, for the bond of $400 million. Ghana’s planned issuance was mainly to refinance its existing debt.