Let’s begin with several developments in emerging markets.
1. Emerging market bonds performed superbly through the Brexit fiasco and continue to rally. Here is the Brazil and Russia 10yr local currency government bond yield.
Indeed, in the equity markets, there was a drastic contrast between developed and emerging markets volatility during the past few days.
On Tuesday, as the risk-off sentiment eased, emerging markets currencies rallied sharply. Here is the Brazilian real – up 2.6% vs. the dollar.
Source: @barchart (chart shows the number of reais one dollar buys)
Part of the reason for the real’s rally was some hawkish messaging from Brazil’s central bank.
Business confidence in Brazil clearly shows signs of stabilization. Analysts expect economic activity to follow.
An ugly political battle is unfolding in Venezuela where Maduro is attempting to dissolve congress (by influencing the courts). This action is in response to the legislative body trying to recall him.
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