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Thursday, 13 September 2018

More What We’re Tracking on 13 September 2018

Oil is hurtling toward USD 80 as a “once in a lifetime” hurricane barrels toward the eastern seaboard of the United States. But Hurricane Florence is only one of the factors contributing to jitters in oil markets this fall: Look at US sanctions on Iran taking effect in November, a slowdown in shale production in America, uncertainty in demand growth, and the bets that hedgies are taking. Meanwhile, OPEC itself is freaked out about “trade tensions, monetary tightening by central banks and the financial problems of some emerging nations that ‘constitute challenges to the current global economic growth trend.’” Dive deeper with the Financial Times and Bloomberg.

Crypto is tanking, with Bloomberg declaring that the Great Crypto Crash of 2018 is now worse than the dotcom crash of nearly two decades ago as a key crypto index has now fallen 80% from its January peak. The crypto tourists are fleeing, the Wall Street Journal adds, and while those who piled in looking for a 100x return “are in for a rude awakening,” we’ve only scratched the surface of what cryptocurrencies could do to the economy.

**#9 Success secret of the last man standing on Wall Street: JP Morgan’s Jamie Dimon will be the last pre-financial crisis CEO of a major Wall Street bank when Lloyd Blankfein exits Goldman Sachs later this month in favour of his favourite DJ. One of the most interesting object lessons for leaders of service business in an interview with the Financial Times to mark the 10-year anniversary of the crisis: Rivals and boosters alike agree that Dimon’s success is in no small part thanks to his ability to makes clients feel good about how highly their business is prized.” Read JPMorgan: defying attempts to end ‘too big to fail.’

Can the EM “contagion” spread to developed economies? Voices that seem to think so are getting louder, according to Bloomberg. For starters, an extended downturn in EM asset prices could weigh on the prices of counterpart assets in more mature economies, says ING chief Asia economist Rob Carnell. “Developed markets are living on borrowed time to some extent.” JPMorgan says that Asia’s fate — which largely hinges on the threat of a trade war between the US and China — will be a huge determining factor in whether the current crisis in emerging markets seeps into the developed world. The supply chain disruption that a trade war could cause would leave Asia and other mature economies “relatively more vulnerable.”

Elsewhere in EM: Bargain hunters are picking over Argentina and Turkey. The Financial Times shines the spotlight on Argentina with a solid piece on pockets that may hold opportunities amid signs of “nascent stability” (and the ever-present threat of recession). Meanwhile, the Wall Street Journal cautions that “bargain hunters in Turkey, Argentina struggle with inflation … Turkish companies [are trying] to keep a lid on prices while in Buenos Aires there is strong demand for higher wages.” It will sound very familiar indeed to all of us who lived through Egypt’s currency crunch, inflation crisis, interest rate hikes and the time it has taken for wages (and corporate earnings) to start catching up. Ditto the Catch-22 Turkey faces if it hikes interest rates on Thursday: It’s a chance to stabilize the TYR, but will also guarantee higher borrowing costs for the state and bad news for corporate earnings and investment.

Are you an EM newb? Start with this quick, bullet-pointed primer on some of the top emerging markets, courtesy the FT.

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