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Free AccessFinancials Continue To Underperform As Macro Outlook Deteriorates
- The significant deterioration in the macro outlook has led to an underperformance of EM financials relative to the market, decoupling from LT bond yields in recent months (see chart)
- We previously saw that the rise in LT bond yields since the beginning of 2021 was first associated with an outperformance of EM financials.
- However, even though inflation has continued to surprise positively after the Ukraine invasion, the surge in recession risk globally, particularly in Europe, has left cyclical equities vulnerable.
- Even if we include this week’s tactical bull retracement (partly driven by the consolidation in the US dollar), EM financial stocks are still down over 20% since their January high, breaking below the 300 level in the beginning of the month.
- Next level to watch on the downside (MXEF0FN Index) stands at 262.60, which corresponds to November 2020 lows.
Source: Bloomberg/MNI
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.