LATIN AMERICA: Ecuador: Fitch Upgrade – Positive
(ECUA; Caa3/B-/B-)
• Fitch praised the low government debt/GDP at 51%, which was commensurate with peers in the ‘B’ rating category of 51.4% and higher than the 67.2% median for lower rated peers. Also positive was the interest payments to revenue ratio of 9.7% that was below the ‘B’ median of 15% which was helpful for fiscal metrics.
• ECUA 35s were quoted at $79.65, or 11% yield, up a point after the news. Interesting to note that El Salvador (ELSALV; B3/B-/B-) with the same rating at both S&P and Fitch has 2035s yielding 7.17%, nearly 400bp lower.
• Fitch cited high political uncertainty, weak rule of law and weak control of corruption as part of its ESG-governance score which still weighs down overall ratings. Improvements in those areas as well as implementation of economic and fiscal reforms to reduce government financing needs could be factors in a future upgrade.
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US: US Corporations Optimistic About Economy
Semafor reports, “US corporations appear optimistic about the country’s economy, marking a turnaround from CEOs’ post-“Liberation Day” warnings. In this week’s slew of earnings reports, companies ranging from automakers (General Motors) to defense firms (Northrop Grumman) to consumer giants (Phillip Morris) raised their profit outlooks.”
- Semafor continues, “The disclosures offer investors critical signals about the US’ economic health in the absence of government data during the federal shutdown. And thanks to a “resilient customer base,” spending is also likely to hold up during the upcoming Western holiday season, Walmart US’ CEO told Semafor last week. The upbeat reports have sent stocks to record highs, though analysts are watching whether the ongoing shutdown and Big Tech earnings next week could cool that momentum.”
Figure 1: US Consumer Sentiment Index
Source: Semafor, University of Michigan, Federal Reserve Bank of St. Louis
US OUTLOOK/OPINION: A Slightly Hawkish Update To CPI Expectations For Friday
Updating the analyst tables from the MNI US CPI Preview to include two more hawkish unrounded entries from Morgan Stanley and NatWest.
- The median unrounded estimate shifts from 0.40 to 0.41% M/M for headline and from 0.30 to 0.32% M/M for core CPI in September.
- The latter narrows the expected moderation from what was a slight upward surprise of 0.35% M/M in August.
USDJPY TECHS: Holding On To Its Recent Gains
- RES 4: 154.39 76.4% retracement of the Jan 10 - Apr 22 bear leg
- RES 3: 153.82 1.618 proj of the Sep 17 - 26 - Oct 1 price swing
- RES 2: 152.61/153.27 High Oct 14 / 10 and the bull trigger
- RES 1: 152.17 High Oct 21
- PRICE: 151.93 @ 15:35 BST Oct 22
- SUP 1: 149.38 Low Oct 17
- SUP 2: 149.05 50-day EMA
- SUP 3: 147.82 High Oct 3
- SUP 4: 147.20 Trendline support drawn from the Apr 22 low
USDJPY is holding on to its recent gains. The latest rally highlights a bullish reversal - last Friday’s price pattern is a hammer candle formation. The pattern signals the end of a corrective pullback that started Oct 10, and highlights the fact that support at the 50-day EMA, at 149.05, remains intact. The bull trigger is at 153.27, the Oct 10 high. The 50-day EMA is key support. A clear break of it would be bearish.
