Latin America Update: Chile, Brazil and Argentina

The report below comes courtesy of Nouriel Roubini’s team of analysts at RGE.

Marc Chandler submits:The market has been well aware that last year’s massive 442 bln euro 12-month repo operation by the ECB, which accounts for a little more than half of ECB’s outstanding 870 bln euro of liquidity, was set to expire this week. However, the situation is getting a bit more acute. There has been underlying concern that banks in the periphery of Europe are particularly vulnerable because they have come to depend on ECB funding.

Marc Chandler submits:Brazil reported much better than expected February retail sales and this is encouraging expectations of a 75 bp rate hike later this month and allowing the real to extend its winning streak for the fifth consecutive session. The real has now recovered all of the ground it lost in the first several weeks of the year.

Marc Chandler submits:The US dollar is consolidating its post jobs loss against the major currencies, but it softened against most of the Asian currencies. The notable exceptions were the Singapore dollar and Philippine peso, both of which slipped ever so slightly. most of the Asian currencies.

Marc Chandler submits:Tertiary reports are warning of renewed weakness in the US housing sector.On Tuesday, the NAHB Housing Market Index was reported. This little watched survey of home builders tracks present sales, 6-month sales expectations and traffic of prospective buyers (of single family homes). The index ranges from 1 to 100, and it most recently peaked in Sept. 09 at 19.

Marc Chandler submits:The US reported a slew of data and although there are some interesting nuggets, the data is unlikely to alter views on the state of the economy or the likelihood of QEII.CPI was uninspiring, though the core rate slipped to 0.8%, which is the lowest level in nearly 50 years. Of note, the owners equivalent rent was unchanged for the second consecutive month. Apparel prices were unusually weak and medical prices were unusually strong. Retail sales were a bit better than expected.

Marc Chandler submits:Mexico is taking advantage of the investment climate and the near insatiable demand for emerging market credits. The peso may also benefit from actions by other countries, from Brazil to South Korea taking actions to deter hot money inflows.Yesterday. Mexico brought a 100-year bond to market, an unprecedented duration for Latam and a rare issue in general.

Marc Chandler submits:The US dollar is broadly mixed. Poor sentiment toward the greenback, following last week’s soft Beige Book, talk of the potential need for quantitative ease by a Fed official often seen as a hawk, soft Q2 GDP figures, coupled today with fairly positive European PMI readings have conspired to keep the pressure on the dollar in general. The dollar, bloc, sterling and the Scandi currencies are leading the way.