ECB responds decisively to “protracted” Euro Area weakness—but will it prolong September’s risk rally?; Persistent trade tensions put a spotlight on aggregate financing needs in emerging markets; At close to 90% of GDP, Argentina’s government debt is well above the EM average of 50%; over half is now owned by foreigners; Boom in “sustainable debt” issuance—green is the new gold!

Portfolio flows to Russia are weakly correlated with global flows, likely due to sanctions. Despite the risk of further sanctions, government debt remains attractive to investors, as Russia stands out among EM due to exceptionally low macroeconomic vulnerabilities. In the long run, sanctions can lead to less prudent policies and reduce growth prospects. We expect discussions of Russia sanctions in the US Congress to pick up again in the fall.

We have long argued Argentina’s program is too small, given our estimates for the country’s external funding gap. The principal drivers of that gap are debt amortization and – to a large and rising extent – resident capital flight. Debt reprofiling is unlikely to change these numbers.

Borrowing costs have fallen sharply as a result of policy changes. Lending remains subdued due to concerns over bank asset quality. Credit-fueled growth has increased private sector indebtedness. Banks remain well-capitalized and profitability is set to increase. 

Recession or new normal? Extensive U.S. yield curve inversion feeds concerns about a global growth slowdown; Policy uncertainty continues to weigh on earnings estimates; Low emerging market valuations present opportunities—particularly when combined with credible reform prospects; Mozambique’s debt restructuring--putting a lid on the “tuna bond” can; Sustainable debt issuance set to hit a new record high of over $350 billion this year

There is growing concern over disruption to global supply chains, given the now multiple rounds of tariffs in the US-China trade dispute. Despite all this, China’s current account and trade surplus look robust. This resilience is partly driven by a shift in the composition of exports away from the US and towards destinations like ASEAN and the Euro zone.

Low breakeven oil price for the current account provides buffer against shocks. Introduction of the fiscal rule in 2017 has led to significant reserve accumulation. Debt repayments spiked after the 2014 sanctions but are now less of a concern. However, private sector capital outflows have picked up and may accelerate. Portfolio inflows have returned but are sensitive to sanctions announcements.