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  • Emerging Markets Debt Daily

    Venezuela Hit with Harsh Sanctions

    Natalia Gurushina ,Economist, Emerging Markets Fixed Income
    January 29, 2019
     

    The U.S. administration imposed new harsh sanctions on Venezuela’s state-owned oil company, PDVSA. China rolled out another set of “drip” measures to support consumption.

    The U.S. administration toughened its stance against Venezuela’s President Nicolas Maduro by imposing new sanctions on the state-owned oil company, PDVSA. The sanctions are quite harsh, banning U.S. persons from doing business with PDVSA and effectively blocking PDVSA’s assets in the U.S. (the funds may be released in the event of political change). The situation on the ground remains very fluid, with both Maduro and designated President Juan Guaido calling for new demonstrations. Venezuela’s designated charge d’affairs, Carlos Alfredo Vecchio, is expected to meet with U.S. Vice President Mike Pence this afternoon.

    As the markets brace for the release of the next batch of China’s activity surveys later this week, authorities rolled out a new set of measures to boost consumption. The measures fall into the “drip stimulus” category – loosening local restrictions on second-hand autos, encouraging upgrades to environmentally friendly home appliances, etc. – but every little bit helps, given that consumption now accounts for more than 70% of China’s gross domestic product (GDP) growth.

    In the U.S., the Conference Board Consumer Confidence Index1 disappointed in January, moderating more than expected and dropping to the lowest level since mid-2017 (see chart below). The release had limited market implications – given the focus on this week’s Federal Open Market Committee meeting – but it contributed to the popular narrative about the end of U.S. growth outperformance.

     

    Chart at a Glance

    U.S. Consumer Confidence Index

    Source: Bloomberg LP

  • IMPORTANT DEFINITIONS & DISCLOSURES  

    PMI – Purchasing Managers’ Index: economic indicators derived from monthly surveys of private sector companies; ISM – Institute for Supply Management PMI: ISM releases an index based on more than 400 purchasing and supply managers surveys; both in the manufacturing and non-manufacturing industries; CPI – Consumer Price Index: an index of the variation in prices paid by typical consumers for retail goods and other items; PPI – Producer Price Index: a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Personal Consumption Expenditures Price Index: one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: an American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options.; GBI-EM – JP Morgan’s Government Bond Index – Emerging Markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging market governments.; EMBI – JP Morgan’s Emerging Market Bond Index: JP Morgan's index of dollar-denominated sovereign bonds issued by a selection of emerging market countries; EMBIG - JP Morgan’s Emerging Market Bond Index Global: tracks total returns for traded external debt instruments in emerging markets.

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