• Fitch Solutions will be paying close attention to the mid-November inflation print from Mexico, which is forecasted to have a significant impact on the next policy rate decision by the Banco de México (Banxico).
• October’s inflation data suggests that price growth in Mexico has peaked; it showed a deceleration from 8.7% y-o-y in September – itself flat with August – to 8.4%, in line with the view that inflation will begin to cool by the end of the year.
• The Agency argued that Banxico would slow the pace of its rate hiking cycle from 75 bps to 50bps at its next meeting on December 15, due in part to cooling inflationary pressure. However, if inflation comes in line with consensus expectations at 8.3% in the first half of November, it would reinforce Fitch’s view that Banxico will moderate its hiking in December.
• On the contrary, if inflation surprises to the upside, either at the headline or the core (8.4% in October), this would pose a risk to its view that the overnight policy rate will end the year at 10.50%, and that inflation will stand at 8.4% at end-2022.
• Notably, the preliminary print showed the economy grew 4.2% y-o-y in Q3 2022, which led to the Agency revising its forecast for the year from 2.0% to 2.7%. While the finalised print may shift the Q3 2022 number slightly, the changes are typically minor, and should not affect the annual forecast.

(Source: Fitch Solutions)

• Oil prices were down on Monday, but reversed some losses after hitting their lowest since early January on conflicting reports about whether Saudi Arabia and other OPEC oil producers are considering a half-million barrel daily output increase.
• Brent crude futures for January fell $1.41, or 1.6%, to $86.21 a barrel by 12:16 p.m. EST (1716 GMT). U.S. West Texas Intermediate (WTI) crude futures for December were down $1.69, or 2.1%, at $78.39 ahead of the contract's expiry later on Monday.
• Both benchmarks had plunged by more than $5 a barrel earlier in the session after the Wall Street Journal reported an increase of up to 500,000 barrels per day will be considered at the OPEC+ meeting on Dec. 4.
• Oil pared some losses following a Saudi state news agency report that the kingdom was not discussing such a boost. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, recently cut production targets and de facto leader Saudi Arabia's energy minister was quoted this month as saying the group will remain cautious.
• Releasing more oil amid weak Chinese fuel demand and U.S. dollar strength could move the market deeper into contango, encouraging more oil to go into storage and pushing prices still lower.

(Source: Reuters)

• The world's largest investment banks expect global economic growth to slow further in 2023 following a year roiled by war and soaring inflation that triggered one of the fastest monetary policy tightening cycles in recent times.
• The U.S. Federal Reserve has increased interest rates by 375 basis points this year since rolling out its first hike in March. This has sparked worries about a recession, even as the central bank is expected to temper its pace of hikes.
• Real GDP (annual Y/Y) forecasts for 2023:

• Morgan Stanley sees the Fed delivering its first rate cut by December 2023, taking the benchmark rate to 4.375% by the end of that year. Barclays sees the rate between 4.25% and 4.5% by the end of next year, following a rate cut.

(Source: Reuters)

• The Bank of Jamaica (BOJ) has increased its policy rate by an additional 50bps to 7.00% effective November 18. While the key external drivers of headline inflation, such as grains and shipping prices, continued to trend downwards, the Bank has not yet seen the full pass-through to domestic food prices. This was evident in Jamaica’s inflation rate at October 2022 of 9.9% which was higher than the outturn at September 2022 of 9.3%.
• The decision also factored in the fact that monetary tightening among Jamaica’s main trading partners continued at a fast pace. On 2 November 2022, the Federal Reserve Board (Fed) raised its interest rate target by 75 basis points (bps) and signalled further rate increases. This policy stance could cause capital outflows from Jamaica and a faster pace of exchange rate depreciation if domestic monetary policy is not aligned correctly.
• However, after twelve months into its tightening cycle, the Bank judges that it is appropriate to pause further policy rate increases and to watch the pass-through effects on deposit and loan rates. However, the pause is conditional on the MPC seeing more pass-through of international commodity price reductions to domestic prices and on the Fed not exceeding their targeted rate increase for 2022(4.4%) and 2023 (4.6%).
• The current policy rate is in line with forecast Fitch’s Solution’s forecast that the policy rate for Jamaica would be 7.00% by the end of 2022 and stay constant at that level for 2023. 

(Source: BOJ & NCBCM Research)

• FESCO and FTNA have reported strong net profit for this earnings season. FESCO reported net profit growth of 189.3% to $281.08Mn for its six months ended September 30, 2022, while FTNA reported an increase of 43.3% to $87.58Mn for its first quarter ended September 30, 2022.
• FESCO’s profitability was supported by the broader economic reopening, which positively affected the transportation sector and higher prices for its products. Additionally, the company continues to benefit from the opening of additional service stations. Meanwhile, seasonality trends such as back-to-school sales would have contributed positively to Fontana’s strong first quarter.
• On another note, both FESCO and FTNA’s cost of sales would have increased by 209.7% and 21.8%, respectively; however, both companies’ margins would remain fairly unchanged. FESCO saw its gross profit margin remain at 3.0%, while FTNA’s declined slightly to 64.2% from 66.2%.
• Going forward, both companies are expected to perform well in the coming quarters. FESCO will continue to invest in real assets and equipment to support the growth of its service station network and its promised entry into the LPG industry. Additionally, Fontana will benefit from seasonality trends, especially as we approach the Christmas season.
• FESCO’s stock price has increased the most since the start of the year, with a price appreciation of 72.66%, while FTNA’s increased by 14.19%. At the current P/E multiplies, both stocks trade above the Junior Market Distribution Sector Average of 15.9x, with FESCO trading at 27.5x, and FTNA trading at 16.7x. 

(Sources: Company Financials & NCBCM Research)

• Colombia's economic growth is likely to have slowed in the third quarter of the year due to more moderate domestic consumption amid rising interest rates and rampant inflation. According to the median of 15 analysts' estimates, Latin America's fourth-largest economy expanded by 6.7% between July and September.
• Despite the slowing, the median forecast was slightly higher than projections by the country's central bank, which estimated third-quarter economic growth at 6.4%. "Although the economy still shows symptoms of powerful aggregate demand, there is slowing as consumers become more cautious as inflation continues to put pressure on their wallets, and entrepreneurs assume higher financing costs," said Wilson Tovar, chief economist for brokerage Acciones y Valores.
• Colombia's central bank has hiked its benchmark interest rate to 11%, the highest level in 21 years, in a bid to slow inflation. The Andean country saw 12-month inflation hit 12.22% in October, the highest level since 1999.
• Median estimates suggest Colombia's economy could grow by 7.70% this year before slowing to 1.60% in 2023, as central banks raise rates around the world to cool inflation. The Central Bank is expected to continue hiking rates at least until the first quarter of 2023 and right up to levels close to 12.5% or 13% as there are no signs of inflation slowing in the economy.

(Source: Reuters)

• The Caribbean Export Development Agency (Caribbean Export) has signed a Memorandum of Understanding (MOU) with the World Trade Center Miami (WTCM) and Canning House agreeing on a framework to sustain trade and investment promotion efforts in the Caribbean.
• This presents an opportunity to deepen the economic trade and investment relationships between the UK and Latin America. This means that Caribbean Investment Forum (CARIFORUM) businesses, workers, and producers will need to collaborate and work smarter to successfully compete globally and enter new markets for trade and the attraction of investment. 
• Most significantly, Florida, for many reasons, including its logistic positioning, large Caribbean diaspora, is an important gateway for Caribbean investment and trade and home to the WTCM.
• Further, president Ivan Barrios said that the Caribbean was very important to the South Florida community and that the signing of the MOU was timely given a new series of seminars being planned for the Caribbean titled 'How to export your products to the United States using Miami as platform'.
• The Caribbean Investment Forum placed strategic focus on sectors such as the digital economy, renewable energy, agriculture technology (AgTech) and logistics and transportation; all sectors deemed critical for the sustainable development of Caribbean economies.

(Source: Trinidad Express Newspaper)

• Federal Reserve Governor Christopher Waller said Wednesday he’s open to reducing the level of interest rate increases soon, so long as the economic data cooperates.
• The rate-setting Federal Open Market Committee is set to meet Dec. 13-14. Market expectations are running high that policymakers will approve another rate hike, but this time opting for a 0.5 percentage point, or 50 basis point, move. That would come after approving four consecutive 0.75 percentage point increases.
• “Looking toward the FOMC’s December meeting, the data of the past few weeks have made me more comfortable considering stepping down to a 50-basis-point hike,” Waller said in prepared remarks for an event in Phoenix. “But I won’t be making a judgment about that until I see more data, including the next PCE inflation report and the next jobs report.” A basis point equals 0.01 percentage point.
• Investors have grown optimistic that a lower-than-expected increase in October’s consumer price index reading is indicative that inflation is cooling. Headline CPI increased 0.4% for the month and 7.7% from a year ago, while the core reading excluding food and energy rose 0.3% and 6.3%, respectively. All the readings were lower than market estimates.

(Source: CNBC)

• The number of Americans filing new claims for unemployment benefits fell last week, showing widespread layoffs remain low despite a surge in technology-sector job cuts that has raised fears of an imminent recession.
• The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy's health, suggested the labor market remained tight. That, together with solid consumer spending, keeps the Federal Reserve on track to continue raising interest rates, though at a slower pace amid signs inflation was starting to subside.
• Initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 222,000 for the week ended Nov. 12. Economists polled by Reuters had forecast 225,000 claims for the latest week.
• There has been an increase in layoffs in the technology sector, with Twitter, Amazon (AMZN.O) and Meta (META.O), the parent of Facebook, announcing thousands of job cuts this month. Companies in interest-rate sensitive sectors like housing and finance are also letting workers go.
• The layoffs have so far not been evident in official data. Unadjusted claims dropped 6,101 to 199,603 last week. Economists say businesses outside the technology and housing sectors are hoarding workers after difficulties finding labor in the aftermath of the COVID-19 pandemic. With 1.9 job openings for every unemployed person in September, some of the workers being laid off are probably finding new employment quickly.

(Source: Reuters)

• For October 2022, the All-Jamaica Consumer Price Index (CPI) increased by 1.5%, the second-highest increase for 2022. This contributed to a point-to-point inflation rate of 9.9% for October, a slight jump relative to September’s point-to-point inflation figure of 9.3%.
• For October, the rise in monthly inflation was largely driven by an increase in the ‘Housing, Water, Electricity, Gas and Other Fuels’ (+3.4%) and Food and Non-Alcoholic Beverages’ (+2.0 %) divisions. These increases were due mainly to higher rates for electricity, water, and sewage, as well as higher costs for agricultural products.
• Though there was an uptick in the point-to-point outturn in October, the current rate of 9.9% is keeping with expectations, as the BOJ noted that inflation was projected to stabilize in the range of 9.0% to 11.0% for the remainder of 2022. 
• On November 18, 2022, the BOJ will host its monetary policy meeting in which it is expected to sustain its hawkish stance.  Given the increase in inflation for October and the recent 75bps Fed Fund rate hike it is expected that the BOJ will raise rates by another 50 bps. This increase would bring the policy rate to 7.00%, which would be consistent with Fitch’s forecast.

(Source: Statin and NCBCM Research)