• Providers of environment, social and governance (ESG) ratings on companies will be asked to apply a voluntary best practice code as a first step to regulating the sector, Britain's Financial Conduct Authority (FCA) said on Tuesday.
• Trillions of dollars have flowed into sustainable investments globally using unregulated ESG ratings on companies as a guide for their 'green' credentials, leaving regulators worried about greenwashing or over inflated ESG claims.
• Britain's government is considering giving the FCA powers to directly regulate ESG ratings providers.
• In the meantime, the FCA said it wants the sector to develop and follow a voluntary code of conduct to increase transparency, ensure good governance and that conflicts of interest are properly managed with sufficiently robust systems and controls.
• The code will reflect recommendations from the global securities regulatory body IOSCO, and developments in Japan and the European Union, the FCA said.

(Source: Reuters)

• The number of Americans filing new claims for jobless benefits increased to a three-month high last week amid rising layoffs in the technology sector, but that likely does not suggest a material shift in labour market conditions, which remain tight.
• Economists urged against reading too much into the rise in weekly unemployment benefit claims reported by the Labor Department on Wednesday, noting the data tend to be volatile at the start of the holiday season as companies temporarily close or slow hiring. Claims remain in line with pre-pandemic levels.
• "It's certainly possible that layoffs are helping to boost increases in claims filings," said Isfar Munir, an economist at Citigroup in New York. "While this could be interpreted as evidence of a softening labour market, we would caution against this. The holiday season introduces a great deal of volatility into this data. It may be hard to disentangle the impact of seasonal patterns versus layoffs until January."
• Initial claims for state unemployment benefits rose 17,000 to a seasonally adjusted 240,000 for the week ended Nov. 19, the highest level since mid-August. Economists polled by Reuters had forecast 225,000 claims for the latest week.
• Moody's Analytics estimates the break-even level for claims at around 270,000. The jobs market has remained resilient in the face of the Federal Reserve's most aggressive interest rate-hiking cycle since the 1980s aimed at curbing high inflation by dampening demand in the economy.
• 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) says the economy is still projected to grow in the range of 2.5 to 4.5 % for the fiscal year 2022/23. This is following an 8.2% outturn recorded in 2021/22, as indicated by the Governor, Richard Byles.
• There are currently signs, according to the BOJ Governor, that the economy has continued to expand for the September 2022 quarter, and the December 2022 quarter, to date. Among the positive indicators is the 6.6% unemployment rate recorded for July 2022, which was 1.9 percentage points lower than the outturn for the corresponding period last year.
• The Bank expects that growth will continue to be driven by the services industry, particularly tourism, which has been recovering at a rapid pace. There has also been some buoyancy in the agricultural sector, which is expected to continue as the tourism sector recovers and weather conditions improve.
• The forecast also reflects the recent resumption of production at the JAMALCO alumina plant in Halse Hall, Clarendon, which was closed for an extended period after being ravaged by fire in August 2021.
• Meanwhile, growth for the fiscal year 2023/24 is projected to moderate further as income growth among Jamaica’s main trading partners normalises to pre-COVID rates. The Governor cautioned, however, that risks to the forecast are skewed to the downside.

(Source: JIS News)

• Jamaica’s foreign exchange market remains relatively stable, partly reflecting actions by the Central Bank in response to higher-than-targeted inflation. According to the BOJ Governor, the foreign exchange rate for the fiscal year 2022/23, to November 11, depreciated by 0.5%.
• This was significantly slower than the 6.7% depreciation recorded over the corresponding period of 2021/22 he said while speaking during the BOJ’s semi-virtual quarterly media briefing on Friday (November 18).
• The Central Bank, in this context, sold US$396.1Mn via its BOJ Foreign Exchange Intervention and Trading Tool (B-FXITT) facility over the period. This was complemented by sales of US$442.7Mn to selected public enterprises, including the State oil refinery – PETROJAM.
• “Notwithstanding these sales, the Bank net purchased from the market, over this period, US$521.6Mn. As of November 11, 2022, Jamaica’s gross international reserves remained substantial at approximately US$4.3Bn. The Bank projects that the gross reserves will continue to remain adequate in the medium-term,” the Governor further stated

(Source: JIS News)

• Brazil's Economy Ministry on Thursday cut its 2023 GDP growth forecast to 2.1%, from the 2.5% anticipated in September, due to a deterioration in the global economic outlook. Private economists in a Brazilian central bank weekly survey projected gross domestic product would grow 0.7% in Latin America's largest economy next year.
• In a statement, the ministry's Secretariat for Economic Policy stressed that the global economy has weakened in the face of monetary tightening in the United States and other developed economies, which has hampered prospects for growth. "Our base scenario considers market estimates, whose projections indicate a slowdown in global activity, but do not point to a recession," it said.
• At the same time, the ministry kept its 2022 GDP growth outlook at 2.7% on the basis of solid activity in the services sector and an improved labour market. That was in line with the market's 2.77% estimate.
• The ministry decreased its 2022 inflation forecast to 5.85% from the 6.3% projected in September. For 2023, the official inflation projection now stands at 4.6%, up from the prior 4.5% forecast. This too is likely factored into the downward revision for 2023 as it erodes consumer spending capability.

(Source: Reuters)

• 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)