• Contrary to initial projections of a recession in the US by the Federal Reserve, the economy showed faster-than-expected progress on inflation, minimal jobless rate increase, and a robust 5 times growth compared to forecasts.
• The unexpected positive economic indicators prompted a shift in Federal Reserve policy towards potential rate cuts, leading to anticipation of a quicker pace of interest rate easing.
• The market now anticipates increased issuance of investment-grade bonds in the coming year, totalling $770Bn in 2024, as companies seek to take advantage of lower borrowing costs resulting from the potential rate cuts.
• Market dynamics have shifted in favour of borrowers, with a combination of lower borrowing costs, tightening credit spreads, and increased investor appetite for riskier corporate debt. This change is influenced by the perception that the Federal Reserve may be concluding its hiking cycle.

(Source: Reuters)

• Canada's main stock index rose on Monday, led by gains for the energy sector, as optimism that central banks could soon begin cutting interest rates boosted the market.
• Falling bond yields, tighter credit spreads, and rising expectations that the Federal Reserve and the Bank of Canada will cut interest rates in 2024 are tailwinds for the stock market, said Stan Wong, a portfolio manager at Scotia Wealth Management.
• Canada's consumer price index report, due on Tuesday, could offer clues on the Bank of Canada policy outlook. Economists expect inflation to slow to an annual rate of 2.9% in November from 3.1% in October.
• Still, the stock market rally "may have run a bit too far too fast," said Wong, adding, "We've become a little bit more cautious over the very near-term, not committing a lot of cash into stock markets now, just given the fact that we're overbought."
• The energy sector rallied 1.5% as the price of oil settled 1.5% higher at $72.47 a barrel, with attacks by the Iran-aligned Yemeni Houthi militant group on ships in the Red Sea disrupting maritime trade and pushing up costs of supply. Consumer discretionary also added 1.5%, and heavily weighted financials were up 0.4%.

(Source: Reuters)

• The Agri-Linkages Exchange (ALEX) platform has generated more than $1Bn in sales for small farmers so far in 2023.
• This was disclosed by Minister of Tourism, Hon. Edmund Bartlett, during a statement to the House of Representatives on Tuesday (December 12). 
• The ALEX platform is a collaborative initiative between the Tourism Enhancement Fund (TEF) and the Rural Agricultural Development Authority (RADA), which has revolutionized the interaction between hoteliers and farmers.
• The Minister noted that RADA and TEF are working to strengthen that and bring more farmers onto the platform. He also mentioned the tourism loan disbursements through the National Export-Import (EXIM) Bank, which have surpassed $1Bn for 2023.
• The Small and Medium Tourism Enterprise (SMTE) loan facility, managed by TEF and facilitated through the EXIM Bank, plays a pivotal role in enhancing the resilience and capacity of SMTEs in the tourism sector.
• This initiative has empowered business operators with access to financing of up to $25Mn at an interest rate of 4.5% for five years.

(Source:  JIS)

• Shareholding directors of Radio Jamaica Limited, trading as RJR on the stock exchange, announced last week that the allocations of shares under the transaction of the amalgamation with 1834 Investments Limited have been effected.
• The move was based on directives given following the court's approval, and the shares will be reflected in changes to their holdings.
• Chairman Joseph Matalon noted that he has elected in respect of himself and two entities controlled by him, that they should have the share entitlements from the scheme of arrangements allotted to ICD Investments Limited.
• A trade was recently made on the Jamaica Stock Exchange amounting to 241,038,117 shares previously held by Mr. Matalon and entities under his control.
• With the realignments and allotments, all shareholders and connected parties remain below the shareholding limit of 21% in the company.

(Source:  RJR News)

• The recent high tensions between Guyana and Venezuela over the former’s Essequibo region have increased uncertainty for Guyana’s world-leading economic growth outlook.
• In Fitch’s core scenario where Venezuela does not invade Guyana, the short-term economic impact is expected to be modest, though some foreign oil companies could pull back on investment plans, which would hurt output growth in the long term.
• Currently, Fitch expects Guyana will be one of the fastest-growing economies in the world in 2024, following up its 29.5% growth in 2023 with a 23.5% expansion next year. This view is rooted in the forecast for rapid oil production growth. The oil boom is driving an expansion of employment, investment, and exports, while also allowing the government to ramp up public spending.
• In a less-likely scenario where Venezuela does launch an invasion of Essequibo, Guyana’s economy would take a significant hit, as it seems unlikely to be able to hold onto the region – and its massive natural wealth – without help from foreign militaries.
• Following this report, on, December 14, 2023, in Argyle, Saint Vincent and the Grenadines, His Excellency Irfaan Ali, President of the Co-operative Republic of Guyana and His Excellency Nicolas Maduro, President of the Bolivarian Republic of Venezuela held discussions on matters consequential to the territory in dispute between their two countries.
• The countries came to the resolve that, Guyana and Venezuela, directly or indirectly, will not threaten or use force against one another in any circumstances, including those consequential to any existing controversies between the two States.
• Other declarations were made including resolving their current issues by following international law; promoting peaceful coexistence and good neighbourliness; and continuing dialogue on any other pending matters of mutual importance to the two countries

(Sources: Fitch Solutions & The Joint Declaration of Argyle for Dialogue and Peace Between Guyana and Venezuela

• Following an initially sluggish post-pandemic recovery, Mexican real GDP growth has now averaged around 4.0% on a q-o-q annualized basis for eight consecutive quarters, which compares to a 2015-2019 run rate of closer to 1.5%.
• This economic strength has in turn reflected the combined impact of US economic resilience which has lifted both exports and supported remittance inflows, the Mexican government’s pursuit of a relatively loose fiscal policy stance, and nearshoring-related headlines that are helping to boost private sector sentiment.
• Given these factors, Fitch remains upbeat on the outlook for the Mexican economy, which it now anticipates will grow by a solid 2.5% (previously 2.0%) in 2024 after an estimated 3.5% expansion in 2023.
• This remains the base case that growth will ease throughout 2024 as the external backdrop turns gradually less favourable, weighing on exports and remittance inflows.
• These headwinds will be mostly offset by the government’s ongoing fiscal largesse over H124, but as spending is retrenched over the second half of the year growth should lose steam.

(Source: Fitch Solutions

• U.S. retail sales unexpectedly increased by 0.3% in November, signalling a robust start to the holiday shopping season. Following a 0.2% decline in October, this growth is attributed to deep discounting by retailers.
• The rebound in retail sales underscores consumers' resilience, supported by a strong labour market. This positive trend challenges market expectations of an early rate cut by the Federal Reserve, which recently signalled the end of its two-year tightening of monetary policy. This same resilience provides a foundation for the Fed to achieve a soft landing but shows the Fed will likely not cut rates in early 2024.
• Online retail sales rebounded by 1.0%, reflecting a shift away from traditional brick-and-mortar stores. Various sectors experienced growth, such as motor vehicles and parts dealers (0.5%), furniture stores (0.9%), and food services and drinking places (1.6%). However, electronics and appliance outlets saw a decline of 1.1%.
• The stable labour market, evidenced by a drop in initial claims for state unemployment benefits, contributes to economists' expectations of decent fourth-quarter consumer spending and a potential GDP growth rate of 2.75%. Despite concerns about rising unemployment rolls, economists dismiss them as reflecting difficulties in adjusting for seasonal fluctuations.

(Source: Reuters)

• The European Central Bank (ECB) affirmed its commitment to maintaining record-high interest rates despite lower inflation expectations. The central bank, focused on combating a severe inflationary period, emphasised that borrowing costs would stay unchanged.
• ECB President Christine Lagarde's stance contrasted with the more dovish tone of her U.S. Federal Reserve counterpart, Jerome Powell. Lagarde stressed that inflation would rebound soon, and the ECB had no discussions about rate cuts. This differed from Powell's signal of potential interest rate reductions.
• The ECB announced plans to phase out its last remaining bond-buying scheme, a measure introduced during the COVID-19 pandemic. This move is viewed as a smaller policy change, not indicating a shift to a more dovish stance like the U.S. Federal Reserve.
• The ECB's updated economic projections revealed lower growth and inflation expectations for the coming years. ECB staff expect headline inflation to average 5.4% in 2023, 2.7% in 2024, 2.1% in 2025 and 1.9% in 2026, closing in on the bank's 2% target.
• Lagarde hinted at the possibility of data-rich months in the first half of the next year, implying that any rate cut might not occur before June or July. This came on the back of lower-than-expected inflation reading for November and comments from ECB board member Isabel Schnabel that were perceived as dovish.
• A sharp fall in bond yields since then has eased borrowing costs, undoing the ECB's tightening and potentially helping fuel inflation. Traders adjusted their expectations slightly, with rate cuts now anticipated in April, and the ECB's deposit rate remains at a record-high of 4%.

(Source: Reuters)

• The Bank of Jamaica has given an update on the progress of implementing the twin-peaks model, which was announced earlier this year.
• The supervisory model for the financial sector is to be implemented by the end of the 2024/25 fiscal year. 
• Senior Deputy Governor of the BOJ, Dr. Wayne Robinson, says the structure of the new model and how it will be funded is still being contemplated.
• Under the regime, the Financial Services Commission will be responsible for consumer protection and market conduct oversight, while the BOJ will manage matters of financial stability and prudential affairs.

 (Source:  RJR News)

• The Ministry of Tourism estimates that Jamaica should record 4,122,100 visitor arrivals from January to December 2023. Portfolio Minister, Hon. Edmund Bartlett said this would represent a 23.7% increase over the 2022 figure.
• Of this number, 2,875,549 are expected to be stopover visitors, representing a 16% increase over the number recorded last year.
• Additionally, Minister. Bartlett expects to end the year with 1,246,551 cruise passengers, representing a 46.1% increase over the tally for 2022.
• A breakdown of these estimated revenues, specifically including direct inflows to the government’s coffers, are Tourism Enhancement Fund (TEF) fees, which go to the Consolidated Fund, US$57.5Mn or J$8.9bn.
• There is also the Departure Tax of US$100.6Mn or J$15.6Bn; Airport Improvement Fees – US$28.8Mn or J$4.47Bn; Airline Passenger Levy – US$57.5Mn or J$8.9Bn; Passenger Fees and Charges – US$69Mn or J$10.7Bn; and the Guest Accommodation Room Tax (GART) – US$22.6Mn or J$3.5Mn.
• The influx of visitors is expected to generate US$4.3Bn in tourism earnings for 2023, representing a projected increase of 17.8% over total inflows for 2022 and a 17.2% spike over the out-turn for the pre-pandemic year of 2019.

(Source:  JIS)