Morning Commentary: Mexico declines, South Africa outperforms; oil stabilizes; NLMK posts earnings

By Christine Van Dusen

Atlanta, Nov. 1 – Bonds from Mexico dipped and South Africa outperformed on Tuesday as oil prices mostly stabilized and much of Europe was out for the All Saints Day holiday.

“We expect flat trading today with moderate price growth,” according to a report from Schildershoven Finance BV.

Said a London-based analyst: “Oil prices continued to plummet yesterday but stabilized overnight, with both WTI and Brent crude remaining somewhat distant from the $50-barrel threshold.”

From Latin America, prices of bonds from Mexico were lower, with mixed performance across the curve, a trader said.

“The long end seems to be doing a bit better,” he said.

Investors were keeping an eye on South Africa, where bonds outperformed on reports that the National Prosecuting Authority would drop fraud charges against finance minister Pravin Gordhan, the analyst said.

“The decision is undoubtedly a relief to markets, but we’re far from done,” he said. “At this time, it remains unclear what impact [this move] has on the ongoing investigation against a rogue unit within the South African Revenue Service. Some will see the latest events indicating the faction behind Gordhan gaining overhand in an ongoing political infighting in the ANC.”

Investor sentiment “will likely remain buoyed on the Gordhan story,” he said.

Also on Tuesday, investors were looking at Russia-based Novolipetsk Steel (NLMK)’s strong third-quarter financial results, released this week.

“However, the market effect is likely to be neutral due to the tight pricing of the eurobonds,” Schildershoven said in its report.

And Hungary was upgraded by Moody’s Investors Service.

“Hungary’s rating upgrade by Moody’s would not dramatically change the situation but may add some positive to investors,” Schildershoven said in a report.

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