• The U.S. trade deficit jumped to a record high in March amid roaring domestic demand, which is drawing in imports, and the gap could widen further as the nation's economic activity rebounds faster than its global rivals.
• Manufacturers lack the capacity to satisfy the surge in demand because of resource constraints and bottlenecks in the supply chain. Inventories are very lean. Demand is being driven by a rapidly improving public health situation and massive government aid to households and businesses to cushion the blow from the COVID-19 pandemic.
• "The widening of the trade gap will likely be a persistent feature of the economy this year as domestic demand outstrips the U.S. economy's productive capacity," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
• The trade deficit increased 5.6% to an all-time high of $74.4 billion in March, the Commerce Department said on Tuesday. The trade gap was in line with economists' expectations.
• Imports soared 6.3% to a historic $274.5 billion in March. Goods imports shot up 7.0% to $234.4 billion, also an all-time high. Imports of consumer goods were the highest on record, as were those for food and capital goods.

(Source: Reuters)

• Hong Kong’s economy posted its fastest growth in more than a decade in the first quarter, though the recovery is an uneven one led mainly by exports and held back by weak consumer spending and a slow vaccine rollout.
• After declining for a record six quarters, gross domestic product surged 7.8% from a year earlier, advance data showed Monday, beating all estimates in a Bloomberg survey of economists. The figures were partly distorted by the low base a year ago when the economy was in lockdown, but the quarter-on-quarter expansion, a better reflection of growth momentum, also outperformed estimates.
• The latest data show an export sector that’s booming but consumption that remains subdued. The city’s hotels and retail shops are reliant on tourism spending, especially from visitors from the mainland, and border closures have hurt those sectors. Low vaccination rates are hindering the city’s ability to reopen and fully rebound from the pandemic.
• Hong Kong has endured its most economically challenging two-year stretch in its history, posting unprecedented back-to-back annual contractions in 2019 and 2020 as the city grappled with waves of political unrest, the fallout from the deteriorating U.S.-China relationship, and the Covid-19 pandemic.
• The economy has recently shown signs of a stronger recovery. Exports surged above HK$400 billion ($51.5 billion) for the first time ever in March while unemployment dropped the most since 2003 in the month, easing back from a 17-year high. Retail sales by value jumped 30% in February, the first increase in that measure since January 2019.​

(Source: Bloomberg)

• For the first quarter ending March 31, 2021, Mayberry Jamaican Equities Limited (MJE) saw a significant improvement in its operating performance with the company recording a net profit of $299.71Mn (EPS $0.25) relative to a net loss of $1.13Bn (EPS: -$0.93) in Q1 2020.
• Unrealized gain of $281.61Mn on its investments relative to a loss of $1.12Bn in the prior year, along with a $110.28Mn increase in dividend income to $118.75Mn were behind the improvement. The increases in unrealized gains and dividend income are likely a reflection of the improvement in the performance of the local stock market during Q1 2021 (+0.7%), when compared to the steep fall-off seen in 2020 (-26.0%) as a result of the COVID-19 induced sell-down.
• The stock market is expected to fare better in 2021 aided by the economic rebound during the second half of the year, as major economies continue to recover, and as the government continues the rollout of the COVID-19 vaccine and relaxes restrictions. This should support domestic consumption and production, which bodes well for a recovery in corporate earnings and investor confidence.
• Nevertheless, we believe there is a concentration risk to the performance of MJE’s portfolio with a 46.9% exposure to Supreme Ventures. SVL's earnings could come under pressure, given the emergence of competitors in the lottery business.
• MJE’s stock price has appreciated by 1.7% since the start of the year and currently trades at $8.12 per share. This is 26.6% below the last reported net asset value per share (NAVPS) of $10.28.

(Source: MJE Financials)

• Jamaica Bauxite Mining Limited (JBM) is looking to commence work to upgrade the Ocho Rios Port during the current fiscal year. This is according to the 2021/22 Public Bodies Estimates of Revenue and Expenditure, which states that the exercise will serve to enhance the facility’s business activities while maximizing revenue.
• The renovation will result in the establishment of a multipurpose facility that allows for continued loading and shipment of limestone and sugar as well as additional and larger cruise ships. The engagement forms part of JBM’s efforts to continue stakeholder collaborations this year to promote responsible mining practices and speedy restoration of mined lands, all aimed at preserving the environment.
• This should help to support the country’s path to economic recovery, through increased construction activities as well as aid in the recovery of the mining industry.

(Source: JIS)

• Eleven markets in Latin America will be publishing CPI prints this week, including Chile, Colombia, and Mexico. Base effects, due to the collapse in prices in Q2 2020, will be the primary driver of higher prices in April, though currency weakness, rising energy prices, and supply chain bottlenecks will likely contribute as well.
• Fitch Solutions expects that regional central banks will pay close attention to the rate of inflation acceleration in the next several CPI prints as they consider whether to tighten monetary policy in 2021. In Q1 2021, several major markets saw inflation rise past the mid-point of their central banks’ target range.
• Latin American central banks began aggressively loosening monetary policy in Q2 2020 in order to support credit growth as the region suffered the worst contraction in the global economy. Fitch Solutions does not forecast that any major central banks, outside of Brazil, will enact rate hikes in 2021. However, should inflation accelerate significantly in the months ahead, policymakers would likely be forced to tighten monetary policy, potentially leading to a slower economic recovery than current forecasts.
• In addition, Fitch Solutions has previously highlighted how rising bond yields in the US are eroding the relative attractiveness of Latin American assets. An increase in inflation in the region could exacerbate this trend, causing investors to demand even higher yields as rising prices erode the value of fixed returns. Higher borrowing costs would, in turn, weigh on investment and reduce regional governments' fiscal flexibility.

(Source: Fitch Solutions)

• Colombia's peso, public debt, and stocks depreciated on Monday after President Ivan Duque withdrew a tax reform proposal seen as important for the country's fiscal stability, sparking market uncertainty and comment from rating agency Moody's.
• Duque withdrew the proposal on Sunday after staunch opposition from lawmakers and deadly street protests, but he said tax reform is still necessary and that a new proposal will be made with consensus among business leaders, political parties, and civil society. 
• The withdrawn proposal, originally intended to raise more than $6 billion in revenue, would have increased taxes paid by individuals and businesses, expanded sales taxes, and eliminated exemptions and deductions.
• The Colombian currency fell 1.4% to a six-month low of 3,804.95 pesos per dollar. Since the tax proposal was sent to Congress on April 15, the peso has depreciated 5.3%. Considering the withdrawal of the proposal, the cessation of the social unrest will likely influence some positive movement in the currency.
• However, the government will have to find alternative solutions to provide funding to finance its operations and pay down its debt.

(Source: Reuters & NCBCM Research

• The U.S. economy is poised to grow at the fastest rate in decades this year as it rebounds from the crisis caused by the coronavirus pandemic, but financial conditions are nowhere near the level where the Federal Reserve would consider pulling back its support, New York Fed Bank President John Williams said on Monday.
• U.S gross domestic product could increase by around 7% this year after adjusting for inflation, bringing in the fastest growth since the early 1980s, Williams said. But that boom may not be enough to achieve the Fed's dual mandate for inflation and maximum employment, Williams said.
• "It's clear there is a big shift in the economy, and the outlook has improved," Williams said during a virtual event. "But let me emphasize that the data and conditions we are seeing now are not nearly enough for the FOMC to shift its monetary policy stance."
• Fed officials agreed last week to keep interest rates near zero and to continue purchasing $120 billion a month in bonds until there is "substantial further progress" toward the Fed's goals for maximum employment and inflation.
• The labor market is still short about 8.5 million jobs compared to pre-pandemic, and the job losses fell hardest on service sector workers and Black and Hispanic workers, he said. "This means we will need big job numbers for some time to fully get the country back to work," Williams said. While inflation may rise in the near term as prices rebound from the low levels of last spring, it is likely to come back down to about 2% next year, Williams added.

(Source: Reuters)

• Oil prices settled higher Monday, supported by renewed bets on a recovery in energy demand as the U.S. reopening picks up speed ahead of the summer driving season.
• On the New York Mercantile Exchange, crude futures for June delivery rose 1.43% to settle at $64.49 a barrel, while on London's Intercontinental Exchange, Brent rose 1.22% to trade at $67.58 a barrel.
• "Crude oil prices rallied as signs of further strength in demand continue to emerge. The emergence of several US cities from lockdown is stoking confidence of stronger demand in gasoline ahead of the key US summer driving season," ANZ Research said in a note.
• The renewed optimism ahead of the summer driving season, a period in which gasoline demand is typically at its seasonal peak, is helping to offset concerns over a strong record of daily Covid-19 infections in India, the third latest oil-consuming country.
• The upbeat start to the month for U.S. oil prices comes after a 13% rally last month despite lingering concerns over the increase in Iranian production. Over the weekend, Iran said it expects to export as much as 2.5 million barrels of oil should nuclear deal talks with the U.S. and other nations lead to the removal of restrictions against the Islamic Republic.

(Source: Investing.com

• For the first quarter ending March 2021, Caribbean Cement (CCC) reported a net profit of $1.53Bn (EPS: $1.79), which translates to a 215.9% increase over the $483.10Mn (EPS: $0.57) earned over the same period in 2020. This was due to a 31.2% (or $1.42Bn) increase in revenues, which management attributed to an increase in the demand for cement during the period. The company was able to achieve record production of more than 100,000 metric tonnes of cement in March.
• The sector was already showing momentum during the latter half of 2020, with two consecutive quarters of growth (Q3: 7.2% & Q4: 6.2%), when most of the sectors in the goods-producing industry contracted consistently due to the impact of the pandemic.
• The government has expressed plans to ramp up expenditure on infrastructure during the 2021/22 fiscal year, and there are various residential, commercial, and hotel expansion projects planned for this year, which should help to sustain demand for CCC’s products.
• The improvement in the company’s operating performance was also influenced by its cost-containment measures, which resulted in operating expenses declining by $69.37Mn (or 10.6%) to $582.01Mn.
• Caribbean Cement’s stock price has appreciated by 40.7% since the start of the year, and currently trades at a P/E of 17.7x earnings, which is below the main market industrials and materials sector average of 18.5x earnings.

(Source: Caribbean Cement Company Financials)

• Fitch Solutions believes the surge in COVID-19 cases in Q1 2021, and the resulting lockdowns, will weaken Jamaica’s economic recovery and undermine support for the ruling Jamaica Labour Party government.
• The length of the lockdown is expected to pare back some of the gains made in the Jamaican labour market during the second half of 2020. The country’s unemployment rate fell to 8.9% in Q4 2020 from 12.6% in Q2 2020, but will likely return to double digits amid the months-long lockdown.
• The country’s slow vaccination programme will likely extend the economic impact of the pandemic, as only 4.5% of Jamaica’s population had received at least one dose of the COVID-19 vaccine, and the government’s supply agreements would vaccinate only 16.0% of the population. As a result, Fitch Solutions believes Jamaica will fail to reach herd immunity until 2022.
• It also believes that an increase in violent crime, on top of Jamaica’s regional leading homicide rate, will also weigh on public approval for the JLP. The country’s homicide rate was 3.5% higher year-over-year (YoY), despite the restrictions on mobility seen in Q1 2021. In response to the uptick in violence, the Private Sector Organization of Jamaica (PIOJ) publicly called for the government to pass additional security legislation. This pressure could push the government to increase spending on policing, potentially limiting its ability to maintain higher social spending in the quarters ahead.
• Despite a potential decline in public support, the agency believes the JLP government will be able to pursue significant fiscal consolidation in the medium term due to its large parliamentary majority.

(Source: Fitch Solutions)