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3 popular emerging-market trades for 2019

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Mexican bonds are another investment strategists like as they are trading around their lowest levels in nearly decade.

The 10-year Mexican yield broke above 9 percent for the first time since the financial crisis in late November. On Tuesday, the benchmark yield traded around 8.50 percent.

“Mexican bonds are under-loved and pricing in the worst-case scenario,” said Amr Abdel Khalek, emerging markets strategist at MRB Partners. “We don’t see peso bonds as the strongest outperformer in a universe of EM local-currency denominated bonds, but the combination of peso undervaluation and the relatively rich yields mean that they can outperform the benchmark on a 6-12 month basis.”

Investors are fretting over some of President Andres Manuel Lopez Obrador’s fiscal measures, including pulling the plug on a partially built $13 new airport in Mexico City. Lopez Obrador, better known by his initials AMLO, also said last week he would announce measures supportive of Pemex, a giant state-run oil company.

AMLO did not provide specifics in his comments from last Tuesday, however, leaving investors worried about how sweeping his proposals could actually be. AMLO’s comments came after ratings agency Fitch cut Pemex’s rating to BBB-, the lowest investment-grade rating, from BBB+.

Still, Pictet Asset Management’s Paolini thinks Mexican bonds remain attractive given their valuations. “If you’re looking at Mexican bonds, unless you’re expecting something bad happening on the political front, there is some real value there.”

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World’s biggest airplane, built for rockets

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Aviation has a new number one in size, as a one-of-a-kind airplane completed its first test flight on Saturday morning above California’s Mojave desert.

The test makes the immense Stratolaunch the largest airplane in the world to fly, with a wingspan measuring 385 feet — wider than a football field is long. The plane flew for 2½ hours over the Mojave at altitudes up to 17,000 feet, hitting a maximum speed of 189 miles per hour. With two fuselages and six Boeing 747 engines. Stratolaunch is built to launch rockets from the air.

Stratolaunch is an “air launch” system, meaning that the aircraft will carry rockets up to about 35,000 feet and then drop the rocket. One of the advantages of such a system, touted by Stratolaunch as well as Richard Branson’s Virgin Orbit, is that flying in and out of a traditional runway gives greater flexibility and, eventually, will allow for quick turnaround between launches.

The company has had various partnerships, as well as internal plans, for the rockets that Stratolaunch will carry. SpaceX was one of the company’s earliest partners but Stratolaunch later switched to a contract with Northrop Grumman-owned Orbital ATK to fly the Pegeasus XL rocket. Stratolaunch’s plan to develop its own fleet of rockets was scrapped in January.



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Oil needs to hold this level for crude rally to rage on: Technician

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Crude can’t crank higher unless it stays above the key $60 level, says expert technician Louise Yamada.

Tightening global supplies have proved bullish for the commodity this year, with U.S. West Texas Intermediate crude prices currently hovering near five-month highs. But the upward action has also been quite volatile, as economic and geopolitical factors have wielded increasing influence over prices.

And if you ask Yamada, who runs Yamada Technical Research Advisors, oil prices are facing some serious resistance that can’t be topped without similarly strong support.

“Right here, $60, $60-61, is an important support on any pullback,” Yamada told CNBC’s “Futures Now” on Thursday. “I’d like to see that hold if we’re going to see a consolidation that suggests higher levels. So, let’s say $60 is an important support.”

At the same time, crude is bumping up against resistance at the $64 level, which it failed to hold in Friday’s session.

“So far, oil has achieved our first target of $63 and, at the moment, it’s gone through the 200-day moving average, which is a plus,” Yamada acknowledged. “But it’s headed up into this 2018 resistance level — that’s almost a yearlong resistance — so I would suspect that we get a little consolidation. It could pull back toward the 200-day [at] $61.60.”

If the stars align — crude’s 50-day moving average crossing above the 200-day moving average at the same time as the price moves above $65 a barrel — Yamada gets more bullish.

“We have an outstanding target at $70” if those two things happen, she said. “But our real concern here was the resistance around $63, $64. So we want to see how it negotiates that level. We did have a nice positive divergence in the daily momentum back in December, suggesting that the low that we saw was a reversal, which we got. […] So this may be a resting point before, and if, prices go higher.”

And while crude’s daily and weekly momentum indicators are still positive, “it’s the monthly that concerns us,” Yamada warned. “It’s close, but has not moved into a positive position. If it did, then I think, possibly, you could see it move higher. But at the moment I think it’s due for a little bit of a rest.”

WTI crude oil prices ended Friday’s trading session fairly flat, up less than half of 1%. On Thursday, RBC Capital Markets raised its 2019 forecast for international Brent crude, the global benchmark, to $75 and forecast bouts of $80 crude throughout the summer.

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Get ready for companies to tell you more about the economy

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It’s now up to corporate America to reveal whether the U.S. economy simply hit a soft patch this winter, as many suspect, or is on the verge of falling into an even deeper rut.

Earnings from a broad swath of industries, like financials, technology, transportation and consumer products roll out in the coming week as the first-quarter earnings season gets underway. According to Refinitiv, earnings are expected to decline 2.3 percent in the first negative quarter in three years, but it is business leaders’ comments on the future outlook that are even more important.

Commentary and guidance is always a big deal, but this quarter it is critical. Analysts do not agree on whether the first quarter earnings season represents the trough, or even whether the second quarter will see a gain or decline in profit growth.

At the same time, economic data, like March’s jobs report, are beginning to turn more positive, and first quarter growth has quickly gone from forecasts of nearly flattish back in January to now around 2%, on the back of better March releases. The economic data has been uneven, in part because of the government shutdown, but it has yet to prove the economy is back on track.

“The market has been very sensitive to data that’s been picking up. The market is reflecting that, even though there’s talk of an earnings recession. What you don’t want is an earnings recession leading to an economic recession. If companies believe there’s a major downturn in revenue growth, they stop spending and ultimately they fire people and that leads to a recession,” said Quincy Krosby, chief market strategist at Prudential Financial.

The stock market is also at an important inflection point, with the major indexes closing in on all-time highs. The S&P 500 pressed through 2,900 Friday, seen as a point of psychological resistance. The S&P ended the week at 2,907, for a weekly gain of 0.5%. The next target traders are watching is the closing high 2,930 on the S&P. The all-time high was an intraday 2,940, reached on Sept. 21.

Earnings season got off to a good start with J.P. Morgan Chase’s quarterly earnings report Friday. CEO Jamie Dimon was very positive, saying the U.S. economy’s expansion “could go on for years.”

“If you look at the American economy, the consumer is in good shape, balance sheets are in good shape, people are going back to the workforce, companies have plenty of capital,” Dimon told analysts during a conference call. J.P. Morgan stock rose sharply, after its record profits beat analysts’ expectations.

“Positive guidance, that’s what the market needs. [The S&P] could cross 2,900, but then again it could pull back,” said Krosby, but she said the momentum has been pointing higher. “The market has basically been endorsing 2,900 and beyond.”

Krosby said important upcoming economic reports include Empire State and Philadelphia Fed surveys Monday and Thursday respectively, for a current look at manufacturing activity in New York and the Mid-Atlantic region. There is also industrial production and retail sales Tuesday.

“Jobs data was strong. Everybody was really negative on the economy, and now we’re getting pleasant surprises,” said Marc Chandler, Bannockburn Global Forex chief market strategist. The economy added 196,000 jobs in March, bringing the monthly average to 180,000 over the past three months, even with February’s shockingly low 33,000 payrolls.

Chandler said industrial production and other data should show an improved trend over last month.

As stocks have shaken off growth fears, bond yields have also moved higher. The 10-year Treasury note was yielding 2.55% Friday, well above the lows of 2.34% reached on March 28.

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