Global Markets Update QNB Economics 19 February 2017
Executive Summary Key Takeaways Yields in advanced economies were stable while local factors dominated emerging market performance The Egyptian pound continued to strengthen as foreigners bought government debt and US dollar shortages eased US equities rose on better economic data Oil markets were stable while OPEC confirmed compliance with production cuts; Saudi Arabia has contributed the most to cuts Business and manufacturing surveys dominate the week ahead in the Euro area and the US Sources: Bloomberg and QNB Economics 2
Yields in advanced economies were stable while local factors dominated emerging market performance Global Benchmark Yields (%, local currencies) Maturity 10-Feb 17-Feb Change in Yield (bps) Advanced Economies Week MTD* YTD* US 10 yrs 2.41 2.41 0.7-3.8-3.0 Germany 10 yrs 0.32 0.30-1.8-13.4 9.4 France 10 yrs 1.06 1.04-1.9 0.0 35.2 Italy 10 yrs 2.27 2.19-8.1-7.2 37.5 Japan 10 yrs 0.09 0.09 0.2 0.7 4.8 UK 10 yrs 1.26 1.21-4.5-20.6-2.8 Emerging Markets Bahrain** 6 yrs 5.04 5.04-0.1-24.3-30.2 Brazil 10 yrs 10.34 10.41 7.2-50.9-99.1 China 10 yrs 3.44 3.36-7.4-0.2 30.3 Egypt 10 yrs 6.92 6.91-1.7 N/A N/A India 10 yrs 6.81 6.85 4.7 44.5 33.7 Indonesia 10 yrs 7.52 7.54 2.0-10.8-43.1 Nigeria 9 yrs 16.77 16.20-56.1-58.4 11.2 Qatar** 9 yrs 3.43 3.42-0.7-8.4-24.0 Russia 10 yrs 8.04 8.19 15.5 3.5-17.0 Saudi Arabia** 10 yrs 3.75 3.68-6.2-10.8-18.4 South Africa 10 yrs 8.80 8.63-16.9-13.1-22.7 Turkey 10 yrs 10.99 10.93-6.0-5.0-46.0 Abu Dhabi** 9 yrs 3.14 3.18 3.8-5.7-16.6 Dubai** 4 yrs 2.81 2.73-7.2-7.8-26.3 Nigeria s yields fell as the government issued local and hard currency bonds which were both heavily oversubscribed The probability of a Fed rate hike in May increased from 38% last week to 44% due to hawkish comments from the Fed and stronger than expected retail sales (0.4%) and inflation (2.5%) data Legend > 2 standard deviation fall in yields > 1 standard deviation fall in yields < 1 standarad deviation change in yields > 1 standard deviation rise in yields > 2 standard deviation rise in yields Sources: Bloomberg and QNB Economics; *Month to Date and Year to Date; **USD denominated 3
The Egyptian pound continued to strengthen as foreigners bought government debt and US dollar shortages eased Global Exchange Rates vs USD 10-Feb 17-Feb Change (%) Advanced Economies Week MTD YTD US Dollar Index 100.80 100.95 0.1 1.4-1.2 Euro Area* 1.06 1.06-0.3-1.7 0.9 Japan 113.22 112.84 0.3 0.0 3.7 UK* 1.25 1.24-0.6-1.3 0.6 Emerging Markets Brazil 3.12 3.10 0.6 1.6 5.1 China 6.88 6.87 0.2 0.3 1.1 Egypt 17.74 16.15 9.0 16.7 12.3 Indonesia 13,312 13,333-0.2 0.3 1.1 India 66.88 67.02-0.2 1.3 1.3 Kuwait 0.31 0.31 0.0 0.0 0.2 Nigeria 314.63 315.36-0.2-1.2 0.0 Russia 58.31 58.29 0.0 3.3 5.6 Turkey 3.70 3.63 1.8 3.9-3.0 South Africa 13.34 13.04 2.2 3.4 5.4 UAE 3.67 3.67 Bahrain 0.38 0.38 Oman 0.39 0.39 PEGGED Qatar 3.64 3.64 Saudi Arabia 3.75 3.75 Broadly stable currency movements over the week Legend > 2 standard deviation strengthening of currency > 1 standard deviation strengthening of currency < 1 standarad deviation change in currency > 1 standard deviation weakening of currency > 2 standard deviation weakening of currency Sources: Bloomberg and QNB Economics; * Exchange rate quoted as amount of USD per currency unit in line with market convention, other exchange rates are amount of currency per USD 4
US equities rose on better economic data Global Equity Indices 10-Feb 17-Feb Change (%) Advanced Economies Week MTD YTD US (S&P 500) 2,316 2,351 1.5 3.2 5.0 Europe (STOXX 50) 3,271 3,309 1.2 2.4 0.6 Japan (Nikkei 225) 19,379 19,235-0.7 1.0 0.6 UK (FTSE 100) 7,259 7,300 0.6 2.8 2.2 Emerging Markets Bahrain (BB) 1,307 1,324 1.3 1.5 8.5 Brazil (IBOVESPA) 64,965 67,748 4.3 4.8 12.5 China (Shanghai ) 3,197 3,202 0.2 1.4 3.2 Egypt (EGX 30) 13,115 12,652-3.5-0.2 2.5 India (CNX NIFTY) 8,794 8,822 0.3 3.0 7.8 Indonesia (Jakarta) 5,372 5,351-0.4 1.1 1.0 KSA (Tadawul) 6,969 7,131 2.3 0.4-1.1 Kuwait (KSE) 6,583 6,824 3.7-0.1 18.7 Nigeria (All Share) 25,340 25,165-0.7-3.3-6.4 Oman (Muscat 30) 5,820 5,843 0.4 1.2 1.0 Qatar (Doha 20) 10,629 10,819 1.8 2.1 3.7 Russia (MICEX) 2,162 2,128-1.6-4.0-4.7 S.Africa (J'burg 40) 45,013 45,075 0.1-1.9 2.7 Turkey (Istanbul 100) 87,473 88,830 1.6 2.9 13.7 UAE (Abu Dhabi) 4,569 4,643 1.6 2.1 2.1 UAE (Dubai) 3,683 3,651-0.9 0.2 3.4 Brazil s stock market rose as the central bank continued its decision towards intervention to support the Brazilian real Legend > 2 standard deviation rise in equity index > 1 standard deviation rise in equity index < 1 standarad deviation change in equity index > 1 standard deviation fall in equity index > 2 standard deviation fall in equity index Sources: Bloomberg and QNB Economics 5
Oil markets were stable while OPEC confirmed compliance with production cuts; Saudi Arabia has contributed the most to cuts Commodity Prices* 10-Feb 17-Feb Change (%) Energy Week MTD YTD Brent 56.7 55.8-1.6 0.2-1.8 WTI 53.9 53.4-0.9 1.1-0.6 Precious Metals Gold 1,234 1,235 0.1 2.0 7.6 Silver 17.9 18.0 0.3 2.5 13.0 Industrial Copper 6,090 5,960-2.1-0.5 7.7 Steel 625 625 0.0-1.0 6.3 Aluminum 1,874 1,880 0.3 3.4 11.0 Wheat 449 441-1.8 4.8 8.1 Corn 375 368-1.7 2.4 4.6 Cocoa 1,939 2,034 4.9-3.3-4.3 US Crude oil inventories rose 9.5m barrels versus an expected increase of 3.5m US Gasoline inventories rose 2.8m versus an expected increase of 0.2m Legend > 2 standard deviation rise in price > 1 standard deviation rise in price < 1 standarad deviation change in price > 1 standard deviation fall in price > 2 standard deviation fall in price Sources: Bloomberg and QNB Economics; * Spot prices or nearest expiring future 6
Business and manufacturing surveys dominate the week ahead in the Euro area and the US Last Week s Data Review* Date Country Event Period Consensus Actual Previous Feb 13 Japan GDP Annualised QoQ Q4 1.1% 1.0% 1.3% Feb 14 Germany ZEW Survey Expectations Feb 15.0 10.4 16.6 Feb 14 Euro Area GDP YoY Q4 1.8% 1.7% 1.7% Feb 15 US Retail Sales MoM Jan 0.1% 0.4% 0.6% Feb 15 US CPI YoY Jan 2.4% 2.5% 2.1% Feb 16 US Initial Jobless Claims Feb 11 245k 239k 234k Forthcoming Economic Events* Date Country Event Period Consensus Actual Previous Feb 21 Euro Area Markit Eurozone Manufacturing PMI Feb 55.0 55.2 Feb 22 Euro Area CPI YoY Jan 1.8% 1.8% Feb 22 Germany IFO Business Climate Feb 109.6 109.8 Feb 21 US Markit US Manufacturing PMI Feb 55.3 55.0 Feb 23 US Initial Jobless Claims Feb 18 240k 239k Feb 24 US U. of Michigan Sentiment Feb 96.0 95.7 Sources: Bloomberg and QNB Economics * A stands for advance, P for preliminary and F for final 7
Two-Year Performance of Major Asset Classes Sovereign 10-Year Bond Yields Equities 3 2 US Germany 1900 1800 Advanced Economies* (left axis) Emerging Markets** (right axis) 1100 1000 1700 1 1600 900 0 01/15 04/15 07/15 10/15 01/16 04/16 07/16 10/16 1500 800-1 1400 01/15 04/15 07/15 10/15 01/16 04/16 07/16 10/16 700 Exchange Rates Commodities 105 100 95 90 85 80 Dollar Index (left axis) EUR:USD (right axis) 1.2 1.1 80 70 60 50 40 Oil (left axis) Food*** (right axis) 400 300 75 30 70 01/15 04/15 07/15 10/15 01/16 04/16 07/16 10/16 1 20 01/15 04/15 07/15 10/15 01/16 04/16 07/16 10/16 200 Sources: Bloomberg and QNB Economics; * MSCI World Index; ** MSCI Emerging Markets Index;; ***S&P GSCI Agricultural Index, which includes wheat corn, soybeans, coffee, sugar, cocoa and cotton 8
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