Global Markets Update QNB Economics 12 March 2017
Executive Summary Key Takeaways US yields rose on a highly likely Fed rate hike this week; Eurozone yields rose after the ECB president lowered expectations for further monetary stimulus The Egyptian pound fell on rising demand for US dollars as households stock up ahead of Ramadan Equity markets in oil producing countries fell on lower prices Oil prices fell sharply on concerns about persistently rising US crude oil inventories This week will be dominated by the expected Fed rate hike on Wednesday Sources: Bloomberg and QNB Economics 2
US yields rose on a highly likely Fed rate hike this week; Eurozone yields rose after the ECB president lowered expectations for further monetary stimulus Global Benchmark Yields (%, local currencies) Maturity 03-Mar 10-Mar Change in Yield (bps) Advanced Economies Week MTD* YTD* US 10 yrs 2.48 2.57 9.7 18.5 13.0 Germany 10 yrs 0.36 0.49 12.9 27.7 27.7 France 10 yrs 0.94 1.12 17.5 22.6 43.0 Italy 10 yrs 2.10 2.37 26.7 28.1 55.2 Japan 10 yrs 0.08 0.09 1.1 3.3 4.3 UK 10 yrs 1.19 1.23 4.6 8.0-0.8 Emerging Markets Bahrain** 6 yrs 4.94 4.99 4.6 8.1-35.3 Brazil 10 yrs 10.24 10.26 2.2 2.2-114.3 China 10 yrs 3.40 3.42 1.8 10.0 36.1 Egypt 10 yrs 6.81 6.90 9.3 N/A N/A India 10 yrs 6.85 6.90 5.9 3.3 38.9 Indonesia 10 yrs 7.50 7.52 2.3-1.6-44.9 Nigeria 9 yrs 16.38 16.16-21.6-49.6 6.7 Qatar** 9 yrs 3.47 3.54 7.7 13.8-11.6 Russia 10 yrs 8.22 8.11-11.0-13.5-25.0 Saudi Arabia** 10 yrs 3.80 3.87 6.7 25.0 0.4 South Africa 10 yrs 8.76 8.72-3.5-10.6-22.9 Turkey 10 yrs 11.27 11.27 0.0 39.0-12.0 Abu Dhabi** 9 yrs 3.28 3.36 7.1 18.3 1.1 Dubai** 4 yrs 2.76 2.84 7.8 9.5-15.5 The probability of a Fed rate hike this week rose to 100% after nonfarm payroll data increased by 235k in February Although the ECB kept rates and quantitative easing unchanged, Mario Draghi s statement dampened the outlook for monetary stimulus 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 fell on rising demand for US dollars as households stock up ahead of Ramadan Global Exchange Rates vs USD 03-Mar 10-Mar Change (%) Advanced Economies Week MTD YTD US Dollar Index 101.54 101.25-0.3 0.1-0.9 Euro Area* 1.06 1.07 0.5 0.9 1.5 Japan 114.04 114.79-0.7-1.8 1.9 UK* 1.23 1.22-1.0-1.7-1.4 Emerging Markets Brazil 3.12 3.14-0.8-1.0 3.6 China 6.90 6.91-0.1-0.6 0.5 Egypt 16.15 17.60-9.0-10.2 3.1 Indonesia 13,383 13,376 0.1-0.3 0.7 India 66.81 66.61 0.3 0.1 2.0 Kuwait 0.31 0.31 0.0-0.2 0.0 Nigeria 315.49 314.67 0.3 0.2 0.2 Russia 58.24 58.98-1.3-1.0 4.3 Turkey 3.70 3.73-0.7-2.3-5.6 South Africa 13.03 13.18-1.2-0.4 4.3 UAE 3.67 3.67 Bahrain 0.38 0.38 Oman 0.39 0.38 PEGGED Qatar 3.64 3.64 Saudi Arabia 3.75 3.75 Other currencies were broadly stable 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
Equity markets in oil producing countries fell on lower prices Global Equity Indices 03-Mar 10-Mar Change (%) Advanced Economies Week MTD YTD US (S&P 500) 2,383 2,373-0.4 0.4 6.0 Europe (STOXX 50) 3,403 3,416 0.4 2.9 3.8 Japan (Nikkei 225) 19,469 19,605 0.7 2.5 2.6 UK (FTSE 100) 7,374 7,343-0.4 1.1 2.8 Emerging Markets Bahrain (BB) 1,342 1,354 0.9 0.3 10.9 Brazil (IBOVESPA) 65,855 64,675-1.8-3.0 7.4 China (Shanghai ) 3,218 3,213-0.2-0.9 3.5 Egypt (EGX 30) 12,310 12,853 4.4 7.7 4.1 India (CNX NIFTY) 8,946 8,935-0.1 0.6 9.1 Indonesia (Jakarta) 5,391 5,391 0.0 0.1 1.8 KSA (Tadawul) 7,017 6,917-1.4-0.8-4.1 Kuwait (KSE) 6,767 6,711-0.8-1.1 16.8 Nigeria (All Share) 25,012 25,238 0.9-0.4-6.1 Oman (Muscat 30) 5,815 5,792-0.4 0.2 0.2 Qatar (Doha 20) 10,721 10,467-2.4-2.2 0.3 Russia (MICEX) 2,057 1,974-4.0-3.0-11.6 S.Africa (J'burg 40) 44,837 44,304-1.2 0.4 0.9 Turkey (Istanbul 100) 89,722 89,611-0.1 2.4 14.7 UAE (Abu Dhabi) 4,596 4,457-3.0-2.1-2.0 UAE (Dubai) 3,584 3,520-1.8-3.0-0.3 Egypt s stock market was boosted by the weakening pound 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 prices fell sharply on concerns about persistently rising US crude oil inventories Commodity Prices* 03-Mar 10-Mar Change (%) Energy Week MTD YTD Brent 55.9 51.4-8.1-7.6-9.6 WTI 53.3 48.5-9.1-10.2-9.7 Precious Metals Gold 1,235 1,205-2.4-3.5 5.0 Silver 18.0 17.0-5.2-6.9 7.0 Industrial Copper 5,917 5,732-3.1-4.0 3.5 Steel 616 631 2.4 1.8 7.3 Aluminum 1,892 1,880-0.6-2.3 11.0 Wheat 434 423-2.5-0.5 3.6 Corn 375 358-4.5-2.4 1.7 Cocoa 1,989 1,967-1.1 1.2-7.5 US crude oil inventories rose by 8.2m barrels versus an expected increase of 1.3m 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
This week will be dominated by the expected Fed rate hike on Wednesday Last Week s Data Review* Date Country Event Period Consensus Actual Previous Mar 07 Eurozone GDP SA YoY 4Q F 1.7% 1.7% 1.7% Mar 09 Eurozone ECB Main Refinancing Rate Mar 09 0.0% 0.0% 0.0% Mar 10 US Unemployment Rate Feb 4.7% 4.7% 4.8% Mar 10 US Change in nonfarm payrolls Feb 190k 235k 238k Forthcoming Economic Events* Date Country Event Period Consensus Actual Previous Mar 15 US CPI YoY Feb 2.7% 2.5% Mar 15 US Fed Rate Decision Mar 15 1.00% 0.75% Mar 16 UK Bank of England Bank Rate Mar 16 0.25% 0.25% Mar 16 Eurozone CPI YoY Feb F 2.0% 2.0% 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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