Global Markets Update QNB Economics 12 November 2017
Executive Summary Key Takeaways Advanced economy 10-year yields rose on expectations of reduced quantitative easing; Saudi Arabia s corruption probe raised yields in MENA The dollar fell after the US Senate proposed Trump s corporate tax cut plan could be delayed until 2019 or scaled down European stocks dropped on weak mining shares; Saudi Arabia s corruption probe also impacted GCC equities Oil prices edged up on geopolitical tensions in the Middle East This week markets will likely focus on activity data from Europe and Asia and US inflation Sources: Bloomberg and QNB Economics 2
Advanced economy 10-year yields rose on expectations of reduced quantitative easing; Saudi Arabia s corruption probe raised yields in MENA Global Benchmark Yields (%, local currencies) Maturity 03-Nov 10-Nov Change in Yield (bps) Advanced Economies Week MTD* YTD* US 10 yrs 2.33 2.40 6.6 1.9-4.6 Germany 10 yrs 0.36 0.41 4.6 4.7 20.2 France 10 yrs 0.75 0.78 2.6 2.4 9.3 Italy 10 yrs 1.79 1.85 5.4 1.9 3.1 Japan 10 yrs 0.06 0.04-1.2-2.8-0.3 UK 10 yrs 1.26 1.34 8.0 1.0 10.3 Emerging Markets Bahrain** 11 yrs 6.67 7.02 35.1 41.6 33.3 Brazil 10 yrs 10.16 10.19 3.4 31.5-120.9 China 10 yrs 3.88 3.93 5.1 3.2 86.6 Egypt 9 yrs 5.85 6.08 23.3-110.3 NA India 10 yrs 6.89 6.96 6.4 9.4 44.1 Indonesia 10 yrs 6.64 6.66 2.0-13.5-131.1 Nigeria 9 yrs 15.04 15.19 14.3 17.6 NA Qatar** 9 yrs 3.55 3.75 20.1 19.8 8.1 Russia 9 yrs 7.62 7.66 4.5 6.0-70.0 Saudi Arabia** 9 yrs 3.42 3.58 15.1 12.5-27.0 South Africa 10 yrs 9.28 9.36 8.0 25.6 43.3 Turkey 10 yrs 12.25 12.28 3.0 45.0 89.0 Abu Dhabi** 10 yrs 3.26 3.41 14.5 NA NA Dubai** 3 yrs 2.52 2.56 4.4 1.2-28.5 Yields in advanced economies rose on a global sell off as investors expect policy support from the Fed and ECB for long-dated securities to gradually fade, bidding up their yields 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 dollar fell after the US Senate proposed Trump s corporate tax cut plan could be delayed until 2019 or scaled down Global Exchange Rates vs USD 03-Nov 10-Nov Change (%) Advanced Economies Week MTD YTD US Dollar Index 94.94 94.39-0.6-0.2-7.6 Euro Area* 1.16 1.17 0.5 0.2 10.9 Japan 114.07 113.53 0.5 0.1 3.0 UK* 1.31 1.32 0.9-0.7 6.9 Emerging Markets Brazil 3.31 3.28 0.9-0.4-0.9 China 6.63 6.64-0.1-0.1 4.6 Egypt 17.65 17.65 0.0 0.0 2.8 Indonesia 13,498 13,543-0.3 0.1-0.5 India 64.60 65.17-0.9-0.6 4.2 Kuwait 0.30 0.30 0.1 0.0 1.0 Nigeria 355.02 355.49-0.1 0.9-11.3 Russia 59.06 59.16-0.2-1.4 4.0 Turkey 3.89 3.86 0.6-1.9-8.8 South Africa 14.22 14.38-1.1-1.7-4.4 UAE 3.67 3.67 Bahrain 0.38 0.38 Oman 0.39 0.39 PEGGED Qatar 3.81 3.84 Saudi Arabia 3.75 3.75 Most global currencies were stable 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
European stocks dropped on weak mining shares; Saudi Arabia s corruption probe also impacted GCC equities Global Equity Indices 03-Nov 10-Nov Change (%) Advanced Economies Week MTD YTD US (S&P 500) 2,588 2,582-0.2 0.3 15.3 Europe (STOXX 50) 3,690 3,594-2.6-2.2 9.2 Japan (Nikkei 225) 22,539 22,681 0.6 3.0 18.7 UK (FTSE 100) 7,560 7,433-1.7-0.8 4.1 Emerging Markets Bahrain (BB) 1,279 1,268-0.9-0.7 3.9 Brazil (IBOVESPA) 73,915 72,166-2.4-2.9 19.8 China (Shanghai ) 3,388 3,433 1.3 1.2 10.6 Egypt (EGX 30) 14,277 14,350 0.5 0.1 16.2 India (CNX NIFTY) 10,424 10,322-1.0-0.1 26.1 Indonesia (Jakarta) 6,038 6,022-0.3 0.3 13.7 KSA (Tadawul) 6,957 6,954 0.0 0.3-3.6 Kuwait (KSE) 6,530 6,258-4.2-3.9 8.9 Nigeria (All Share) 36,877 37,120 0.7 1.2 38.1 Oman (Muscat 30) 5,040 5,055 0.3 0.9-12.6 Qatar (Doha 20) 8,146 7,886-3.2-3.4-24.4 Russia (MICEX) 2,081 2,169 4.2 5.1-2.8 S.Africa (J'burg 40) 53,199 53,425 0.4 1.6 21.7 Turkey (Istanbul 100) 111,293 108,949-2.1-1.1 39.4 UAE (Abu Dhabi) 4,485 4,376-2.4-2.3-3.7 UAE (Dubai) 3,635 3,450-5.1-5.1-2.3 European mining stocks fell due to weaker mining commodity prices; some view the fall as profit-taking after strong outperformance 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 edged up on geopolitical tensions in the Middle East Commodity Prices* 03-Nov 10-Nov Change (%) Energy Week MTD YTD Brent 62.1 63.5 2.3 3.5 11.8 WTI 55.6 56.7 2.0 4.3 5.6 Precious Metals Gold 1,270 1,275 0.4 0.3 11.1 Silver 16.8 16.9 0.2 1.0 6.0 Industrial Copper 6,895 6,786-1.6-0.8 22.6 Aluminum 2,185 2,101-3.8-2.7 24.1 Wheat 426 432 1.4 3.1 5.8 Corn 348 344-1.4-0.7-2.4 Cocoa 2,061 2,223 7.9 6.2 4.6 Other Bitcoin 7,229 6,582-8.9 3.2 591.4 US crude inventories rose by 2.4m barrels (-2.2m expected and -2.4m in the prior week) US gasoline inventories fell by 3.3m barrels (-1.9m expected and -4.0m in the prior week) 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 markets will likely focus on activity data from Europe and Asia and US inflation Data Review Date Country Event Period Consensus Actual Previous Nov 06 Euro Area Markit Eurozone Composite PMI Oct 55.9 56.0 55.9 Nov 06 Japan Nikkei Japan PMI Composite Oct 53.4 51.7 Nov 09 US Initial Jobless Claims Nov 232k 239k 229k Nov 09 China PPI YoY Oct 6.6% 6.9% 6.9% Nov 10 US University of Michigan Sentiment Nov 100.6 97.8 100.7 Forthcoming Economic Events Date Country Event Period Consensus Actual Previous Nov 14 Euro Area GDP YoY Q3 2.5% 2.5% Nov 14 China Industrial Production YoY Oct 6.2% 6.6% Nov 15 Japan GDP YoY Q3 1.5% 2.5% Nov 15 US Retail Sales Advance MoM Oct 0.0% 1.6% Nov 15 US CPI YoY Oct 2.0% 2.2% Nov 16 US Initial Jobless Claims Nov 11 235k 239k Sources: Bloomberg and QNB Economics * A stands for advance, P for preliminary, S for second and F for final 7
Two-Year Performance of Major Asset Classes Sovereign 10-Year Bond Yields 3 US Germany 2 1 0 11/15 02/16 05/16 08/16 11/16 02/17 05/17 08/17-1 Exchange Rates 2100 2000 1900 1800 1700 1600 1500 Advanced Economies* (left axis) Equities Emerging Markets** (right axis) 1400 11/15 02/16 05/16 08/16 11/16 02/17 05/17 08/17 Commodities 1200 1100 1000 900 800 700 105 Dollar Index (left axis) EUR:USD (right axis) 1.3 70 Oil (left axis) 400 100 95 90 85 80 75 1.2 1.1 60 50 40 30 Food*** (right axis) 300 70 11/15 02/16 05/16 08/16 11/16 02/17 05/17 08/17 1 20 11/15 02/16 05/16 08/16 11/16 02/17 05/17 08/17 200 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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