NBKCapital_MENA_Markets_Review_022-Aug2018

MENA MARKETS REVIEW: AUGUST 2018

NBKCapital latestNews, MENA Markets Review

Kuwait: September 6, 2018

HIGHLIGHTS

Despite some domestic political rumbling and continuing trade war fears, the domestic economic news flow in the US has remained consistently upbeat over the past month
  • US equities posted positive returns in August with the S&P 500 recording its longest bull run ever. The Dow Jones and S&P 500 each closed in the green returning 2.2% and 3.0%, respectively.
  • Europe’s equity markets registered losses and Greece announced it no longer needs external financing. The German DAX Index posted a loss of 3.5% reversing a majority of the gains from the previous month while France’s CAC 40 Index dropped 2.0%.
  • Emerging markets are back in negative territory shedding 2.9% on concerns of trade wars. Tensions rising from potential trade wars, mainly between the US and China, continue to put a strain on markets overall.
  • Brent Oil price was volatile during the month yet ended up 4.3%. The commodities performance rebounded during the second half of the month supported by US crude stockpiles coming in significantly lower than what was expected.
  • GCC equity markets had mixed performance with 3 of the 7 markets achieving positive returns. The GCC equity markets were negatively impacted by the global sell-off amid growing trade tensions despite higher oil prices supporting the markets.
  • Saudi’s PIF arranges for its first commercial bank loan while Qatar’s central bank issues bonds and sukuk.

TRADE WAR CONCERNS PERSIST; EMERGING MARKET CURRENCIES SEE LARGE SELL-OFF

Global trade remained at the forefront of the economic agenda over the past month, with the further ratcheting up of tensions between the US and China joined by attempts to reshape the tripartite NAFTA agreement. US President Trump was due to announce tariff increases on a further $200 billion in imports from China following the end of a consultation period in early-September, with retaliation from China likely. Meanwhile, although the US and Mexico agreed a bilateral trade pact, President Trump said that without concessions, “Canada will be out” and threatened to terminate the existing deal.

There is also heightened concern about stability across emerging markets, with economic crises in Turkey and Argentina triggering sharp currency sell-offs and the latter forced to raise interest rates to 60%. A combination of trade war worries, a strong US dollar and contagion fears also pressured currencies in India, Indonesia and South Africa.

GLOBAL EQUITIES

Global equities in August posted a positive return of 0.6% as measured by the MSCI All Country World Index. In the US, the Dow Jones and S&P 500 each closed in the green returning 2.2% and 3.0%, respectively. The S&P 500 in August recorded its longest bull run ever, since bottoming out in March 2009 during the global financial crisis. Trade war talks continue to take center stage although some relief came to the market as the US and Mexico came to an agreement with respect to revamping NAFTA. The US and China are still unable to find common ground with the US increasing tariffs on Chinese imports of USD 16 billion bringing the total to USD 50 billion. During the month, the Federal Reserve left rates as is although the Fed Chair did confirm during a month-end speech at Jackson Hole that monetary policy would maintain its course of tightening, albeit a cautious one.

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