Global Markets Commentary – November 2019

Kuwait: December 10, 2019

16.7% increase in the All Share Index of the market since the beginning of the year

The GCC markets showed some strength in November after four months of weak and negative performance. The S&P GCC Composite Index edged up by 1.37% during the month supported by a strong performance in Kuwait, Saudi Arabia, and Oman. The Index’ performance since the beginning of the year is now 1.87% but still negative at 1.33% for the fourth quarter. Leading the GCC markets upwards was Kuwait with the All Share Index up 3.69% and the Premier Market Index up 4.96%. Kuwait’s Indices are up 16.7% and 23.8% on a year to date basis as at the end of November respectively, making Kuwait the best GCC performer this year. The Saudi Tadawul All Share index added 1.48% returning marginally to positive territory for the year at 0.41%. The Omani market, on the other hand, came in third in term of performance with a gain of 1.61% narrowing its loss for the year to 6.0%. On the negative side, both UAE equity markets closed in the red, with Dubai’s DFM General Index down 2.48% and Abu Dhabi’s ADX General Index down 1.51%. The wider S&P Pan Arab index slightly underperformed its GCC counterpart with a gain of 1.11% weighted down by a 4.87% decline in Egypt’s EGX 30.

After a strong performance in October, Emerging markets generally underperformed in November dragged by the weak performance of Asian markets. The MSCI EM was down -0.19% for the month sending its year-to-date performance down to 7.7%. The MSCI Asia-ex-Japan added a marginal 0.19% as the Shanghai Composite lost 1.95%. Elsewhere, notable emerging markets gainers included Turkey’s Borsa Istanbul 100 Index which added 8.57% in November, increasing its year-to-date performance to 17.13%. Russia Stock Exchange added 1.43% for the month, while India’s Nifty 50 and Taiwan Stock Exchange increased by 1.50% and 1.15% respectively.

Cautious optimism regarding a successful conclusion of a phase one trade deal between China and the US provided support for global markets during November. An agreement, however, that was initially expected to be signed by end of November may not take place until the new year as some sticky remain to be resolved as China seems to be demanding a rollback of existing tariffs on Chinese goods, and not only planned ones, to be part of a phase one deal. In the meantime, a more reassuring view of the economy in the United States boosted the US markets which led the performance of global markets during the month. The MSCI AC World Index added 2.30% in November pushing its year-to-date performance to 20%. The index’ performance was clearly driven by the US markets as the MSCI EAFE Index, which represents the performance of developed markets outside the US and Canada, underperformed adding 0.97% for the month resulting in a year-to-date return of 14.8%.

In the US, third quarter GDP was revised upward to 2.1% from a previous estimate of 1.9% and compared to a second quarter growth of 2.0%. This alleviated recession fears and helped prop up the markets. Inflation stayed subdued with the revised numbers of Core Personal Consumption Expenditures (PCE) for the third quarter coming in at 2.1% compared to an initial estimate of 2.2% and a Q2 figure of 1.9%. Industrial activity, on the other hand, remained weak with the ISM Manufacturing PMI coming in at 48.1 in November down from 48.3 in October and undershooting expectations of 49.2.

In the meantime, US Indices continued to lead international markets and record new highs. The S&P 500 added 3.40% during November, while the Dow Jones Industrial Average (DJIA) outperformed with a gain of 3.72%. The tech-heavy Nasdaq, on the other hand, recorded a gain of 4.50%. With one month left to the end of the year, all major indices are on track to close at record levels. The Nasdaq Composite tops the list with a 30.6% gain since the beginning of the year. It is followed by the S&P 500 with a gain of 25.3% and the DJIA with 20.3%. Yields on the 10-year treasuries regained some ground advancing to 1.78% at the end of November from a closing of 1.69% in October after reaching an intra-day high of 1.97% during the month. The 2-year yield, on the other hand, advanced to 1.61% at the end of the month up from 1.52% at the end of October.
In Europe, GDP figures for the third quarter were revised up marginally to 1.2%, unchanged from the second quarter. Inflation remained stable in November with the core Consumer Price Index (CPI) unchanged at 1.1%. Manufacturing activity edged marginally higher as the Markit Manufacturing PMI increased to 46.6 in November from a revised reading of 45.9 in October. German economic indicators, although still weak, seem to be ticking marginally to the upside. Preliminary German GDP for the third quarter showed a significant improvement growing at 1.0% year-on-year up from a revised -0.1% in the second quarter. Markit’s Manufacturing PMI also showed an increase to 44.1 in November from a revised 42.1 for the previous month, while the unemployment rate remained unchanged at 5%. Against this backdrop, European markets fared well during the month, although underperforming their US peers. The Stoxx Europe 600 managed a gain 2.69% in November for a year-to-date gain of 20.67%. The German DAX and French CAC40 added 2.87% and 3.06% for the month. So far this year, the indices of the two major European economies added 25.36% and 24.83% respectively.

After a sizable decline of 2.16% in October, the UK’s FTSE 100 managed to end the month of November in the green increasing by 1.35% and accumulating a gain of 9.2% for the year. Manufacturing activity remains weak with the Markit Manufacturing PMI coming in at 48.9 beating consensus estimates of 48.3 but below the previous month’s reading of 49.6. Inflation, on the other hand, weakened in October as headline CPI numbers declined to 1.5% year-on-year for October from 1.7% for the previous month, while the Core measure of CPI remained stable at 1.7% over the same period.