NBK Capital Global Markets Commentary – February 2017

Kuwait: March 6, 2017

Global equities continue to perform well ending the month up 2.6% as measured by the MSCI All World Index.

Global equities continue to perform well ending the month up 2.6% as measured by the MSCI All World Index. The rally was led by the US and emerging markets. President Trump continues to be a positive force on US equities, which closed up 3.7% for the month as measured by the S&P 500. Other major markets ended the month with gains, whereas the GCC region was down 0.8%, as measured by the MSCI GCC Countries. Commodities had mixed performance for the month with Gold closing up 3.1% and Brent Oil closing down 0.2%. As of the end of this month, oil producers remain compliant with the OPEC deal terms.

US manufacturing continues expanding with the ISM Manufacturing PMI for February coming in at 57.7, slightly higher than January’s number of 56. ISM Non-Manufacturing PMI was also higher in February, at 57.6 versus the 56.5 in January. The labor market continues to be strong with Initial Jobless Claims at 223,000 compared to the previous month’s claims of 242,000. Durable goods orders increased to 1.8% in January from -0.8% in December. Housing starts declined in January by 2.6% from the previous month although building permits increased from 1.228m in December to 1.285m in January. US retail sales for January was positive at 0.4% although lower than the prior month. Existing home sales was also up in January at 5.7m compared to the December’s reading of 5.5m. Consumer confidence was up 2.9% for the month of February, with a reading of 114.8 versus 111.6 in the prior month.

UK equities closed the month up 2.3%, as measured by the FTSE 100.

The UK Manufacturing Purchasing Managers Index (PMI) was 54.6 for the month of February, slightly lower than January. The Consumer Price Index for January, YoY, was 1.8% compared to 1.6% in December. Retail sales performed poorly in January dropping to 1.5% from a reading of 4.6% December. Consumer confidence also dropped for the month of February to -6 from -5 in January.

UK equities closed the month up 2.3%, as measured by the FTSE 100.

The Eurozone Markit Manufacturing PMI for the month of February was 55.4 compared to the January figure of 55.2 indicating continued expansion. The Markit Services PMI preliminary reading increased to 55.6 in February from 53.7 in January further showing improvement in business activity. Consumer confidence was unchanged from the previous month at -6.2, while CPI for the Eurozone area, on a year on year basis for the month of January, was also unchanged at 1.8%.

European equities rose in January by 2.8%, as measured by the Stoxx Europe 600.

Japan exports, on a year on year basis in January was positive at 1.3%, although it dropped from 5.4% in December. Imports for the same time-period were up 8.5% from the -2.6% in December. The Nikkei Manufacturing PMI for February was at 53.3, slightly below the prior month’s reading of 53.5, indicating Japanese manufacturing is continuing to expand. Housing starts were up year on year for the month of January at 12.6% compared to 3.9% for the month of December.

Japanese equities were slightly up in February, as measured by the Nikkei 225, increasing 0.4%.

Global monthly market commentary chart for Feb 2017

China’s imports and exports both expanded year on year during the month of January at 7.9% and 16.7%. Overall, the country recorded a trade surplus for January of RMB 354.5b compared to RMB 335b in December. The Caxin Manufacturing PMI for the month of February was 51.7 compared to 51 in the previous month while the Non-manufacturing PMI was slightly down at 54.2 from 54.6 in January.

The CPI reading year on year for January was reported at 2.5% coming in above expectations and the previous month’s reading of 2.1%.

Emerging market equities continued to perform well in February up 3.0% while Chinese equities, as measured by the Shanghai Stock Exchange Composite Index, also performed well posting gains of 2.6%.

The GCC equity markets had mixed performances for the month of February. Saudi experienced the largest decline at -1.8% followed by Kuwait at -0.8% and Dubai at -0.3%. Bahrain’s equity market was the star performer gaining 3.5% followed by Qatar gaining 1.0%. Abu Dhabi and Oman were almost flat for the month posting a gain of 0.07% each. Egypt’s index did not continue its rally from the previous month, decreasing 5.8% in February.