NBK Capital Global Markets Commentary – July 2017

Kuwait: August 6, 2017

In July, most global markets posted gains. The MSCI All Country Index was up 2.7% with the MSCI Emerging Market Index posting a gain of 5.5%. In the US, both major indices reached all-time highs with the Dow Jones and S&P 500 gaining 2.5% and 1.9%, respectively. The US continues to deal with political turmoil in Washington DC and Trump was unable to secure the necessary votes in the Congress to pass healthcare legislation. Across the Atlantic, Brexit remains a major issue with the UK and EU remaining at odds on several matters such as the financial settlement and rights of EU citizens residing in the UK. Mainland European equities, mainly the German DAX and French CAC 40 were down 1.7% and 0.5% respectively. On the commodity front, Gold has increased 2.2% while Brent increased 9.9% in July.

US Manufacturing and Services continue to hold above the 50 marker for the month of July on a preliminary basis. The US Markit Manufacturing PMI came in at 53.2 compared to last month’s 52 while the US Markit Services PMI was flat at 54.2. Initial Jobless Claims for July came in at 244,000 compared to the end of June reading of 250,000. Durable Goods Orders increased in June by 6.5% compared to the drop registered in May of -0.1%. Retail Sales in June continued to shrink by -0.2% on a month on month basis. Existing Home Sales in June dropped by 1.8% compared to the previous month while New Home Sales increased, albeit at a lower rate, for the month of June by 0.8%. Housing Starts and Building Permits increased month on month in June by 8.3% and 7.4%, respectively. Gross Domestic Product annualized for Q2 on a preliminary basis in line with expectations at 2.6%.

The UK Markit Manufacturing Purchasing Managers Index (PMI) increased to 55.1 in July compared to the previous month’s reading of 54.2. The Consumer Price Index in June was flat month on month compared to May while Retail Sales increased by 0.6%. Consumer Confidence in July continued to drop with a reading of -12 compared to May’s reading of -10. Gross Domestic Product on a preliminary basis year on year for Q2 dropped 0.3% to 1.7%.

UK equities were slightly up, closing with a gain of 0.8%, as measured by the FTSE 100.

The Eurozone’s Markit Manufacturing PMI for July remains above 50 at 56.6 slightly dropping from June’s reading of 56.8. The preliminary reading of the Markit Services PMI held constant at 55.4. The Unemployment Rate across the zone decreased by 0.1% for a reading of 9.1% in June. Consumer Confidence in July came in at -1.7 compared to June’s figure of -1.3. Gross Domestic Product on a preliminary basis year on year for Q2 increased to 2.1% from the previous reading of 1.9%. Retail Sales for June on a month on month basis increased by 0.5% compared to May’s growth of 0.4%.

European equities declined in July by 0.4%, as measured by the Stoxx Europe 600.

Japan’s imports and exports year on year continue to rise growing in June by 15.5% and 9.7%, respectively, beating out expectations however slowing down from the previous reading in May. The Nikkei Manufacturing PMI for July came in at 52.1 versus 52.2 for the month of June. Housing Starts for June increased by 1.7% year on year increasing from -0.3% in May. Retail Trade on a month on month basis improved in June by 0.2% but came in below expectations of 0.4%.

Japanese equities were down in July, as measured by the Nikkei 225, 0.5%.

China’s imports and exports in June increased 17.2% and 11.3% respectively on a year on year basis resulting in a trade surplus of USD 42.8b compared to the previous month’s surplus of USD 40.8b. The Consumer Price Index was flat for the month of June compared to May on a year on year basis. Retail Sales continue to grow in June on a year on year basis by 11.0% while Industrial Production also grew by 7.6% compared to the previous month’s reading of 6.5%. Gross Domestic Product year on year for Q2 was flat at 6.9%.

Chinese equities, as measured by the Shanghai Stock Exchange Composite Index, reported a gain of 2.5% in July.

Most of the GCC equity markets closed for the month of July in the green. The MSCI GCC Index was down in July 1.2%. Also posting negative returns for the month was Saudi Arabia’s equity market with -4.5% and Oman’s equity market with -1.8%. The top performing equity market in the GCC was Dubai with a gain of 7.1%, followed by Qatar up 4.2%, Kuwait up 3.5%, Abu Dhabi up 3.2%, and Bahrain up 1.4%. Egypt was flat closing in the green at 0.02%.