Global markets are cratering. Here’s what you need to know.

It’s a grim morning out there, ladies and gentlemen, as we head back to the trenches after a beautiful midweek holiday. To wit:

• US and European equities cratered yesterday, with American equities erasing their gains for the year as a rout kicked off by tech shares deepened and edged into other sectors. The big five “FAANG” tech stocks have lost a combined USD 1 tn in market cap since the correction began.
• Asian shares are following suit this morning. (You can get the latest snapshot here.)
• Oil plummeted 7.6% on Tuesday, driven in part by Wall Street’s use of futures contracts.Need a primer on what’s going on with oil? Stanley Reed has your back.
• The USD was up more than 0.7% against a basket of six major currencies. With “fears of a slowdown in [global] economic growth growth taking hold,” the greenback is looking like a safe haven, some think.
• Still, Wall Street’s “fear gauge” hasn’t returned to its October peak yet, though the Vix is now at a three-week high.

What’s going on? A growing number of analysts are worried about the global growth outlook, and some are suggesting that the markets are picking up on underlying weaknesses in the US and other developed economies.

A loss of momentum in Western markets is going to create more turbulence for EM: “There should be little doubt that developed economies are losing momentum,” the always-on-point Mohamed El Erian writes for the Financial Times — and “the Brexit saga, Italy’s stand-off with Brussels and the changing politics in Germany” suggest there could be still more downside to come. That’s “only adding to the complexities facing an emerging world already coping with China’s more uncertain outlook. … The world’s emerging economies also face challenges because of the shift from synchronised growth in developed economies last year to a much more mixed trend in 2018.” What does this all mean for investors? Read: Risks rise for investors as developed economies falter.

The bottom line? It may not yet be time to “buy the dip,” the FT suggests (see chart, below).

Donald Trump is standing with Saudi Arabia, downplaying Crown Prince Mohammed bin Salman, “pledging to remain a ‘steadfast partner’ of the kingdom and dismissing U.S. intelligence conclusions that the Saudi crown prince had ordered the killing of a dissident journalist last month,” the Wall Street Journal reports.

Speaking of MbS: The crown prince will visit Egypt “soon” in a tour that will also take him to the UAE and Bahrain before heading to Argentina to attend the G20 summit, a diplomatic source revealed. MbS is due to hit the road this coming Friday.

Carlos Ghosn, the architect of the Nissan-Renault alliance, was arrested in Japan on Monday. The high-flying exec, who was said to be negotiating a full merger between the two companies in the days leading up to his arrest, faces charges he under-reported his compensation. That merger could be entirely off now: “Nissan’s investigation into alleged misconduct by Chairman Carlos Ghosn is expanding to include Renault-Nissan finances … in a further sign that Nissan may seek to loosen its French parent’s hold on their global carmaking alliance,” Reuters reports. The allegations are a warning to high-flying chief executives everywhere, the Financial Times editorial board writes.

A ray of sunshine? Goldman’s 2019 outlook for emerging markets: Goldman Sachs expects EM shares, currencies and bonds to see a “modest” rebound next year after a tumultuous 2018, according to its 2019 Outlook report (pdf). Returns on assets during the next six months may be better than the past period, analysts wrote, especially as concerns about the next US recession grow over time. Goldman sees EM growth sliding to 4.7% next year compared to 5.1% this year before accelerating to 5.3% in 2020. Thanks to a modestly weaker USD and economic improvements outside of China, EM equities will see the biggest rise at 12 percent in USD terms, while EM currencies should appreciate by an average of 2 percent, while local rates return round 10 percent and sovereign bonds return 5.5 percent, Bloomberg writes, picking up on the report.

In miscellany this morning:

• We like standing desks for our backs and hips — but using one doesn’t qualify as exercise, and there’s no real research proving that sitting at work will kill you. (NYT)
• 4am starts and spinach smoothies: Da Vinci Code’s Dan Brown on how to write a bestseller. (Guardian)
• Four on the floor? Not for you. A Canadian province will phase out sales of non-electric cars by 2040. (Reuters)
• Pasta maker Barilla wants to sell you a Nutella knock-off and thinks you’ll buy it because it has no palm oil. (Reuters)

MUST-READ INTERVIEW: Fidelity’s Abigail Johnson (“most powerful woman in investing”) speaks to Bloomberg about cryptocurrencies, M&A and why her firm cut index fund fees to zero.

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Take our 2019 poll in English. Or, if you prefer, take it in Arabic.
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No particular theme dominated last night’s talk shows, save for a few talking heads taking note of Universal Children’s Day.

Egypt currently has some 38.9 mn citizens under the age of 18, Hona Al Asema’s Lama Gebril said, citing CAPMAS figures (watch, runtime: 5:55). As the government looks to contain Egypt’s population growth, the Social Solidarity Ministry is set to inaugurate 34 reproductive health clinics (akin to Planned Parenthood) next month, according to the ministry’s population program coordinator Randa Fares. The clinic should serve around 1.15 mn women across 10 governorates (watch, runtime: 7:00).

Some 117k children between the ages of 10 and 17 get married each year in Egypt, Al Hayah Al Youm noted in a brief discussion of child marriages (watch, runtime: 1:56).

The General Authority for Freezones and Investments (GAFI) will inaugurate the Nuweiba freezone “soon,” GAFI head Mohsen Adel said on Al Hayah Al Youm. Adel also discussed progress on several development projects the government is launching in Upper Egypt, which was the topic of discussion with a visiting delegation from the World Bank (we have more in Diplomacy + Foreign Trade, below) (watch, runtime: 16:41).

Suez Canal Authority boss Mohab Mamish chatted about the investments the Suez Canal Economic Zone has attracted over the past few years and noted the wide range of projects that have been established in the zone (watch, runtime: 8:28).

Elsewhere, CAF’s decision to suspend the Algerian referee who presided over Al Ahly FC and Esperance Tunis’ latest match over alleged bias was a topic of discussion on Yahduth fi Masr. The former head of CAF’s technical committee, Monem Shatta, said that the referee should be summoned for questioning. If the probe finds that the ref was bribed, a re-match should be held, he said (watch, runtime: 4:12).

Egypt and the UK are reportedly in “early talks” over a post-Brexit trade agreement, government sources told the domestic press yesterday. The agreement is necessary as the UK looks set to abandon a trade pact that saw Egypt and the European Union cut tariffs, quotas and barriers to the sale of agricultural products and manufactured goods. It’s anyone’s guess what the final shape of an agreement would look like, according to Gamal Bayoumi, a veteran trade watcher and Secretary-General of the Egyptian-European Association. The UK is apparently looking to negotiate terms similar to those in the EU-Egypt Association Agreement, while Egypt will push to increase exports under the new pact, the report says.

UK looking to preserve market access: UK Minister of Investment Graham Stuart told us exclusively in May that his government is working hard to ensure Brexit doesn’t affect Britain’s standing trade agreements. The country, the largest non-Arab investor in Egypt, is set to formally leave the EU in March 2019

The potential: Egypt’s total trade relationship with the UK was worth USD 3.9 bn in FY 201718, with Egyptian exports to Britain accounting for USD 1.7 bn of that total. Trade with the UK accounts for roughly 4.3% of Egypt’s global trade balance.

Executive regulations are due this week for one piece of “reform” legislation the business community could come to dread. The Madbouly Cabinet is reportedly set to approve this week the executive regulations for the amended Consumer Protection Act, unnamed sources at the Consumer Protection Authority tell Amwal Al Ghad. The law gives the CPA the right to impose price controls, to censor advertisements and to regulate the e-commerce, automotive and real estate markets. The act was approved by the House of Representatives last April. Read our rundown on its provisions here.

Egypt’s budget deficit narrowed slightly to 1.9% during the first quarter of FY2018-19, down from 2% during the same period in the last fiscal year, Finance Minister Mohamed Maait said, according to Reuters. Maait said the narrowing of the deficit indicates that Egypt is on track to meet its budget deficit target of 8.4% for the current fiscal year, according to the newswire. A government source had told us in September that the Finance Ministry was likely to amend the target to 8.6% on the back of rising US interest rates and a spike in oil prices this year. Initial budget projections had assumed an oil price of USD 67 / bbl. According to Bloomberg, every USD 1 increased above the budgeted oil price adds EGP 4 bn (USD 222 mn) to the state’s annual outlay. The recent plunge in the price of oil from a high well north of USD 80 / bbl has given the state considerable breathing room on that front.

Egypt’s non-oil industrial output jumped 32% in 1Q2018 to EGP 168.5 bn, up from EGP 127.7 bn in the same quarter last year, according to a CAPMAS release. Food products accounted for 23% of overall output while steel production accounted for 19.2%.

Gov’t disburses EGP 504 mn in export subsidy funds: Finance Minister Mohamed Maait has disbursed EGP 504 mn in export subsidy funds, bringing total payouts in recent months under the state-run Export Subsidy Fund to EGP 1.2 bn, the ministry said in a statement. The fund is supposed to pay out 8-12% of the value of exports to companies, depending on how much local content is used and the export destination.

Background: The announcement comes after industry trade groups sent “emergency” letters to the Madbouly government suggesting they were struggling after what they characterized as a two-year delay in the release of subsidy payments. Exporters say the state still owes them EGP 9-12 bn in payments, a figure that grows in lock-step with a 7% rise in exports in 9M2018.

The central bank sold USD 1.7 bn-worth of one-year USD-denominated treasury bills on Monday at an average yield of 3.697%, it said on its website. Egypt also issued on Monday USD 2.57 bn-worth of treasury bonds in two tranches: A USD 860 mn series with a 2026 maturity at 7.12% and a USD 1.76 bn series maturing in 2028 at 7.62%. The issuance was a repurchase as part of a USD 3.8 bn “repo” agreement signed in October between the CBE and a consortium of 11 global banks.

M&A WATCH- Gulf investors are acquiring as much as 25% of Ostoul Capital Groupunder a planned capital increase, CEO Ali Al Ghannam told Al Mal. Funds from the EGP 50 mn capital increase will allow the firm to grow its brokerage arm, Al Ghannam said, adding that Ostoul is exploring potential investments in the health and education sectors.

M&A WATCH- Uber, Careem merger talks appear to be in advanced stages despite Egyptian Competition Authority warning: Dubai-based ride-hailing operator Careem is using investment bank Jefferies as an advisor on a potential merger with Uber, three inside sources told Reuters. The news suggests Careem and Uber are ignoring a sharp warning from Egypt’s competition watchdog last month that the companies could face fines up to EGP 500 mn apiece if they were to follow through with the merger. Two of the sources pointed out to the newswire that appointing the investment bank to advise on the potential merger with Uber may signal that talks have entered a “serious” stage.

Background: A warning from the Egyptian Competition Authority (ECA) had said that the merger would be anticompetitive. The move came as the ECA has sought expanded powers to sign off on M&A worth more than EGP 100 mn. Both companies denied reports in July that Uber was in talks to acquire Careem, but Bloomberg revealed in September that talks were ongoing over the potential merger, which could be worth as much as USD 2-2.5 bn.

LEGISLATION WATCH- Executive regulations for the Ride Hailing Apps Act will be ready before year-end, Mohamed Hegazy, the head of the CIT Ministry’s legislative division, tells Masrawy. The act passed the House of Representatives in May and was signed into law in June. The executive regulations were initially due out in September. We had heard shortly after the announcement would not be ready before January 2019, but now appear to be on the fast track after recent protests by Uber and Careem drivers over the delay. Careem had submitted a proposal last month to the committee drafting the regs to include provisions that would ensure driver inclusion, flexible working hours for seasonal drivers, and a call for a single authority to enforce the law.

LEGISLATION WATCH- Gov’t to send Real Estate Tax Act back to House in December: The Madbouly Cabinet has pledged to send amendments to the Real Estate Tax Act back to the House of Representatives for review in December, said Rep. Yasser Omar. The House had overhauled government-proposed amendments and drafted a revised version that significantly waters down the original bill, which covered everything from the new real estate tax formula to how rented properties will be taxed and avenues for appeal. President Abdel Fattah El Sisi had asked for the amendments to be “revisited” to be more considerate of low-income citizens.

LEGISLATION WATCH- E-Commerce Act coming in 1Q2019: The Communication and Information Technology Ministry will finish drafting a new law regulating e-commerce in 1Q2019, CIT Ministry official Mohamed Hegazy told Al Mal. The ministry will hold public consultations on the bill before the end of November in cooperation with the central bank as well as the trade and finance ministries. Industry players including representatives from Jumia, Souq, Facebook and Google will be invited to join, Hegazy said. The inclusion of the last two suggests the act will not just cover the online sale of goods, but also the sale of ads on web and social platforms. An official had previously said the legislation would be ready to present to the Madbouly Cabinet in 1H2019.

EARNINGS WATCH- Elsewedy Electric’s consolidated net profit fell to EGP 1.16 bn in 3Q2018 from EGP 1.58 bn during the same quarter last year, the company said in its earnings release (pdf). The company’s consolidated revenues for the quarter also fell to EGP 10.21 bn from EGP 11.46 bn the previous year, which the company attributed largely to lower revenues from turnkey projects. Elsewedy’s “core wires and cables business is providing the growth expected from a mature anchor segment as margins at our younger segments stabilize at normalized range,” CEO Ahmed Elsewedy said. Looking ahead, Elsewedy expects demand for infrastructure in the GCC and Africa continuing to grow at a fast clip. “Having secured our turnkey backlog for the coming two-and-a-half years, management is actively exploring the options for expansion, whether organically by extending our geographic reach, or through the synergies to be had by acquisitions.”

French President Emmanuel Macron will visit Egypt in January. Look for security cooperation (including the situation in Libya) as well as economic ties to feature high on the agenda, France’s ambassador in Cairo, Stéphane Romatet, said on Monday, according to Sada El Balad.

A delegation of 12 French companies is expected to accompany Macron to kick the tires on potential investments in Egypt, head of the Federation of Private Hospitals of France Lamine Gharbi told Al Mal.

SWF bylaws and articles coming soon: Officials will meet on Thursday to look into the “nearly complete” bylaws and articles governing Egypt’s upcoming sovereign wealth fund, Planning Minister Hala El Said said, according to Al Mal.

Pitch for a spot in Fintech Cairo: Pharos’ Pride Capital has launched Fintech Cairo in partnership with global seed program organizer Startup Bootcamp, along with Pride Capital has launched. The six-month accelerator program will select 10 companies from a pool of applicants. Our friends at Pharos Holding, along with Bank of Alexandria and the German development agency GIZ, are proud supporters and sponsors of the program. You can submit applications here. The deadline for submissions is the 31 December.

Consumer finance panel discussion: The French Chamber of Commerce and Industry is hosting a panel discussion on consumer finance in Egypt. The event takes place Monday, 3 December from 6-8pm at the Fairmont Hotel Nile City. Speakers will include former Financial Regulatory Authority boss Sherif Samy, EFG Hermes Finance CEO Walid Hassouna and Shalakany Law Office senior partner Aly El Shalakany. You can check out the agenda for the event here (pdf).

Also in the pipeline:

• Amendments to the Real Estate Registry Act will be introduced in the House this week;
• Egypt and Ethiopia will start talks within two weeks on “unresolved” issues stemming from the Grand Ethiopian Renaissance Dam (GERD);
• The government is due to announce “soon” the date of its first auction of up to 10 mn sqm of ‘unused’ state land;
• Cabinet is set to “soon” unveil a comprehensive development and infrastructure strategy for Sinai.

Egypt’s community of falconers gathered on Saturday in Borg El Arab to celebrate World Falconry Day, Xinhua said. “For two days, falconers have been showing their skills and the skills of the birds in hunting, speed as well as the beauty of the raptors,” Egyptian falconer Sayed El Sayed said. El Sayed is the admin of Al Qannas Al Masry “Egyptian Sniper” Facebook page, one of the event’s organizers. The Raptors Club of Egypt, which has some 12k followers, also helped organize the event. Falconry as an art and sport is believed by many to have originated in Egypt. The falconers train by releasing the birds into the skies and carefully luring them back in using special techniques, sounds, and items made to look like their natural prey (watch, runtime: 4:33).

It can only be called a “weird” day for Egypt in the international press, with our homegrown answer to WWE going viral a few weeks after it first made headlines and a passel of stories tackling the nation’s human rights record.

Fighters with eccentric costumes, masks, and face paint are giving us our own version of WWE right here in Omm El Donia. A wrestling arena in Ismailia that draws inspiration from the WWE has hosted 22 events since Egyptian Professional Wrestling Federation (EWF) founder Ashraf Mahrous set it up in 2012. France’s AFP first reported the story, which has spread to outlets including Al Bawaba, Saudi Gazette, Africanews (who’s put together an interesting video report), and Arab News.

Other headlines worth noting in brief:

• Austerity measures are not enough to resolve Egypt’s “debt crisis,” Maged Mandour writes for the Carnegie Endowment for International Peace, saying that the issue is rooted in the military’s role in the economy.
• The abuse of homegrown psychedelic “strox” is alarming officials, Reuters reports.
• Release Shawkan: Reporters Without Borders is calling for the release of Egyptian photojournalist Mahmoud Abu Zeid “Shawkan,” who is still in prison despite completing his term, the IFEX network notes.
• Disregard for child rights: Egypt has disregarded basic children’s rights for subjecting six children “to horrific violations including torture, prolonged solitary confinement and enforced disappearance,” according to findings published by Amnesty International.
• Abuse of red notices: Egypt is among countries who persecute foreign-based critics using Interpol’s red notices, including China, Russia, Turkey and Azerbaijan, the Financial Times notes.
• Politics in the Coptic Church undermine efforts for religious reform as Pope Tawadros II of Alexandria faces backlash from conservative Coptic bishops on church-state relations, Dr. Georges Fahmi writes for Chatham House.
• 166th birthday of the Egyptian Museum: Egypt celebrated yesterday the 166th anniversary of the Egyptian museum asserting the establishment will not become out-of-date when the Grand Egyptian Museum launches, Reuters reports.

Egypt’s economy could easily grow at an annual 8% clip in the coming period, Abdel Moneim Said writes for Al Masry Al Youm, but it requires effort as well as learning from other countries’ successful experiences. Said points to how other countries such as Latvia and China have harnessed their competitive advantages, whether in labor or capital, to propel their economies and encourage local and foreign direct investments in various sectors. On a smaller level, Said adds that governorates themselves should attract also local investments by developing infrastructure.

Egypt and the Eurasian Economic Union (EAEU) will hold the first round of talks on a potential trade agreement in mid-January, according to a Trade Ministry statement. Minister Amr Nassar signed yesterday a cooperation framework with the Eurasian Economic Commission’s Trade Minister, Veronika Nikishina, to hold a joint business forum during 1H2019 to enhance trade.

AFD to lend Egypt EUR 60 mn to finance first phase of Universal Health Insurance scheme: The French Agency for Development (AFD) is granting Egypt a EUR 60 mn loan to finance the first phase of Egypt’s health insurance scheme, which is set to roll out in June, AFD senior project officer Dina Khalil said. The new loan is expected to be signed during French President Emmanuel Macron’s visit to Cairo in January, Khalil said, without providing further details on the loan.

On a related note, nine French companies formed a consortium to help Egypt develop its healthcare sector and improve the country’s pharmaceutical industry, according to a statement from the Investment and International Cooperation Ministry. France has already invested EUR 31 mn in healthcare projects across five Egyptian governorates, Investment Minister Sahar Nasr said, according to the statement.

Sahar Nasr discusses USD 500 mn Upper Egypt development program with World Bank: Investment and International Cooperation Minister Sahar Nasr met yesterday with a delegation from the World Bank to discuss the ministry’s implementation of a USD 500 mn development program for the Upper Egypt region, according to a ministry statement. The World Bank had pledged last month a USD 3 bn loan for infrastructure projects across Egypt, as well as development projects in the Sinai peninsula.

The Asian Infrastructure Investment Bank (AIIB) is eyeing fresh investments in Egyptian infrastructure projects, a delegation from the bank told Investment and International Cooperation Minister Sahar Nasr and Suez Canal Authority Chief Mohab Mamish, according to a ministry statement. No details were provided on the expected size of the investments. The delegation will be in town until Friday to discuss the financing plans.

Oil Minister Tarek El Molla and Electricity Minister Mohamed Shaker met on Monday with US Bureau of Energy Resources Assistant Secretary Francis Fannon to discuss bilateral cooperation in the energy sector.

The Military Production Ministry inked yesterday an MoU with Slovenian company Iskra to cooperate in manufacturing devices and equipment used for energy distribution, according to a ministry statement. No further details were provided.

Italy’s Eni has completed drilling work on Zohr’s ninth deepwater well at a cost of USD 300 mn, according to an industry source. Early tests put initial production levels at 150 mcf/d. The well was closed after the company finished drilling due lack of capacity at the treatment plant, but will enter production by the end of the year once the sixth gas treatment plant is completed. Production from the ninth well will increase Eni’s Zohr production to 2.25 bcf/d. Zohr’s total output will reportedly reach 2.95 bcf/d by the time the field’s development is complete in July 2019. Eni had previously estimated the field’s final output would reach 2.7 bcf/d.

The European Bank for Reconstruction and Development (EBRD) has signed a USD 7 mn loan agreement with Egyptian cheesemaker Obour Land, according to an EBRD statement. Obour Land will us the loan to finance its expansion plans, including establishing a “greenfield dairy farm, with imported milking equipment and 2,500 dairy cows.” The farm has an estimated production output of 60 tonnes of milk per day.

Winter tourism bookings to Egypt from Germany, Italy, Poland, and Ukraine are “particularly promising” this year, travel company Travco Group CEO Hamed El Chiaty told Reuters. Occupancy rates at the group’s hotels this year have hit more than 80%, excluding Sharm El Sheikh, El Chiaty said.

The Transport Ministry has received three bids from international companies to construct two high-speed monorail lines which will link the new administrative capital to 6 October, Minister Hisham Arafat told Al Ahram. Arafat did not disclose when the ministry will announce the winning bid. The tendered project has been fraught with delays since 2015.

Suez Canal Economic Zone (SCZone) head Mohab Mamish signed yesterday three contracts with local and international companies for projects in the zone, Al Mal reports. The projects include a USD 1.8 bn salt production factory, which India’s TCI Sanmar will establish under a three-year usufruct basis, and a EGP 1.6 mn liquid waste station in west Port Said that Life Petrochem will build. Mamish also signed a contract with Sesco Trans to construct a multipurpose terminal in East Port Said for EGP 1.5 bn.

The Financial Regulatory Authority (FRA) has amended the Egyptian Accounting Standards (EAS) to bring them in line with the IFRS, FRA boss Mohamed Omran announced yesterday. The amendments include adding standards to be compatible with IFRS 9 and 15, as well as a third standard to resolve discrepancies between the EAS and the recently approved Leasing and Factoring Act.

The Cairo Economic Court has settled five bankruptcy cases worth a combined USD 7 bn from companies in the food, pharmaceutical and real estate sectors. The Bankruptcy Act, which was approved by parliament in January, saw the establishment of specialized bankruptcy courts to mediate and arbitrate bankruptcy cases. Since their establishment, bankruptcy courts have received about 20 dispute settlement requests.

Arsenal is reportedly looking into trading off defensive midfielder Mohamed Elneny for GBP 15 mn in the upcoming winter transfer window, according to The Sun. Elneny has failed to make an “impact” at Arsenal since his 2016 move from Swiss FC Basel, and Leicester could “offer him an escape route” the British tabloid says.