What we’re tracking on 10 April 2018
We hope you all had a wonderful and relaxing holiday — the last big one before Ramadan (you get only day each for Sinai Liberation Day on 25 April and Labor Day on 1 May). Yes, Ramadan is in a little over a month from now. Food for thought (Mmmm, food).
We have a handful of news for you this morning, including the successful conclusion of Egypt’s EUR 2 bn eurobond sale and a ruling in favor of ride-hailing apps Uber and Careem, among other things, which we cover in detail in the Speed Round, below.
But first, it’s inflation report day: We are expecting today results from the CBE and CAPMAS on inflation figures for March. Annual headline inflation fell to 14.4% in February from a high of 33% in July 2017, while core inflation dropped to 11.9% in February from a high of 35.3% in July — the lowest they’ve been since 2016. This undoubtedly bolstered the CBE’s resolve to continue with monetary easing for the second straight month since the EGP float, cutting rates 100 bps last month.
An expected rise in global interest rates may soon see African economies facing a debt crisis, according to African Business. The continent’s debt levels have risen to alarming levels, as widening deficits and a sharp drop in commodity prices have prodded more than 20 African countries to seek out loans from international funding institutions and issue large eurobonds in the last few years, including Egypt, Nigeria, Ghana, Kenya, and Cote d’Ivoire. “It is the equivalent of using one credit card to pay off another,” as most of the inflowing cash is used to plug budget deficits and pay off existing debt. “Commercial debt is also becoming a problem. Some USD 35 bn of existing eurobond debt will mature between 2021-2025.”
Equity markets will be holding their collective breath ahead of Chinese President Xi Jinping’s speech today, which is “fraught with market peril” and “could really stir the pot,” Performance Trust Capital Partners’ Brian Battle tells Reuters. Xi “is expected to announce new economic reforms and market-access measures in a delicate attempt to answer complaints by the US and other trading partners,” according to the FT. China had threatened last week to slap a 25% tariff on USD 50 bn-worth of US imports, in response to US President Donald Trump announcing a plan to impose a similar levy on a range of Chinese products, which US officials said was still months in the making. Chinese businessmen and academics attempted yesterday to dispel rumors of China’s intention to escalate the fight, the FT says.
An agreement in the offing? On the other side of the pond, Trump also downplayed rumors of a trade war, saying at a White House Cabinet meeting he expects Beijing to strike a bargain with the US and move to eliminate trade barriers. “‘Taxes will become reciprocal and [an agreement] will be made on intellectual property,’” he said, adding that while a pact was probable, the lack of one would mean China paying “pretty high taxes to do business with our country.”
Global stock prices were up yesterday as equity markets began to recover from fears of the imminent trade war that had sent indices tumbling last week Asian and European stock markets saw prices continue on their uptrend from last week. In the US, the S&P 500 closed the day with a 0.33% gain, “after rising as much as 1.9% during the session,” while Nasdaq was up 0.51%. Both indices were weighed down by news that the FBI had raided Trump’s longtime lawyer Michael Cohen’s office.
Meanwhile in Russia, major companies saw their share prices drop after the US announced a new round of sanctions on Friday that “target officials and businesspeople around President Vladimir Putin in an aggressive response to alleged Russian meddling in the 2016 US election,” Reuters says (The FT looks into whether or not the sanctions will have a last impact on Russia here).
In other news from across the pond, Trump is receiving Qatar’s Emir Tamim bin Hamad Al Thani today, according to a White House statement. The two will discuss ways to “strengthen ties” and advance “common security and economic priorities” between the US and Qatar. Trump had recently met with Saudi Crown Prince Mohammed bin Salman at the White House, and will be meeting with Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed soon. Bin Zayed and Trump had called for greater unity within the GCC in a phone call on Friday, Reuters reports. Tamim’s visit comes amid an ongoing Gulf spat, which Trump is hoping to resolve in a September summit. Not likely to help are Saudi proposals to turn Qatar into an island, by digging a canal and a zone to dump nuclear waste, according to Gulf News.