What we’re tracking on 18 December 2018
Has the year-end news slowdown begun? It’s exactly one day early, but it feels as if news flow fell off a cliff yesterday. Not that we’re complaining. If the pattern holds, you can expect a bounce a week from now ahead of the Central Bank of Egypt’s next interest rate decision, due Thursday, 27 December.
How slow is it? Last night’s talk shows included the breaking news that Fifi Abdo has declared she has not quit dancing and will perform twice on New Year’s Eve. (We got up in the middle of the night for this?)
Speaking of rates: It’s interest rate day in the United States as the US Federal Reserve is expected to announce this evening (CLT) a quarter-point rate hike to take the fed funds rate range to 2.25-2.50%.
What to watch out for: Will the Fed cut language from its post-meeting statement suggesting it will continue with “gradual” rate increases into 2019? The US central bank was “expected to raise interest rates three more times next year, but economists now expect that will change to show two more hikes next year, with another possible in 2020,” CNBC says.
What does it mean for us? Not as much as for some emerging markets, but interest rate hikes in the US are generally bad news for EM, prompting “capital outflows … in favor of relatively higher-yielding U.S. assets,” Reuters reminds us. In parallel, the strengthening greenback then makes imports for EM more expensive.
Meanwhile: Oil prices are now down almost 40% from their recent four-year high after crude closed down again yesterday, the Wall Street Journal reports. Oil tumbled more than 7% yesterday in heavy trade “due to fears of oversupply and deteriorating demand,” Reuters adds. There are few signs the outlook will improve, Bloomberg warns.
Against a messy backdrop for equities and commodities, bearish investors responsible for some USD 575 bn are pouring their cash into bonds, according to a Bank of America survey, reports Bloomberg. In the biggest ever one-month rotation, investors increased their allocation to bonds by 23 percentage points. 53% of survey respondents believe global expansion will slow over the next year, the gloomiest outlook on the global economy since 2008.
Keeping score among hedgies: Equity funds are the biggest losers of the year, while relative value funds have (on the whole) squeezed out a win in what otherwise stands as an annus horribilis for the hedge fund world, Bloomberg reports in its annual roundup of winners and losers from the US, Europe and Asia.
Has socially responsible investing lost its soul? “All too often, critics say, revenue-chasing triumphs over principles. Investors who think they’re buying environmental, social, and governance funds—ESG for short—to promote a better world often wind up with costlier products that are, in almost every other respect, the same as any index fund. Criteria are so broad and disparate that companies as unlikely as Exxon Mobil Corp. and Philip Morris International Inc., the maker of Marlboro cigarettes, make the cut in some cases.” Read on Bloomberg Businessweek.
New business idea for the NBFI set: Financing online sellers in e-commerce marketplaces.
International news worthy of your time this morning:
Saudi Arabia’s King Salman has extended bns in handouts to citizens for another year, Bloomberg reports. KSA will fund a SAR 40 bn package to cushion the impact of rising costs, prompting concern about whether the government is committed to trim its state wage and entitlements bill. The cost of living allowance was renewed until a study of the kingdom’s “social protection system” is completed by mid-2019. The story is getting wide play in the global business press.
The UK will prepare to leave the European Union in March without an agreement, a spokesman for the British prime minister said yesterday, adding that although it’s more likely the UK will leave the bloc with an agreement, the country must prepare itself. Meanwhile, the jitters are spreading as Credit Suisse bankers have been advising wealthy clients to move their assets out of the UK, the Financial Times reported. Sterling-denominated assets have taken a hit since PM Theresa May abandoned a parliamentary vote on Brexit, taking with it the GBP and stocks.
In miscellany today:
FACT OF THE MORNING- Commodity traders now control 10% of the global LNG market, bulling their way over the past 2-3 years into a market previously dominated by global oil majors and state-owned petroleum companies. You can thank Egypt, among other emerging market buyers, for helping develop viable spot markets and flexible-destination contracts.
Buy yourself a reusable water bottle: Evian is pledging to make all of its plastic bottles from recycled plastic by 2025 as the industry comes under consumer pressure over its wasteful use of disposable plastic. (WSJ)
Getting hate on our twitter this week: The world’s most successful people start their day at 4am. Inc. magazine is amazing. Its website? A clickbait hellhole.
Worthy of hate on our twitter. Except that we snickered a couple of times. In a moderately good way: The 12 office workers you love to hate, by Emma Jacobs and Andrew Hill in the FT.
Worthy of love on your morning commute: The FT’s roundup of its Best of the Big Read for 2018.
For the geeks among our people: Apple computers used to be built in the U.S. It was a mess. (NYT)
For the uber-geeks among our people: This dude built a Spotify player. For his 1989-1991 vintage Macintosh SE/30. It was enough to drive us down alleys on the interwebs including Low End Mac, r/vintagecomputing and Ebay.