Tuesday, 2 July 2019

What we’re tracking on 2 July 2019

The question of the day is whether we should expect new 95-octane fuel price changes this month. All signs seem to indicate the answer is “yes,” particularly as the local press is on high alert for any clues. We have the full rundown in this morning’s Speed Round, below.

The EGX didn’t have a great second quarter. The EGX is back today from a four-day weekend. Last week, the bourse issued a report stating that the EGX30 fell 4.3% in 2Q2019, with analysts we spoke with telling us that the Global Telecom Holdings dispute and a turbulent global market as a result of the US-China trade war contributed to the decline. We have more in this morning’s Speed Round below.

It’s interest rate day next week: The CBE’s Monetary Policy Committee will meet to review interest rates on Thursday, 11 July. The MPC left key rates on hold at the last meeting in May and the expectation is that it is likely to do the same again this month — especially considering the fuel and electricity subsidy cuts.

Watch for these news triggers in the coming days:

  • PMI: The purchasing managers’ index for Egypt, Saudi Arabia, and the UAE will be released tomorrow.
  • Foreign reserves: The CBE is due to release Egypt’s net foreign reserve figures for June this week.
  • Inflation: Monthly inflation figures are due out next week.

Alain Pilloux, vice president of banking at the EBRD, began a four-day visit to Egypt yesterday with a meeting with Prime Minister Moustafa Madbouly. Pilloux suggested that the EBRD might fund Egypt’s monorail project. We have more in this morning’s Diplomacy + Foreign Trade, below.

It’s your last chance to register for AmCham’s monthly luncheon with Electricity Minister Mohamed Shaker, taking place today.

The planned resumption of US-China trade talks is doing good by global stocks as investors are banking on improved global economic growth, Reuters reports. The S&P 500, Dow Jones Industrial Average, Nasdaq Composite, and MSCI’s broadest global index all rose yesterday, and the USD rose around 0.4%, driving gold prices down 1.5%. “‘Any step toward a trade resolution — and it doesn’t have to be a lot of progress — just a step, is viewed very positively by markets,’ said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida. ‘And investors at this point are trying to focus on the positive in hopes that there will be some trade resolution down the line.’”

Restarting negotiations is piling pressure on the US Federal Reserve to move ahead with its first rate cut in a decade to help strengthen the US economy and put The Donald in a stronger position in the trade talks, according to the newswire. Fed Chairman Jerome Powell said last week that slowing economic growth made it more likely that a rate cut would come to fruition in the next few months, but cautioned against knee-jerk policy responses to current conditions.

A slump in global manufacturing is a signal that easing tensions could not happen soon enough. The impact of the trade standoff on the global economy can be seen in a series of bleak manufacturing index releases from JP Morgan and IHS Markit, which showed manufacturing slumping across the world, according to the Financial Times. Key Asian markets, including South Korea, China, and Japan, as well as most eurozone countries have reported falling output, which some analysts are concerned could start a domino effect of job cuts and a downturn in the services sector.

US companies took the lead in the global M&A market in 2Q2019, as corporates took advantage of gains in the equity and debt markets to hammer out several mega agreements, according to Reuters. Major agreements in the US included a USD 121 bn merger between United Technologies’ aerospace division and Raytheon, AbbVie’s USD 63 bn acquisition of Allergan, and Occidental Petroleum’s USD 38 bn purchase of Anadarko.

But European and Asian M&As plunge: The mega agreements were not enough to prop up global M&A volumes, which fell 27% y-o-y in 2Q, Refinitiv data shows. The value of European M&As plummeted 54% to USD 152 bn in 2Q2019 while Asian companies fell 49% to USD 132 bn. In comparison, US M&As dipped only 3% over the quarter. Hernan Cristerna, global M&A co-head at JPMorgan Chase, said that European firms “risk losing their competitive edge” if they continue to fall behind their US rivals.

Riyadh and Moscow give their blessings to an oil supply cut extension: The alliance between OPEC and non-OPEC oil producers is set to extend oil supply cuts until March 2020 at the two-day OPEC+ meeting which began yesterday in Vienna, Bloomberg reports. Concern is reportedly growing among exporters that supply growth will soon outstrip weakening demand. Plans to extend the cuts were discussed by Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman during last weekend’s G20 summit. The cuts removed 1.2 mn b/d from the market at the tail-end of 2018 in a bid to arrest the slump in oil prices.

In global miscellany this morning:

  • Iran has intentionally breached its 2015 nuclear agreement by exceeding the agreed-upon limit on its stockpile of enriched uranium as tensions between Tehran and Washington continue to grow, according to the Wall Street Journal.
  • Beijing’s new airport is a sneak peek into the future: China has just completed the futuristic looking c.USD 12 bn Beijing Daxing International Airport, the capital’s second.

PSA- The General Administration for Passports, Immigration and Citizenship has been moved from the bureaucratic nightmare that is the Mogamma to a new location in El Abbasiya, Egypt Independent reports. The seven-story building is more advanced and equipped with digital queuing and electronic visa systems.

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