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Thursday, 25 July 2019

What we’re tracking on 25 July 2019

We did it, ladies and gentlemen — we survived the full duration of the IMF’s Extended Fund Facility. The fund’s Executive Board approved yesterday the disbursal of our final USD 2 bn tranche of the total USD 12 bn financing package, bringing to an end the three-year arrangement. We have more in this morning’s Speed Round and Last Night’s Talk Shows, below.

Expect the biggest news of the day to come out of the East Med Gas Forum being held here at home, with officials from the US, Israel, Greece, Cyprus, Italy, Jordan, Palestine, and Egypt all set to attend. The oil and gas news already started flowing yesterday as Delek Drilling disclosed it is looking along with Noble Energy to amend the terms of their natural gas export agreement with Alaa Arafa’s Dolphinus Holding. The full story is also in this morning’s Speed Round, below.

Across the pond, all eyes were on special counsel Robert Mueller’s congressional testimony on his two-year investigation into potential Russian interference in the 2016 US presidential elections. “With his terse, one-word answers, and a sometimes stilted and halting manner, Mueller made clear his desire to avoid the partisan fray and the deep political divisions roiling Congress and the country,” the Associated Press says. Mueller spent the better part of the seven-hour hearing avoiding falling victim to leading questions from Democrats and Republicans alike, but was clear in his denial of completely exonerating The Donald of criminally conspiring with the Russians.

The first of two major central bank meetings takes place today when the European Central Bank meets to review key interest rates. Bank chief Mario Draghi signaled last month to expect further stimulus, and with the weak PMI data coming out of Germany yesterday (see below) and the IMF’s downbeat global outlook, the stage could be set tomorrow for a move deeper into negative interest rate territory. The FT is out with an article looking at what negative rates mean for the real economy and how the ECB can use them as a policy tool to encourage lending.

The blockbuster event is coming up: The US Federal Reserve meeting that everyone and their mother has been talking about for weeks will take place on Tuesday and Wednesday next week.

It wasn’t a great day for Germany, whose manufacturing PMI fell to seven-year lows in July, raising fears that the eurozone’s largest economy could be heading for recession. The sector dropped deeper into contraction territory, registering 43.1 in July compared to 45.0 the month prior. IHS Markit blamed Brexit, trade disputes and falling demand for German products for the slowdown. Reuters has more.

Deutsche Bank posted larger-than-expected losses of EUR 3.15 bn in 2Q2019, prompting shares to fall 5% at the start of trading yesterday, CNBC reports. The bank had predicted a quarterly loss of EUR 2.8 bn and research firm Refinitiv estimated a loss of EUR 1.7 bn. Deutsche blamed the costs of overhauling its investment banking arm for the losses. The bank earlier this month cut 18k jobs, closed much of its overseas equity business and created a ‘bad bank’ to hold its junk assets.

Jared Kushner isn’t done pushing his “Peace to Prosperity” plan: Donald Trump’s son-in-law will be back in Egypt in the coming weeks to persuade the government to back his Israel-Palestine peace plan, the Jerusalem Post reports. Egypt would receive USD 9 bn under the economic plan released by the White House last month, but if — as many people suspect — Kushner’s plan involves trying to persuade us to give up a chunk of the Sinai, we can’t see it being anything other than a non-starter. Kushner will also visit Israel, Jordan, Saudi Arabia, the United Arab Emirates and Qatar to drum up regional support for the plan.

In miscellany this morning:

  • The Hyperloop is coming to the Arabian desert: Saudi Arabia will play host to the world’s longest Hyperloop test track, Virgin Hyperloop One said in a press statement.
  • US government regulators are launching an antitrust review of Big Tech — including the usual culprits Facebook, Google and Amazon — to see to what extent it has “reduced competition, stifled innovation, or otherwise harmed consumers,” Vox reports.
  • Facebook has agreed to pay a USD 5 bn fine imposed by the US’ Federal Trade Commission for the social media giant’s privacy violations. The penalty, the largest the commission has ever handed, imposes other restrictions on El Face to protect user privacy.
  • Netflix is looking to India’s mobile users to grow its subscriber base, and is planning to offer subscriptions for less than half of the country’s cheapest rate, and around a third of the cheapest subscription available in the US, according to CNN. As Netflix’s subscriber growth fell short of expectations in 2Q2019, a country with 400 mn smartphone users looks like a good market to go after, if you ask us.

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