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Thursday, 29 August 2019

What we’re tracking on 29 August 2019

It’s day two of the Tokyo International Conference on African Development (Ticad) today: The opening day saw President Abdel Fattah El Sisi meet with his Japanese counterpart Shinzo Abe, and discuss education initiatives with the Japanese International Cooperation Agency. The event, designed to facilitate Japanese investment on the African continent, will wrap up tomorrow. We have full coverage of the day’s events in this morning’s Speed Round, below.

The previous six iterations of Ticad haven’t done much for Japan, the FT notes. Tokyo has struggled to grow exports to the continent, foreign direct investment has expanded only marginally, and India and the UAE have overtaken it in terms of trade volumes.

This time, they’re not messing around: For this year’s Ticad, the Japanese government has set up a permanent council with corporations in a more determined effort to increase investment. This, as well as the dwindling investment options at home, has analysts optimistic that Japanese investors will finally begin stepping up their involvement in Africa.

The outlook on US corporate profits is taking a turn for the worse on the back of trade tensions with China, with analysts’ earnings expectations dropping to a three-year low, according to the Financial Times. Previous expectations that S&P 500 companies will see their earnings jump 7.7% have been scaled down to 2.4%. “With global growth slowing sharply, and domestic activity cooling, further profit weakness represents a risk for business investment and hiring — a key support to consumer spending,” says Oxford Economics senior economist Lydia Boussour.

Yield on 30-yr US treasuries hits record low: Investors continued to move into long-term US sovereign debt yesterday, sending the rate on 30-year US treasuries falling to record lows. The yield dropped to a historic low of 1.907% before recovering slightly to close at 1.933%. The falling yield comes despite the US and China sounding positive notes this week over trade talks, suggesting continued concern among investors over the US economy’s short-term prospects.

The tables are turning on high-yield EM debt: Anxiety over a looming economic slowdown has EM investors playing it safe, especially as US-China trade talks fall through and the Argentinian market dives, Bloomberg reports. High-yield USD-denominated debt in emerging markets is expected to lose 4% of its value this month after having recovered since the beginning of the year following a tough 2018, Bloomberg Barclays indexes showed. Winning though are the low-yield bonds, which are expected to reach their highest recorded gains this August.

We might be on the cusp of a rally in gold prices as investors are piling into the lower-risk assets, CitiGroup says, according to Bloomberg. UBS Group AG is also bullish on the metal, saying gold could hit USD 1,650 “as central-bank easing spurs flows into bullion-backed exchange-traded funds,” the news information service says. In Egypt, gold prices are expected to rise to EGP 800 per gram by the end of next month.

Bad news for natural gas producers — prices are at their lowest ever amid a supply glut mainly driven by the US, where exports have surged from around the 20 bcf mark in 2016 to around 130 bn this year. A widely used European price for LNG has dropped to nearly USD 3, from around USD 9 just a year ago. This is fairly disastrous for the US domestic market, the WSJ reports. And given our ambitious plans for LNG exports, it isn’t great news for us either.

Tadawul falls as Saudi stocks join MSCI: A sell-off in Saudi bank stocks caused the Tadawul to fall 1.4% yesterday after the second batch of shares were added to the MSCI EM Equity Index, Reuters says. The market has long priced in the effects of the upgrade, limiting the chances of an immediate post-inclusion boost in stocks. The Institute of International Finance said yesterday that joining the MSCI and FTSE indices has helped the Tadawul to attract USD 18 bn in foreign inflows this year. The second phase of inclusion will see another USD 5 bn of equity inflows, it said. The weighting of Saudi shares on the MSCI index rose to 2.8% from 1.45% after the second batch was added yesterday.

Trump’s Mideast peace plan delayed (again): The US will not unveil the political part of its Mideast peace plan before Israel’s elections in September, Trump’s Middle East envoy Jason Greenblatt has announced. Trump said on Monday that the long-delayed plan could be revealed prior to the elections, an idea that has received support within the Israeli government. But Greenblatt appears to have ruled that out, writing “We have decided that we will not be releasing the peace vision (or parts of it) prior to the Israeli election,” on Twitter yesterday.

Boris Johnson deploys the nuclear option: UK Prime Minister Boris Johnson has suspended parliament for five weeks in an attempt to block MPs from preventing a hard exit from the European Union. Brexiteer Jacob Rees-Mogg defended the controversial move as a “completely proper constitutional procedure,” but MPs from both sides of the political aisle denounced it as a “constitutional outrage” and a “coup”. The BBC has more.

The periodic table is 150 years old: To celebrate, Bloomberg is out with an incredibly long interactive page examining each and every element, and explaining how they’re applicable to businesses.

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