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Sunday, 23 February 2020

What we’re tracking on 23 February 2020

***BIG NEWS OF THE DAY #1: The Central Bank of Egypt left interest rates unchanged on Thursday for the second consecutive meeting as officials take stock of the recent (if modest) uptick in inflation and the global impact of the covid-19 virus.

EGP WATCH- The EGP’s surge against the greenback continued on Thursday, rising another 3 piasters to hit EGP 15.51 per USD. The currency has now almost gained more than 3% — almost half an EGP — since the start of the year.

***BIG NEWS OF THE DAY #2: All defendants, including high-profile members of the business community as well as Alaa and Gamal Mubarak, were yesterday acquitted of charges they had illegally profited from the sale of Al Watany Bank to the National Bank of Kuwait in 2007. The high-profile case, which began back in 2012, was the last standing case brought against members of the business community for alleged misdeeds during the Mubarak era.

We have the full story on the interest rate decision and the AWB verdict in this morning’s Speed Round, below.

Our friends at EFG Hermes are holding their annual One on One conference on 2-5 March at Atlantis, Dubai. The gathering is the world’s largest frontier- and emerging-market-focused investor conference.

Other dates for your diaries during the first week of March:

COVID-19 WATCH- There are no reported active cases of covid-19 in Egypt after our only reported patient tested negative for the virus. China remains the center of gravity for the infection, but there are concerns that South Korea may be a new hub for transmission and the New York Times notes that there are “multiple” infections in the United States, Italy, Iran and the United Arab Emirates. Lebanon reported its first case over the weekend.

Conferences worldwide are pulling the plug or facing cancellations from anchor attendees, particularly after a Wall Street Journal investigation about how a single sales conference in Singapore helped spread the bug around the world. Facebook, which had earlier canceled its own 4k-person marketing conference, joined Sony in pulling out of the San Francisco Game Developers Conference, and Reuters reports that the RSA cybersecurity gathering is being hit by cancellations. MarketWatch has a solid piece on what the bug means for conference season.

Long-term US bond yields hit record low on virus fears: The yield on the 30-year US bond fell below 1.9% for the first time ever on Friday as investors flocked to safe havens on fears of a spread of covid-19 outside of China’s borders, the Financial Times reports. “We are now expecting the coronavirus to have a longer impact on global growth,” said Dickie Hodges, portfolio manager at Nomura Asset Management. “The US is one of the few places that has room to cut rates, and I think they will cut at least twice this year.”

Renewed concern puts an end to the two-week rally in US stocks: All three major stock exchanges in the US closed last week in the red, with tech stocks particularly hard-hit. MarketWatch has the figures.

Is the Fed actually preparing for a rate cut in response to the virus? Market uncertainty at the tail-end of last week has increased market speculation that the Federal Reserve will restart its easing cycle. The CME Group says that the market is now giving a 58% likelihood that the Fed will make at least one rate cut between now and June, up from less than 20% in January, according to the AP.

In covid-19 miscellany:

  • EgyptAir will resume its weekly Cairo-Beijing-Guangzhou flight as of Thursday to accommodate demand, according to a cabinet statement. The national flag carrier will gauge demand before deciding whether to add more flights.
  • The Health Ministry denied that Egypt’s pharma manufacturing has been affected by a halt of raw material imports from China, saying there are sufficient strategic reserves, according to another cabinet statement.
  • Lebanon on Friday confirmed its first case of the virus after a 45-year-old woman coming from Iran to Lebanon exhibited symptoms on a plane carrying 150 people, according to Reuters.
  • The virus has claimed its first Italian victim, an elderly man in the northern city of Padua, Reuters reports. The country’s Health Ministry said there are 15 cases in the wealthy Lombardy northern region and two in neighboring Veneto, where Padua is located.
  • Old Cairo’s Khan Al Khalili is missing its Chinese tourists, with vendors lamenting the lost business that usually accompanies the Spring Festival, Xinhua reports.


The votes were still being counted as of dispatch time, but Bernie Sanders is already penciled in as the winner of the Nevada Caucus, the Associated Press and CNN said. Sanders had claimed some 47% of the delegate votes as we hit “send” on this morning’s issues, with Joe Biden coming in second (with a wide berth) at around 24%, according to the Wall Street Journal. Sanders delivered his victory speech and moved on to Texas, where the next round of Democratic primary elections will happen on Super Tuesday (3 March).

What does this mean? Sanders’ “commanding victory” in Nevada places him firmly as the frontrunner to face off against Donald Trump in the presidential elections this fall, but the AP says it also “[escalated] tensions over whether he’s too liberal to defeat” the sitting president.

Trade tensions ease as China lifts more tariffs on US goods: The Chinese Finance Ministry has announced a one-year reduction in tariffs on industrial components and medical and factory equipment imported from the US to take effect from 28 February, the AP reports. The decision to cool tensions comes amid deteriorating economic conditions in China following the covid-19 outbreak. The ‘Phase One’ trade agreement signed by the two sides in January saw the US pledge not to increase tariffs on China’s imports in exchange for Beijing committing to increase its agricultural imports and opening discussions on tech policy.

Other international headlines worth your attention:

  • Is the US finally about to exit from the neverending war? The US and the Taliban are planning to sign a peace agreement next Saturday in Qatar following months of negotiations, according to Bloomberg. Negotiators have reportedly agreed on terms that would see US troops withdrawing from Afghanistan after almost 19 years of war, and talks starting between the two governments.
  • Libya’s ceasefire talks are moving in the “right direction,” the United Nations envoy for Libya Ghassan Salame told Reuters on Friday. The military talks between Libya’s two warring sides resumed on Thursday in Geneva.

Global investment banks’ revenues dip to lowest since 2008: Revenues at the world’s 12 largest investment banks sank to their lowest since the financial crisis in 2008 last year, according to the FT. Banks posted revenues of USD 147.5 bn in 2019, a 4% decline from the year before. The slide has led to 6% of workers in the banks’ investment banking divisions being laid off. This is in contrast to the record profitability at parent banks JPMorgan and Morgan Stanley, whose consumer banking and investment managing businesses are booming.

eBay has contacted several potential buyers for its classified-ads business, which could be worth roughly USD 10 bn, Reuters reports.

Carlos Ghosn is a fugitive in his own homeland, flanked by bodyguards wherever he goes with an eye out for suspicious-looking Japanese people, like the ones who rented a house in front of his and keep taking pictures. The Wall Street Journal takes a look at the life of the ex-Nissan boss in Lebanon who fled Japan in a black box after being arrested on financial misconduct charges in 2018, an establishment figure in a country overtaken by protests against them.

PSA- Keep an umbrella in reach this week: Meteorologists are warning of a three-day wave of unstable weather starting today, with a chance of light-to-heavy rainfall in Cairo. Highs of 15-16°C and overnight lows of between 9-11°C are expected in the capital city.

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