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Wednesday, 23 June 2021

Inflation, inflation, inflation

INFLATION STORY OF THE DAY #1: House prices in the US and parts of Europe have surged to record highs as emergency measures introduced in response to covid-19 cause a wave of new borrowing, the Financial Times reports. Purchases in the US last year hit their highest level since the peak of the housing bubble in 2006 despite the pandemic devastating large parts of the economy, while in the Netherlands prices are growing at their fastest pace in 20 years.

More boom (and bust) to come? Analysts are split on where the market goes from here. Falling sales last month has some suggesting that the market has topped out, but others see the boom continuing. “Loose monetary conditions could push asset prices even higher, risking an eventual sharp correction,” said Adam Slater, economist at Oxford Economics. “For central banks, neither this outcome nor persistently higher inflation are attractive prospects.”

INFLATION STORY OF THE DAY #2: Growing chorus of industry players suggest we’re heading back to USD 100 / bbl oil: Leading oil firms and Bank of America have joined a number of commodities players to float the possibility of USD 100 / bbl oil. This would be the first time we’ve seen three-figure oil since the 2014 oil crash. Oil has seen strong gains in 2021 on the back of a surge in post-lockdown demand and shrinking supply.

INFLATION STORY OF THE DAY #3: Slightly less temporary- Recent inflation figures were larger than the Federal Reserve expected and higher prices may stick around for longer than previously thought, Fed chief Jay Powell said yesterday. “I will say that these effects have been larger than we expected and they may turn out to be more persistent than we expected,” he said, before reiterating his belief that inflation will soon start to decelerate. The Associated Press and Bloomberg have more.

Also worth noting this morning:

  • Globalization probably isn’t to blame for the past decade of low inflation in advanced economies: Policymakers have been concerned that a possible tilt towards deglobalization may feed into inflationary pressures, but a study by the European Central Bank argues otherwise. Researchers found that while fewer trade barriers, integrated supply chains, and globalized communication does help to curb inflation, the effect is relatively minimal. (ECB)
  • Is Gamestop back (again)? The videogame retailer / meme stock raised as much as USD 1.13 bn in an equity offering by selling up to 5 mn shares yesterday, further capitalizing on a Reddit-fueled mega-rally earlier this year. (Bloomberg)
  • US-based chip maker GlobalFoundries is building a new USD 4 bn facility to manufacture semiconductors in Singapore as it looks to capitalize on the historic demand for chipsets that has led to a global shortage. (Company statement)

Up

EGX30

10,206

+1.4% (YTD: -5.9%)

None

USD (CBE)

Buy 15.61

Sell 15.71

None

USD at CIB

Buy 15.61

Sell 15.71

None

Interest rates CBE

8.25% deposit

9.25% lending

Up

Tadawul

10,891

+0.3% (YTD: +25.3%)

Up

ADX

6,650

+0.5% (YTD: +31.8%)

Up

DFM

2,856

+0.3% (YTD: +14.6%)

Up

S&P 500

4,246

+0.5% (YTD: +13.1%)

Up

FTSE 100

7,090

+0.4% (YTD: +9.7%)

Up

Brent crude

USD 75.00

+0.1%

Up

Natural gas (Nymex)

USD 3.26

+2.1%

Down

Gold

USD 1,777.40

-0.3%

Up

BTC

USD 32,283

+2.1% (as of midnight)

THE CLOSING BELL-

The EGX30 rose 1.4% at today’s close on turnover of EGP 1.71 bn (26.1% above the 90-day average). Local investors were net sellers. The index is down 5.9% YTD.

In the green: TMG Holding (+8.5%), Palm Hills Development (+5.7%) and Cleopatra Hospital (+5.3%).

In the red: Ezz Steel (-1.7%), Oriental Weavers (-1.0%) and Orascom Financial Holding (-1.0%).

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