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Wednesday, 3 November 2021

Bond market nervous, equities shrug ahead of key Fed meeting

Volatility is spiking in US bond markets, but equities are turning a blind eye to risk: The uncertain outlook on inflation has jolted US government bonds, as fixed-income investors fret over the impact of the prospective Fed taper. Meanwhile, the S&P 500 stock index chased fresh peaks all through October to record its best month so far this year, the Financial Times reports.

US stocks again notched fresh record highs yesterday, leading the Dow to close above 36,000 for the first time ever, a day before the Fed announces its decision on whether to start curtailing stimulus. Strong earnings in the face of rising commodity prices and supply chain disruptions led one analyst to conclude that the fundamentals are “very, very strong.”

Is a “balanced bear” on the horizon? The divergence between the two asset classes is leading some analysts to warn that the stock market isn’t taking note of the risk for a combined equity and bond market sell-off, aka a “balanced bear.” “Equities — and equity volatility — should not miss the forest for the trees, as they’ve never been more dependent on the Fed and the Fed has never been more dependent on economic data, which itself has never been more volatile,” one Bank of America analyst told the FT.

Dubai vies for a piece of the Gulf IPO rush with state listings: Dubai will IPO 10 state-owned companies to raise trading volumes on its bourse to AED 3 tn, the emirate said. There was no indication of which companies are set to see their public debut or the timeline for the listings, but candidates could include Dubai Electricity and Water Authority and Emirates Airline, according to Bloomberg. The announcement comes as the DFM tries to close the gap with neighboring UAE and Saudi markets, which have soared this year on the back of an IPO boom that has seen bumper listings from Adnoc Drilling and Fertiglobe in Abu Dhabi to ACWA Power in Riyadh.

Amazon-backed EV startup Rivian is targeting a USD 60 bn valuation in its IPO next week: Rivian — which is also backed by Ford, and Cox Enterprises — is planning to sell shares between USD 57-62 apiece, giving the electric vehicle startup a valuation of USD 60 bn at the high end of the range, writes the Wall Street Journal.

Up

EGX30

11676

+0.9% (YTD: +7.7%)

None

USD (CBE)

Buy 15.66

Sell 15.76

None

USD at CIB

Buy 15.66

Sell 15.76

None

Interest rates CBE

8.25% deposit

9.25% lending

Up

Tadawul

11,752

+3% (YTD: +35.2%)

Up

ADX

7,977

+0.7% (YTD: +58.1%)

Up

DFM

2,995

+4% (YTD: +20.2%)

Up

S&P 500

4,631

+0.3% (YTD: +23.3%)

Down

FTSE 100

7,275

-0.2% (YTD: +12.6%)

None

Brent crude

USD 84.72

0.0%

Up

Natural gas (Nymex)

USD 5.55

+0.2%

Down

Gold

USD 1,788

-0.1%

Up

BTC

USD 62,980

+3.0% (as of midnight)

THE CLOSING BELL-

The EGX30 rose 0.9% yesterday on turnover of EGP 1.39 bn (9.2% below the 90-day average). Local investors were net sellers. The index is up 7.7% YTD.

In the green: GB Auto (+9.0%), Palm Hills Development (+3.5%) and TMG Holding (+3.1%).

In the red: Ibnsina Pharma (-2.8%), Egypt Kuwait Holding-EGP (-2.3%) and Abou Kir Fertilizers (-2.2%).

Asian markets are down slightly in early trading this morning and US and European futures are mixed ahead of the Federal Reserve’s policy decision later today.

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