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Monday, 11 April 2022

Why stocks are rallying despite global turmoil + Binance gets the go-ahead in Abu Dhabi

Why are stocks proving resilient despite the Russian invasion of Ukraine and surging inflation? The Wall Street Journal tries to unpick why stocks are rallying through such a period of uncertainty. After falling into correction territory in a terrible start to the year, the S&P 500 has bounced back 7.6% from its nadir on 8 March and is now down only 6% year-to-date. This is despite rising fears of a US recession, unprecedented commodity price volatility, historic bouts of inflation, covid lockdowns in China, and the biggest European geopolitical crisis since the Cold War.

Among the reasons given by the journal:

  • Historically, rate hikes haven’t been bad for stocks: In the past five tightening cycles, the S&P 500 rallied after the initial post-hike sell-off. “The early stages of Fed tightening should not be seen as a negative for stocks, as equities tended to make new highs after the initial volatility,” JPMorgan’s Marko Kolanovic wrote last week.
  • The economy remains strong: US job numbers are positive, wages are growing, and consumers are spending.
  • Inflation is eating those bond returns: Many investors think people are heading back into stocks because bond yields adjusted for inflation are heavily negative. Yields might have risen this year but inflation is more than keeping pace.
  • Investors are BTD: There’s been a recent pickup in retail trading activity — and retail investors love to buy the dip.

Binance gets greenlight from Abu Dhabi: The world’s largest crypto exchange by volume, Binance, has received in-principle approval to operate in Abu Dhabi Global Market, Emirates news agency WAM reported yesterday, marking its third regulatory approval in the Middle Eastern region after Bahrain and Dubai. While it still needs to complete its application process, the approval allows Binance to act as a broker-dealer in digital assets including cryptocurrencies.

The UAE is slowly but surely turning itself into a global crypto hub: Last month, crypto exchange Bybit announced it will move its global headquarters to Dubai, while Crypto.com said it would set up a “regional base” in the emirate, which also handed a license to FTX Europe, an arm of FTX, the third-largest crypto exchange.

Down

EGX30

10,898

-1.8% (YTD: -8.8%)

Up

USD (CBE)

Buy 18.30

Sell 18.40

Up

USD at CIB

Buy 18.30

Sell 18.40

None

Interest rates CBE

9.25% deposit

10.25% lending

Up

Tadawul

13,395

+0.6% (YTD: +18.7%)

Up

ADX

10,094

+1.0% (YTD: +18.9%)

Up

DFM

3,542

+0.8% (YTD: +10.8%)

Down

S&P 500

4,488

-0.3% (YTD: -5.8%)

Up

FTSE 100

7,670

+1.6% (YTD: +3.9%)

Up

Euro Stoxx 50

3,858

+1.5% (YTD: -10.2%)

Down

Brent crude

USD 101.63

-1.1%

Up

Natural gas (Nymex)

USD 6.34

+0.9%

Down

Gold

USD 1,945

-0.1%

Up

BTC

USD 42,825

+0.2% (as of midnight)

THE CLOSING BELL-

The EGX30 fell 1.8% at yesterday’s close on turnover of EGP 597 mn (38.3% below the 90-day average). Regional investors were net sellers. The index is down 8.8% YTD.

In the green: Egypt Kuwait Holding-EGP (+0.2%), Credit Agricole Egypt (+0.1%) and e-Finance (+0.1%).

In the red: Fawry (-7.1%), Ibnsina Pharma (-5.8%) and Madinet Nasr Housing (-5.8%).

It’s a bit ugly out there this morning: Stocks across Asia are under pressure this morning, with the Shanghai and Hong Kong benchmarks in particularly negative territory as worries mount about what the lockdown of Shanghai and other cities could mean for the global economy. Futures suggest major European indexes will be in the red at the opening bell, with France’s CAC 40a alone in bucking the trend. The Dow, S&P and Nasdaq are all likely to open in the red later today.

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