Back to the complete issue
Monday, 13 June 2022

El Erian points fingers at Fed for US inflation as recession clouds build

The Fed missed the boat on inflation, says El Erian: Allianz Chief Economist Mohamed El Erian told CBS’s “Face The Nation” that 40-year high inflation in the US could have been avoided had the Federal Reserve acted earlier. The Fed “mischaracterized what inflation is and it fell behind,” El Erian said. “And the lessons of history is, once you fall behind, you lose the ability of the first best response.”

More price hikes and another 50-bps cut to come? “We may well get to 9% at this rate,” El Erian said, days after US consumer prices rose to 8.6% last month, their highest rate since November 1981. “We should look at the Fed to increase by at least 50 basis points this coming week,” he said. Traders now see a 50% chance that the Fed will raise interest rates by an unusually large 75 bps when it meets on Tuesday and Wednesday this week.

The US will likely fall into recession next year, according to nearly 70% of economists polled by the Financial Times. Nearly 40% of the 49 respondents expect the US economy to enter a recession in the first half of next year, while 30% predict it to happen in the second half.

What’s a recession, technically speaking? It’s a “significant decline in economic activity that is spread across the economy and lasts more than a few months,” according to the National Bureau of Economic Research, which is tasked with declaring recessions in the US.

Also worth noting:

  • Record capital increase in KSA: Saudi Telecom is planning to raise capital by USD 8 bn through issuing bonus shares in what will be the largest capital increase by a Saudi company. Shares rose as much as 9.8% on the news. (Bloomberg)
  • TotalEnergies gets 25% stake in Qatari gas megaproject: The oil and gas major is the first international firm to acquire a stake in Qatar’s USD 30 bn LNG project, which is set to be the largest in the world. (Statement)
  • Around USD 40 bn has been wiped off US companies’ earnings in 1H 2022 due to FX effects after the USD rose to its highest level since 2002. (The Financial Times)

Down

EGX30

10,098

-1.4% (YTD: -15.5%)

None

USD (CBE)

Buy 18.65

Sell 18.73

None

USD at CIB

Buy 18.67

Sell 18.73

None

Interest rates CBE

11.25% deposit

12.25% lending

Down

Tadawul

12,322

-2.2% (YTD: +9.2%)

Down

ADX

9,628

-0.2% (YTD: +13.4%)

Up

DFM

3,377

+0.1% (YTD: +5.7%)

Down

S&P 500

3,901

-2.9% (YTD: -0.9%)

Down

FTSE 100

7,318

-2.1% (YTD: -0.9%)

Down

Euro Stoxx 50

3,599

-3.4% (YTD: -16.3%)

Down

Brent crude

USD 122.01

-0.9%

Down

Natural gas (Nymex)

USD 8.85

-1.3%

Up

Gold

USD 1,875.50

+1.2%

Down

BTC

USD 26,804

-5.9% (YTD: -42.3%)

THE CLOSING BELL-

The EGX30 fell 1.4% at yesterday’s close on turnover of EGP 529 mn (36.5% below the 90-day average). Local investors were net buyers. The index is down 15.5% YTD.

In the green: Heliopolis Housing (+5.5%), Madinet Nasr Housing (+2.9%) and Ezz Steel (+1.1%).

In the red: Eastern Company (-4.0%), Abu Qir Fertilizers (-3.3%) and Egypt Kuwait Holding-EGP (-2.7%).

Asian markets are down across the board in early trading this morning and futures suggest both European indices and then Wall Street will open to a wall of red later on today.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.