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Monday, 18 July 2022

Hike ’til you drop

‘50 is the new 25’ when it comes to rate hikes: Central banks globally are being pushed to impose bigger interest rate hikes under efforts to keep up with the Federal Reserve’s tightening cycle, prop up their currencies, and tame soaring inflation, the Financial Times says. Smaller rate hikes of 25 bps or less were once the norm during tightening cycles, but according to the salmon-colored paper’s data, some 55 central banks have made 62 policy rate hikes of at least 50 bps in the three months to June, while another 17 of these bumper hikes were announced in July. That means we’re living through the biggest monetary policy moves made at any time this century.

Forex is key: The strengthening USD is a key driver for the bigger hikes as countries — and particularly emerging markets — try to get a handle on inflation. “We’re seeing a rate hike feeding frenzy,” one investment portfolio manager told the FT. “Nowadays the last thing anyone wants is a weak currency.”

50 is small fry in the US these days: The Federal Reserve will likely hike rates by 75 bps for the second consecutive meeting when it meets later this month, according to the Wall Street Journal. Worsening inflation data out last week fuelled speculation that the central bank could step up its tightening cycle with a huge 100-bps hike, but some policymakers have since sought to dial back expectations for a full-point increase and publicly came out in favor of 75 bps.

Also worth noting:

  • The Bank of England’s independence could be under threat: Two of the leading candidates vying to succeed Boris Johnson as UK prime minister have signaled that they would bring the Bank of England under greater government control amid criticism of the bank’s failure to tackle inflation and opposition to financial deregulation. (FT | FT)
  • Hydro-powered planes? Rolls Royce will trial the use of hydrogen to power small aircraft, an innovation which ⁠— if it works ⁠— would help the aviation industry reduce carbon emissions. (FT)

Up

EGX30

8,773

+0.1% (YTD: -26.6%)

None

USD (CBE)

Buy 18.83

Sell 18.91

None

USD at CIB

Buy 18.85

Sell 18.91

None

Interest rates CBE

11.25% deposit

12.25% lending

Up

Tadawul

11,292

+1.2% (YTD: +0.1%)

Up

ADX

9,250

+0.1% (YTD: +9.0%)

Up

DFM

3,160

+0.2% (YTD: -1.1%)

Up

S&P 500

3,863

+1.9% (YTD: -19.0%)

Up

FTSE 100

7,159

+1.7% (YTD: -3.1%)

Up

Euro Stoxx 50

3,477

+2.4% (YTD: -19.1%)

Up

Brent crude

USD 101.16

+2.1%

Up

Natural gas (Nymex)

USD 7.02

+6.3%

Down

Gold

USD 1,703.60

-0.1%

Down

BTC

USD 21,004

-0.9% (YTD: -54.6%)

THE CLOSING BELL-

The EGX30 rose 0.1% at yesterday’s close on turnover of EGP 318.46 mn (61.4% below the 90-day average). Local investors were net sellers. The index is down 26.6% YTD.

In the green: Cleopatra Hospitals (+3.1%), Madinet Nasr Housing (+3.1%) and EFG Hermes (+2.4%).

In the red: ِAbu Dhabi Islamic Bank- Egypt (-2.3%), Fawry (-2.1%) and Orascom Development Egypt (-2.0%).

Asian markets are solidly in the green this morning and futures suggest stocks in much of Europe, the US and Canada will follow suit later today at the opening bell.

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; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.