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Sunday, 7 August 2022

A strong US jobs report could mean more bad news for emerging markets

The US labor market is still red-hot — and that means the Fed is unlikely to take its foot off the gas in coming meetings, economists and analysts said in reaction to job figures released Friday, which showed employers added 528k jobs to the economy in July, beating all estimates.

This isn’t what Fed officials wanted to see, but why? The Federal Reserve is attempting to curb soaring inflation by raising interest rates, slowing the economy and curbing wage growth. The fear in policy making circles is that inflation will continue to rise and become more entrenched as long as the labor market remains tight, and this is increasing speculation that the central bank will continue to aggressively hike rates when it next meets in September.

Another 75 bps hike coming? A growing number of analysts and economists are now expecting the Fed to go ahead with its third successive rate hike next month. “Today’s numbers should mollify recession fears but amplify concerns that the Fed has a lot more work to do, and we now think a 75 bps hike in September looks likely. The inflation worries motivating the Fed will only be heightened by this jobs report,” according to a JPMorgan note picked up by the Financial Times.

But a lot can happen over the next six weeks: “If we get to September with things being where they are today — and that’s a big if — 75 bps and signals of the risk of another 75 bps, that’s what you’ll see,” Mohamed El Erian told Bloomberg.

ALSO WORTH NOTING- Are you a Western investor in strategic Russian projects? You’re trapped until at least the end of the year: Russian President Vladimir Putin has imposed a ban on investors from “unfriendly” countries from selling off shares in key areas of the Russian economy including banks, energy projects, commodities production and strategic entities. (Reuters)

Up

EGX30

10,043

+5.3% (YTD: -16.0%)

Up

USD (CBE)

Buy 19.07

Sell 19.18

Up

USD at CIB

Buy 19.10

Sell 19.16

None

Interest rates CBE

11.25% deposit

12.25% lending

None

Tadawul

12,292

0.0% (YTD: +9.0%)

Up

ADX

9,916

+1.0% (YTD: +16.8%)

Down

DFM

3,317

-0.1% (YTD: +3.8%)

Down

S&P 500

4,145

-0.2% (YTD: -13.0%)

Down

FTSE 100

7,440

-0.1% (YTD: +0.8%)

Down

Euro Stoxx 50

3,725

-0.8% (YTD: -13.3%)

Up

Brent crude

USD 94.92

+0.9%

Up

Natural gas (Nymex)

USD 8.06

+2.2%

Down

Gold

USD 1,791.20

-0.9%

Up

BTC

USD 23,193

+0.3% (YTD: -49.8%)

THE CLOSING BELL-

The EGX30 rose 5.3% at Thursday’s close on turnover of EGP 2.03 bn (60.2% above the 90-day average). Local investors were net buyers. The index is down 16% YTD.

In the green: e-Finance (+18.7%), Fawry (+18.6%) and EKH-EGP (+11.5%).

In the red: Juhayna (-0.3%), QNB Alahli (0%).

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