More warnings of a wave of EM debt defaults: Developing and emerging nations’ foreign reserves dropped USD 379 bn in the first half of this year, according to IMF data picked up by the Wall Street Journal — more than at any time since the 2008 financial crisis. Rising commodities prices on the back of war in Ukraine, aggressive rate hikes by the US Federal Reserve, and global inflationary pressures are making it increasingly difficult for developing countries to sustain spending on key imports like food and fuel and service their foreign debt. Sri Lankan USD reserves have almost run dry after the countries in May defaulted on its bonds for the first time in its history — and countries including Pakistan, Turkey, and Ghana could face similar crises, the WSJ says.

FX reserves will be a key challenge for the CBE: Egypt’s foreign reserves have declined by almost 20% since March, slipping to USD 33.14 bn in July, as the fallout from the war in Ukraine and rising interest rates force the central bank to intervene to cover portfolio outflows, finance imports and meet debt repayments. Bringing hard currency back into the country will be a priority for new acting Central Bank of Egypt (CBE) governor Hassan Abdalla, with speculation growing that the EGP may need to be allowed to depreciate further against the USD to dodge a balance of payments crisis.

All those celebrating falling food and energy prices might want to put the cork back in the champagne bottle, according to Invesco, which is predicting commodities to give us a “rude awakening” and rise again in the fall. Fears of recession and an easing of supply problems have seen global food and energy prices fall back from record highs in recent weeks, and the market expects the trend to continue.

Not so fast: Not only will the US Strategic Petroleum Reserve’s releases — which have played a major role in calming markets over the past few months — end in October, but the Russia-Ukraine war will threaten Ukraine’s winter harvest, droughts are expected to squeeze crops in the US, and a historic energy crisis in Europe will further disrupt other markets, Jason Bloom, head of fixed income and alternatives product strategy at Invesco, tells Bloomberg.

Add an unexpected cut to oil production to that list: It’s looking more likely that OPEC+ could cut production soon, with at least six more cartel members backing comments made by the Saudi energy minister this week who said that producers could soon reduce supply to address “extreme” price volatility in the markets, Bloomberg reports. Iraq, Algeria, Kuwait, Equatorial Guinea and Venezuela have all expressed support to Saudi Arabia’s stance on the “disconnect” between physical and paper barrels.

THE CLOSING BELL-

The EGX30 fell 0.3% at yesterday’s close on turnover of EGP 1.32 bn (37.6% above the 90-day average). Foreign investors were net sellers. The index is down 15.4% YTD.

In the green: Rameda (+2.9%), Housing & Development Bank (+1.8%) and Alexandria Containers (+1.5%).

In the red: Palm Hills Development (-2.1%), Heliopolis Housing (-2.0%) and Sidi Kerir Petchem (-1.9%).