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Tuesday, 6 September 2022

OPEC+ unexpectedly cuts oil supply

And Europe learned the meaning of the word A_a… OPEC+ will cut supply in October in a surprise move meant to support oil prices, which have fallen back in recent weeks on fears of a global slowdown. The Saudi Arabia and Russia-led alliance agreed to reduce output by 100k barrels a day in October in its monthly meeting yesterday, it said in a statement.

Market reax: Brent crude jumped 3.0% yesterday to USD 95.78 a barrel while US crude briefly rose above USD 90 for the first time since August before falling back.

Let’s not overstate this: The cut will take us back to where we were in August and reverses the paltry hike made to supply following pressure from Western countries to cool oil prices.

But let’s not understate it either: The move will not be welcomed in European capitals and the US where soaring energy costs and supply shortages driven by the sanctions war with Russia are provoking an unprecedented energy crisis in Europe and fuelling inflation across the Atlantic. The cut also comes as Western nations try to drum up support around the world for a price cap on Russian oil, a policy which, if successful, will send further shockwaves through energy markets.


Dubai’s road-toll operator could become the third state-owned firm to IPO this year: Dubai will sell a 20% stake in Salik on the stock exchange in a transaction that it hopes could raise USD 1 bn, according to Bloomberg. The company will offer 1.5 bn shares to investors in an IPO scheduled to take place in September, it said in a statement (pdf) yesterday. Subscription will open on 13 September to retail and institutional investors.

Advisors- Our friends at EFG Hermes and HSBC have been appointed as joint bookrunners alongside Citigroup, while Emirates NBD, Goldman Sachs and Merrill Lynch are global coordinators.


The CNY is falling — and that’s not great news for emerging markets: The People’s Bank of China (PBOC) is cutting local banks’ FX deposit ratio — the amount of foreign currency banks must hold in reserve — to 6% from 8% in a bid to stop the CNY’s slide, Bloomberg reports. The local currency has hit a two-year low against the greenback, as Beijing’s zero-covid policy and a struggling property market pressure the Chinese economy just as the USD strengthens on rising interest rates. The CNY has lost nearly 10% to the USD over the last six months to trade at around USD 6.93 to the USD, with banks including Goldman Sachs expecting it to pass the USD 7.00 mark.

There will be consequences for EMs: The deepening trade and financial connections between China and other developing economies mean that the fate of other EM currencies are more closely tied to the CNY than ever before. “With the CNY set to weaken further, other emerging markets will face downward pressure on their currencies,” a senior analyst at Nordic lender SEB told the business newswire. “The impact will be felt the most by nations which compete directly with China on exports.”

Up

EGX30

10,178

+1.8% (YTD: -14.8%)

None

USD (CBE)

Buy 19.17

Sell 19.28

None

USD at CIB

Buy 19.20

Sell 19.26

None

Interest rates CBE

11.25% deposit

12.25% lending

Down

Tadawul

12,100

-0.8% (YTD: +7.3%)

Down

ADX

9,687

-0.7% (YTD: +14.1%)

Down

DFM

3,354

-1.2% (YTD: +5.0%)

Down

S&P 500

3,924

-1.1% (YTD: -17.7%)

Up

FTSE 100

7,287

+0.1% (YTD: -1.3%)

Down

Euro Stoxx 50

3,490

-1.5% (YTD: -18.8%)

Up

Brent crude

USD 95.74

+2.3%

Down

Natural gas (Nymex)

USD 8.76

-0.3%

Down

Gold

USD 1,721.20

-0.1%

Down

BTC

USD 19,748

-0.6% (YTD: -57.3%)

THE CLOSING BELL-

The EGX30 rose 1.8% at yesterday’s close on turnover of EGP 1.63 bn (46.4% above the 90-day average). Local investors were net buyers. The index is down 14.8% YTD.

In the green: Telecom Egypt (+15.8%), Ezz Steel (+8.6%) and Citadel Capital (+6.9%).

In the red: Egyptian Kuwaiti Holding-EGP (-1.4%), Abu Qir Fertilizers (-0.7%) and GB Auto (-0.5%).

Asian markets are mixed so far today, with the Nikkei, Kospi and Hang Seng facing selling pressure while shares are up in Shanghai and Australia. Futures suggest European stocks will come under selling pressure at the opening bell (perhaps thanks to fears of how OPEC’s surprise production cut could impact economies this fall). The Dow, S&P, Nasdaq and TSX Composite all look set to gain later today when markets in the US and Canada re-open following labor day weekend.

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