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Sunday, 18 September 2022

US stocks hit two month lows + investors are starting to come back to frontier-market African debt

Another grim week for US equities: The three major US stock indices dropped to two-month lows on intensified recession fears at the end of last week, Reuters reports. Markets plunged on warnings from FedEx of an economic slowdown as it pulled its earnings forecast, following hotter than expected August inflation data earlier in the week. The S&P 500 was down 4.8% for the week, while the tech-heavy Nasdaq dropped 5.5%, marking their worst weekly performances since June. The Dow Jones Industrial was down 4.1%.

The S&P 500 closed below a key 3.9k mark on Friday, triggering alarm bells for investors. “Market risk is elevated as long as the index sits below 3.9k,” one analyst said in a note cited by Market Watch. “Buyers need to throw everything they have at stocks right now to prevent further damage.”

Echoes of 2008: Financial Times journalist Katie Martin draws parallels between current market woes and the 2008 crash — and suggests that until central banks are able to correct years of “overly lavish support,” they won’t be able to break the cycle of boom-and-bust in the markets.

Funds are dipping their toes back into frontier-market debt in Africa: Emergency loan programs from the IMF and China are gradually bringing foreign investors back into risky African sovereign debt, Bloomberg reports. Data from the business newswire shows that asset managers such as BlackRock, Neuberger Berman Group and UBS have recently bought into eurobonds issued by African nations such as Angola and Ghana, marking a change from earlier this year when foreign investors exited the asset class amid fears of debt crises precipitated by Russia’s war in Ukraine. A spate of recent IMF bailouts and China’s decision to waive loans for 17 African countries have helped calm panic in the markets, with yields falling back from record highs since July.

Also worth noting:

  • A larger Salik stake up for grabs in IPO: Dubai will offer 5% more of its state-owned road toll operator after investors covered all 1.5 bn shares on the first day of subscription. The IPO is now worth some USD 1 bn, with 24.9% (1.87 bn shares) of the company on offer. (Bloomberg)
  • GBP hits new lows: The GBP fell to its lowest level in 37 years on Friday, falling as much as 1% against the USD to trade at 1.135. (Bloomberg)
Down EGX30 10,097 -1.1% (YTD: -15.7%)
Up USD (CBE) Buy 19.37 Sell 19.47
Up USD at CIB Buy 19.39 Sell 19.45
None Interest rates CBE 11.25% deposit 12.25% lending
Down Tadawul 11,830 -0.5% (YTD: +4.9%)
Up ADX 10,202 +1.8% (YTD: +20.2%)
Up DFM 3,489 +0.8% (YTD: +9.2%)
Down S&P 500 3,873 -0.7% (YTD: -18.7%)
Down FTSE 100 7,236 -0.6% (YTD: -2.0%)
Down Euro Stoxx 50 3,500 -1.2% (YTD: -18.6%)
Up Brent crude USD 91.35 +0.6%
Down Natural gas (Nymex) USD 7.76 -6.7%
Up Gold USD 1,683.50 +0.4%
Up BTC USD 20,110 +2.0% (YTD: -56.6%)

THE CLOSING BELL-

The EGX30 fell 1.1% at Thursday’s close on turnover of EGP 1.29 bn (26.8% above the 90-day average). Foreign investors were net sellers. The index is down 15.7% YTD.

In the green: Alexandria Containers (+2.7%), Mopco (+2.7%) and Talaat Moustafa (+2.2%).

In the red: QNB Alahly (-8.9%), Egypt Kuwait Holding-EGP (-5.0%) and Elsewedy Electric (-4.8%).

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