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Wednesday, 8 March 2023

Further + faster rate hikes possible, warns Fed’s Powell

From the horse’s mouth: The Federal Reserve will likely need to hike interest rates further and faster than currently expected to temper inflation, central bank chair Jerome Powell told lawmakers yesterday. The comments, made during Senate testimony yesterday, signaled that the Fed could raise its key rate by 50 bps at its next meeting in two weeks time. “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” he said. Reuters, Bloomberg and Financial Times have more.

Reminder: Following a series of huge 75-bps hikes last year, the central bank has been slowing the pace of increases in recent meetings, and in February raised them by just 25 bps. A series of strong economic data and a surprise increase in the Fed’s preferred gauge of inflation has raised expectations that policymakers could get more hawkish in the coming months as they battle to get inflation closer to the 2% target.

The markets didn’t take the news well: Powell’s comments triggered nervousness in the markets yesterday as investor fears of a US recession resurfaced. Shares ended sharply lower — the Dow Jones was the worst performer, losing 1.7% to erase 2023 gains — the USD gained 1.2%, and Brent tumbled 3.6%, its biggest single-day loss since the first week of the year.

The sell off is continuing in Asia this morning, where most exchanges are in the red. The Hang Seng is leading losses (-2.5%) while shares in China, South Korea and Australia are also nursing losses. Shares in Europe and the US are also expected to fall when markets open later today.

MEANWHILE- Sheikh Tahnoon is setting up one of the largest asset managers in the region: Abu Dhabi sovereign fund ADQ and International Holding Company (IHC) are partnering to set up what they’re calling “region’s largest multi-asset class investment manager.” The firm will manage assets from ADQ’s alternative investments platform, Abu Dhabi Growth Fund and IHC, and raise fresh funds from investors, they said. The two companies are bringing on board US private equity General Atlantic as a strategic investor. Sheikh Tahnoon bin Zayed Al Nahyan chairs both ADQ and IHC and is also the UAE’s national security adviser.

Down EGX30 16,433 -2.2% (YTD: +12.6%)
Up USD (CBE) Buy 30.78 Sell 30.89
Up USD at CIB Buy 30.78 Sell 30.88
None Interest rates CBE 16.25% deposit 17.25% lending
Up Tadawul 10,473 +0.2% (YTD: -0.1%)
Down ADX 9,948 -0.5% (YTD: -2.6%)
Down DFM 3,429 -0.8% (YTD: +2.8%)
Down S&P 500 3,986 -1.5% (YTD: +3.8%)
Down FTSE 100 7,919 -0.1% (YTD: +6.3%)
Down Euro Stoxx 50 4,279 -0.8% (YTD: +12.8%)
Down Brent crude USD 82.95 -3.8%
Up Natural gas (Nymex) USD 2.66 +3.4%
Down Gold USD 1,818.30 -2.0%
Down BTC USD 22,055 -1.6% (YTD: +33.2%)


The EGX30 fell 2.2% at yesterday’s close on turnover of EGP 1.9 bn (6.9% below the 90-day average). Local investors were net buyers. The index is up 12.6% YTD.

In the green: Ezz Steel (+3.4%).

In the red: Qalaa Holdings (-4.6%), Telecom Egypt (-4.5%) and GB Auto (-4.3%).

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