MENA MARKETS REVIEW: JULY 2018
Kuwait: August 09, 2018
HIGHLIGHTS
The Federal Reserve, as expected, left its Fed Funds target rate range unchanged at 1.75-2.00% in August though delivered an upbeat assessment of prospects for the economy that – after 25bps hikes in March and June – leant support to two further rate increases this year
- US equities posted positive performance in July amid continued talks of trade wars
- Europe’s equity markets recovered, reversing losses sustained in the previous month
- Emerging markets broke their losing streak ending July in positive territory, up 1.7%
- Brent Oil registered negative performance, closing the month down 6.5%
- GCC equity markets continue to perform well in July supported by relatively high oil prices, renewed investor confidence and strong bank earnings
US GROWTH POWERS AHEAD, BUT TRADE WAR WITH CHINA INTENSIFIES
The economic news flow over the past month was dominated by ongoing global trade tensions and the implications for growth. Although the US and the EU announced a truce on further tariff increases, the USChina dispute has escalated, with both sides threatening fresh measures including the US proposal to impose 25% tariffs on $200 billion in imports from China – around 40% of the total. Partly reflecting trade concerns, the Chinese currency has plunged in recent weeks.
Despite intensifying risks to trade, global central banks are continuing the gradual “normalization” of monetary policy amid still decent growth figures and rising inflation; the Bank of England was the latest to push rates higher in August despite uncertainty over Brexit and the US Fed is likely to raise rates again in September.
GLOBAL EQUITIES
Global equities in July broke their negative streak closing up 2.9% as measured by the MSCI All Country World Index. In the US, both major indices, the Dow Jones and S&P 500, closed in July up 4.7% and 3.6%, respectively. During the month, several announcements provided support to the markets such as the jobs report and earnings announcements. Talk of trade wars continues to take center stage with US rhetoric on imposing tariffs reaching new highs with regards to both the EU and China. Issues have taken a turn for the better with respect to the EU, yet with China President Trump hinted on implementing tariffs on total Chinese imports of USD 500 billion. Despite the trade issues engulfing the US, Chairman of the Federal Reserve made it clear that rates will continue to rise steadily given the strength of the economy.
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