MENA MARKETS REVIEW: NOVEMBER 2018
Kuwait: December 9, 2018
HIGHLIGHTS
Kuwait, on the other hand, was the best performer in the GCC this month with the Boursa Kuwait All Share Index advancing by 1.33% and boosting its returns so far this year to 2.18%.
- A US markets ended up positive this month after the broad-based steep declines which characterized October. Markets were lifted by dovish comments by the Fed’s Powell which were largely interpreted as meaning a much slower path of rate hikes going forward than previously assumed by the markets.
- The breather in the US did not have a contagion effect on European markets which continued their decline deeper into negative territory.
- Oil markets continued their slide during the month on fears that OPEC+ Russia would not be able to reach a deal to curb output.
- Markets in the GCC were generally lower, dragged by the negative sentiment surrounding the outlook of oil prices.
US GROWTH EXPECTED TO REMAIN STRONG IN Q4
Activity levels in the US economy remain in good shape, with the second estimate of GDP confirming growth of 3.5% in 3Q18 backed by robust consumer spending, while high frequency indicators point to a strong, if more moderate, outcome in Q4. ISM surveys of both manufacturing (57.7) and non-manufacturing (60.3) activity for October eased slightly from September, but both remain well above historical averages and some softening from previous levels is welcome on sustainability grounds given reported capacity pressures. Indeed, ‘nowcasts’ from the Atlanta and New York Fed point to annualized growth of 2.5% in Q4 and a consensus view of 2.7%, which are still above estimates of the economy’s long-term potential.
Backed up by steadily rising wage growth, solid employment gains and unemployment at its lowest levels since the 1960s, consumer spending rose by a stronger-than-expected 5.0% y/y in October, slightly softer than average for Q3 but above income growth of 4.3%. With subdued news on inflation, spending is also robust in ‘real’ terms. There are hints however that the labor market could be approaching a turning point. The weekly jobless claims figures have been gradually edging up and rose for the third consecutive week up to November 24th, which could point to a less-than-stellar November employment report when it is released mid-December.
BFALLING OIL PRICES PROMPT OPEC RETHINK ON OUTPUT
Oil markets have been roiled by oversupply concerns and anxieties over weakening oil demand against a backdrop (now somewhat eased) of US-China trade frictions. Brent crude closed out a second consecutive month of declines in November, falling by 22% during the month to $58.7/bb for the steepest one-month fall since the 2008 financial crisis.
Market sentiments have shifted overwhelmingly bearish amid record high US crude production (averaging 11.7 mb/d in November) and near two-year high OPEC supplies (+130 kb/d to 32.9 mb/d in October). Money managers’ bets on Brent falling further are at their highest in fifteen months. November’s precipitous price drop has forced OPEC to consider once again cutting production to stabilize prices; the group’s advisory board recommended cuts of 1.3 mb/d, or 4%, from October levels to bring supply and demand back into balance. More clarity should come after the meeting of OPEC and Russian-led non-OPEC producers on 6 December.
Read the rest of the report here.
