Global stocks, US yields recoup some losses

Global stocks, US yields recoup some losses
In Asia, Japan’s Nikkei led declines with an over 3 percent drop and dipped below 28,000 for the first time in a month. (Shutterstock)
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Updated 22 June 2021

Global stocks, US yields recoup some losses

Global stocks, US yields recoup some losses
  • Investors still digesting last week’s surprise hawkish shift by the US Federal Reserve

WASHINGTON: US stocks were higher on Monday and global stocks advanced in choppy trade after hitting a four-week low earlier in the session, with investors still digesting last week’s surprise hawkish shift by the US Federal Reserve.

The US dollar retreated from Friday’s 10-week high. Yields on 10-year Treasuries turned higher after sliding overnight to a four-month low of 1.354 percent. But the benchmark note was still trading well below its recent mid-point range of about 1.6 percent after traders reacted to Federal Reserve expectations for a rate hike.

Shares of banks, energy firms and other companies that tend to be sensitive to the economy’s fluctuations were higher, recovering some losses after have fallen sharply since the Fed’s meeting on Wednesday, when the central bank caught investors off guard by anticipating two quarter-percentage-point rate increases in 2023.

The Dow Jones Industrial Average rose 1.45 percent, the S&P 500 gained 1 percent and the Nasdaq Composite added 0.2 percent.

“Bulls are attempting to regroup this morning after last Friday’s plunge,” Paul Hickey of Bespoke Investment Group said in a market note.

Stocks in Asia took their cue from Wall Street’s falls on Friday but European shares bucked the trend, with the pan-European STOXX 600 index up 0.6 percent.

“The situation in reality is actually pretty good — the Fed is stabilizing inflation,” said Sebastien Galy, senior macro strategist at Nordea Asset Management in Luxembourg. “Cyclical sectors may have overshot the market in the short term and so you may have a bit of pressure on the sector.”

Galy noted the “interesting part” of the correction was that it lagged as traders digested the news.

MSCI’s All Country World Index, which tracks shares across 49 countries, was up 0.5 percent after hitting its lowest since May 24.

Earlier in Asia, Japan’s Nikkei led declines with an over 3 percent drop and dipped below 28,000 for the first time in a month, while MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2 percent.

The US dollar index was down 0.4 percent, off Friday’s 10-week high of 92.408, following its biggest weekly advance in more than a year.

St. Louis Fed President James Bullard further fueled the sell-off on Friday by saying the shift toward faster policy tightening was a “natural” response to economic growth and particularly inflation moving quicker than anticipated as the country reopens from the coronavirus pandemic.

“We believe there is a limit to how much more hawkish the Fed can be given its inflation projections relative to the catch-up rates range,” BlackRock analysts said in a note.

“Our bottom line: We believe the Fed’s new outlook will not translate into significantly higher policy rates any time soon.”

Several Fed officials have speaking duties this week, including Chair Jerome Powell, who testifies before Congress on Tuesday. 

The euro was up 0.46 percent to $1.1915. Sterling recovered some ground, to trade 0.9 percent higher after sliding to its lowest since April 16.

Commodity-linked currencies have also suffered, with the Australian dollar hovering above a six-month low at $0.7495.

A stronger greenback has pressured cryptocurrencies, too, with Bitcoin falling 7.7 percent, while smaller rival Ether lost 11 percent.

In commodities, gold rebounded 1.0 percent to $1,781.41 an ounce on Monday, looking to snap a six-day losing streak, but remained near the lowest since early May.

Copper continued to fall on Monday, hitting its lowest level since mid-April after moves by China to rein in commodities price rallies and signals from the US Federal Reserve it will tighten monetary policy sooner than expected. 

Benchmark copper on the London Metal Exchange (LME) was down 0.8 percent at $9,070 a ton in official trading, after touching $9,011.

Crude oil rose, underpinned by strong demand during the summer driving season and a pause in talks to revive the Iran nuclear deal that could indicate a delay in resumption of supplies from the OPEC producer. Brent crude futures rose to $74.48 a barrel, up 1.32 percent on the day, as Intermediate (WTI) crude rose 1.9 percent to $73.


Top Saudi leaders meet for ‘4th industrial revolution’ forum

Top Saudi leaders meet for ‘4th industrial revolution’ forum
Updated 6 min 24 sec ago

Top Saudi leaders meet for ‘4th industrial revolution’ forum

Top Saudi leaders meet for ‘4th industrial revolution’ forum

RIYADH: Saudi business leaders, as well as top ministers, are attending a first-of-its-kind forum to talk about the “4th industrial revolution” (4IR).

The two-day event – held by the King Abdulaziz City for Science and Technology – will discuss opportunities to develop, manage, and deploy emerging technologies.

Members of the World Economic Forum network will also attend the event to share insights on global implications of 4IR issues.

High-profile speakers include Saudi energy minister Prince Abdulaziz bin Salman Al-Saud, finance minister Mohammed Al-Jadaan, as well as Saudi ministers of communications and information technology, health, economy, and environment.

Developing...


Gulf Islamic insurers face tough competition, pressure on profits – S&P

Gulf Islamic insurers face tough competition, pressure on profits – S&P
Updated 28 July 2021

Gulf Islamic insurers face tough competition, pressure on profits – S&P

Gulf Islamic insurers face tough competition, pressure on profits – S&P
  • S&P expects more capital raises mergers to improve profitability

RIYADH: Islamic insurers in the GCC may see profitability wane in the second half of 2021 as they face a tough competitive environment amid weak performance in some sectors hurt by the coronavirus pandemic, according to S&P Global Ratings.

Some smaller Takaful companies will need to raise capital or merge, particularly in Saudi Arabia and Kuwait, where losses have persisted, S&P credit analyst Emir Mujkic wrote in a report.

“Our outlook on the sector for the next 12 months remains stable,” he said. “However, given that risks related to the pandemic persist, we could take rating actions in the event of a sharp decline in asset prices, unexpected and severe technical losses, or governance and internal control failures.”

Takaful insurers recorded modest growth of about 1.5 percent in 2020 and about 1.0 percent in first-quarter 2021 according to S&P Global Ratings calculations.

The Saudi Central Bank (SAMA) in January reiterated the need for insurance companies to look at M&A deals since the sector was a key driver of the Kingdom’s economy and a pillar of the Financial Sector Development Program, one of 12 executive programs launched by the Council of Economic and Development Affairs to achieve the objectives of Saudi Vision 2030.

The sector has witnessed a number of agreements and mergers this year, including between Walaa Cooperative Insurance Co. and Metlife AIG ANB Cooperative Insurance Co., and between Al-Ahlia Insurance and Gulf Union National.

Profit in the Kingdom’s insurance sector, including conventional insurers, rose 96.1 percent in the first nine months of 2020 to SR1.32 billion, according to KPMG.

“Despite a recent material improvement in profitability in Saudi Arabia’s insurance sector, more than one third of insurers continue to report losses,” said Mujkic. “Pressure on solvency and certain regulatory incentives have led to a number of mergers in Saudi Arabia over the past year and we expect this trend to continue throughout 2021.”

A new insurance law in Kuwait that requires higher reserve requirements is due to come into force over the next year, putting pressure on small and unprofitable Takaful players in Kuwait, S&P said.

The pandemic did not only affect Islamic Insurance companies in the Kingdom, but also non-Islamic companies, and they are doing great efforts by attracting new subscriptions or new customers, to get a customer with a low risk level that will have a good profit return by the end of the year,” Faiz Alhomrani, a financial market analyst told Arab News.” Many companies and sectors have been greatly affected by the pandemic, thus it became very tough to collect mandatory premiums for these companies, which pressured insurance companies to put financial provisions for non-performing debts.”

Growth in the sector will be unevenly spread, with larger conventional insurers taking more of the gains, said Mujkic.


Saudi Arabia edges out Russia in Chinese oil market as high prices dim Urals demand

Saudi Arabia edges out Russia in Chinese oil market as high prices dim Urals demand
Updated 28 July 2021

Saudi Arabia edges out Russia in Chinese oil market as high prices dim Urals demand

Saudi Arabia edges out Russia in Chinese oil market as high prices dim Urals demand
  • Spread between Urals and Middle East benchmark is widest on record
  • India has also cut purchases of Russian oil

MOSCOW: Russia’s flagship Urals crude oil has mostly been used in Europe so far this year due to relatively low output and high prices, while Asian markets have shunned the blend, data showed on Wednesday.
As a result, Russia has lagged behind Saudi Arabia in China’s energy market, one of the world’s largest.
According to Refinitiv Eikon data, the port of Rotterdam, Europe’s biggest oil hub, received 9.7 million tons of Urals in the first half of this year, up from 7.3 million tons in the same period last year.
At the same time, supplies of seaborne Urals cargoes to China plunged to 1.8 million tons from 7.86 million in the first half of 2020.
This year, the spread between Brent — to which Urals is linked — and the Middle Eastern Dubai blend has reached an all-time high of more than $4 per barrel, making Russian oil uncompetitive in Asia.
India has also cut purchases of Urals, while South Korea and Thailand have completely stopped intake of the blend.
Some European countries, notably Finland, have also reduced purchases of seaborne Urals amid the move to greener economies.
Turkey, Bulgaria and Romania have kept inflows of Urals steady this year, while Poland and Germany have increased imports of the seaborne blend.
According to Refinitiv Eikon, the port of Gdansk in Poland imported 2.7 million tons of Urals in January-June, up from 1.7 million in the first half of 2020.
Seaborne supplies have also risen amid reduced flows via the Soviet-built Druzhba pipeline as some companies have failed to agree supply deals. For example, Poland’s Grupa Lotos has not extended a contract with Russia’s Rosneft.
The United States also increased imports of Urals to 500,000 tons in the first half of the year from 100,000 tons in the same period of 2020.
Some traders believe Russia will increase supplies of Urals as the OPEC+ group of oil producers, of which it is a member, eases production curbs.


Egyptians the biggest winners among Dubai property buyers

Egyptians the biggest winners among Dubai property buyers
Updated 28 July 2021

Egyptians the biggest winners among Dubai property buyers

Egyptians the biggest winners among Dubai property buyers
  • Dubai house prices were up 1 percent in the second quarter of 2021
  • 128 sales of homes worth over $5.45 million in the first half of 2021

DUBAI: Egyptians have been the biggest winners when it comes to buying property in Dubai over the last few years when currency fluctuations are taken into account, according to research by real estate consultancy Knight Frank.

While the overall Dubai market is 26.3 percent down from its peak, house prices were up 1 percent in the emirate during the second quarter of 2021, the report said. That’s the biggest quarterly gain since the summer of 2014, according to Reuters.

However, the value of properties over the last six years differs depending on the nationality of buyers, or the currency they paid in, with Egyptians and Pakistanis the big winners and Europeans and Jordanians the biggest losers.

“Egyptian pound purchasers for instance have seen their investments appreciate by an impressive 51.4 percent, while Pakistani rupee buyers are currently enjoying gains of over 12 percent,” Faisal Durrani, partner and head of Middle East research at Knight Frank, said in a press statement of the valuations for different currency buyers compared to 2015.

“And if we rewind further back in time to the heady days of 2007, Egyptian and Pakistani buyers would have seen their investments increase in value by a staggering 200 percent plus,” he said. “European buyers meanwhile would be looking at gains of 20.5 percent since 2007, while for British buyers, it would be nearer 68 percent. The flipside to the story is of course some of those who held off, or were unable to step onto the property ladder, relative prices are much more attractive today than they were in 2015.”

Knight Frank’s research found that for euro buyers a home in Dubai is now 32.3 percent cheaper than in 2015, followed by British sterling (19 percent cheaper) and Indian rupee buyers (14 percent cheaper).

Earlier this week, the UAE press was awash with reports of a $30 million sale of a villa on Palm Jumeirah, the most expensive ever sold on the manmade island. Moreover, research by Knight Frank showed there has been an increase in sales of high-end luxury homes in Dubai.

The data showed there were 128 sales of homes worth over 20 million dirhams ($5.45 million) in the first half of 2021, the highest level since 2015 when 137 deals were recorded and compared with just 75 last year and 71 in 2019.

“Rather than subdue super prime sales activity, the pandemic has accelerated it,” Durrani said. “Families are looking for larger homes, with more outdoor space and even room for a home office as many are hedging their bets on greater remote working going forward, echoing what we have been seeing elsewhere in the world. And what’s more, they are willing to spend more for the privilege.”


Gazprom to pay $412m in advance to use Saudi-built Bulgarian pipeline

Gazprom to pay $412m in advance to use Saudi-built Bulgarian pipeline
Updated 28 July 2021

Gazprom to pay $412m in advance to use Saudi-built Bulgarian pipeline

Gazprom to pay $412m in advance to use Saudi-built Bulgarian pipeline
  • Bulgartransgaz to use $278 million of proceeds to make advance payments to Saudi-led group Arkad

SOFIA: Russia’s state gas company Gazprom has agreed to pay 349 million euros ($412 million) in advance for capacity on the Bulgarian extension of the TurkStream gas pipeline, Bulgarian state network operator Bulgartransgaz said on Tuesday.
Bulgartransgaz said it would use 461 million levs ($278 million) of the proceeds to make advance payments to Saudi-led group Arkad, which built the pipeline for 1.1 billion euros.
Gazprom’s export unit Gazprom Export has agreed to pay upfront for booked capacity from July 1, 2021 until June 30, 2023, Bulgartransgaz said in a statement.
Bulgaria’s 474 km gas pipeline, which transports Russian gas from its southern border with Turkey to its western border with Serbia — providing a link to the Russia-backed TurkStream twin pipeline to Serbia and Hungary, became operational in January.
The Bulgarian gas network operator will also use the money to cover 65 million euros in loans to commercial banks.
Bulgaria meets most of its gas needs with supplies from Gazprom.