Gulf will escape two years of high US inflation: Invesco

Gulf will escape two years of high US inflation: Invesco
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Updated 30 August 2021

Gulf will escape two years of high US inflation: Invesco

Gulf will escape two years of high US inflation: Invesco
  • US Labor Department reported that its consumer price index lifted to 5.4% in July from a year earlier

LONDON: The US should be braced for two years of higher inflation as a result of the pandemic, says Invesco, but believes the Gulf region will not face the same upward pressure on the prices of everyday goods.

America’s Labor Department reported that its consumer price index lifted to 5.4% in July from a year earlier, as pent-up demand for travel and restaurants pushed up prices after the easing of lockdown restrictions.

This inflation rate matched the largest jump the US economy had seen since August 2008.

Invesco chief economist John Greenwood disagrees with the US Federal Reserve’s view that this high rate is a “transitory” effect of the opening up of the American economy.

He warns that investors, particularly bond investors, should be wary of maintaining exposure to assets that are vulnerable to inflation at a time when rising prices are likely to erode returns for at least the next two years.

Greenwood said: “Central bankers are following an upside-down theory of inflation when they explain the current episode of inflation as a transitory, bottom-up, accidental process delivered by temporary, idiosyncratic or segmented price increases which will soon be reversed.”

He added: “Inflation is a top-down process – money driving individual prices higher in a somewhat random, chaotic order determined by which goods and services happen to be in short supply. However, the overall process is one in which excess money eventually pushes all prices higher.”

The economist said the M2 money supply in the US has jumped by 32 percent since last February, which has led to a large build-up of cash inside the biggest economy in the world.

During this time the Fed has increased quantitative easing, while the US government put millions of US workers on furlough to support the economy through the health crisis.

By contrast, Invesco said the Gulf region should escape this price pressure as “the excess money growth that has produced the current episode of inflation in the US is not present”.

The US investment house said: “Money growth rates in the UAE remain very subdued, and only slightly less so in Saudi Arabia. As a result, Invesco’s chief economist believes that neither area is likely to experience the kind of inflation currently breaking out in the US.”

In Saudi Arabia, the consumer price index rose in July by 0.4 percent compared to the same month a year ago, but this increase is a sharp drop from the annual rate recorded in June of 6.2 percent, data from the Kingdom’s General Authority for Statistics showed.

The sharp fall in annual inflation reflected the diminishing impact of the increase in VAT from 5 percent to 15 percent that significantly affected the consumer price index levels starting from July 2020, the authority said.

In the UAE, the price of goods fell by an average of 0.3 per cent in the first six months of this year, said the Gulf country’s central bank said in its June economic quarterly review.

The central bank attributed the fall to lower real estate prices and private consumption, which still recovering from the pandemic, and the decrease in oil prices.

Greenwood said the Fed is in danger of repeating mistakes that led to the Great Inflation of the 1970s, where the value of goods rose following a hike in oil prices.

At that time policymakers argued the rise in inflation caused by higher oil prices was temporary, however, the prices of cocoa, sugar, wheat and other goods also rose, leading to a long bout of inflation.

The economist said that in this current round of rising US inflation family homes, cars, international shipping rates and electronic chips are in short supply and have seen their prices jump.


Gold edges lower as US Treasury yields rise

Gold edges lower as US Treasury yields rise
Updated 18 October 2021

Gold edges lower as US Treasury yields rise

Gold edges lower as US Treasury yields rise

BENGALURU: Gold edged lower on Monday as a rise in US Treasury yields dented its appeal, although a risk-off sentiment in wider financial markets limited losses for the metal.

Spot gold was down 0.1 percent at $1,765.14 per ounce by 1:35 p.m. EDT (1735 GMT), while US gold futures settled down 0.2 percent at $1,765.70.

“If yields keep rising, the headwinds will remain significant for gold,” OANDA analyst Craig Erlam said.

“Unless markets start to price in bad news for the economy and stock markets, which may be a rational next step if policymakers insist on tightening even as the recovery remains sluggish and downside risks significant.”

Sentiment in wider financial markets remained weak as economic growth in China slowed, while a relentless surge in oil prices fueled concerns about elevated inflation.

US benchmark 10-year Treasury yields climbed as investors ramped up rate hike bets, while the dollar index held steady.

While gold is seen as an inflation hedge, it also contends with the greenback for safe-haven status. Reduced central bank stimulus and the prospect of interest rate hikes push government bond yields up, weighing on non-yielding bullion.

Other precious metals also dipped, with silver down 0.3 percent at $23.21 per ounce and platinum slipping 1.8 percent to $1,035.29. Palladium shed 3.3 percent to $2,005.07, its lowest in over a week.


New York makes registration mandatory for crypto lending platforms

New York makes registration mandatory for crypto lending platforms
Updated 18 October 2021

New York makes registration mandatory for crypto lending platforms

New York makes registration mandatory for crypto lending platforms
  • State’s attorney general directs unregistered outlets to cease operations

RIYADH: New York has made it mandatory on cyrptocurrency lending platforms to register with the Office of the Attorney General if they wish to operate in the state or offer their products to New Yorkers.

New York Attorney General Letitia James on Monday said these steps are aimed to protect New York investors and markets from exploitation by high-risk virtual currency schemes.

The official also ordered the closure of two cryptocurrency lending platforms in New York and three other platforms were directed to provide information about their business.

“Cryptocurrency platforms must follow the law, just like everyone else,” James said.

The move comes weeks after the attorney general won a court order forcing the closure of cryptocurrency exchange Coinseed.

“My office is responsible for ensuring industry players do not take advantage of unsuspecting investors. We’ve already taken action against a number of crypto platforms and coins that engaged in fraud or that illegally operated in New York,” he said.


Saudi Venture Investment Co. launches initiative to support startups

Saudi Venture Investment Co. launches initiative to support startups
Updated 18 October 2021

Saudi Venture Investment Co. launches initiative to support startups

Saudi Venture Investment Co. launches initiative to support startups

RIYADH: The Saudi Venture Investment Co. has launched the “Investment in Accelerator Funds and Startup Studios" initiative, the Saudi Press Agency reported on Monday.
It is part of the company’s efforts to support startups in the Kingdom in the seed and pre-seed phases.
SVC has investments worth SR1.1 billion ($293.2 million) in 20 funds.
The company has supported around 116 startups since its establishment in 2018 till the end of the third quarter of 2021.
 


Saudi Arabia sees gasoline, diesel demand rise in 2021

Saudi Arabia sees gasoline, diesel demand rise in 2021
Updated 18 October 2021

Saudi Arabia sees gasoline, diesel demand rise in 2021

Saudi Arabia sees gasoline, diesel demand rise in 2021

RIYADH/CAIRO: Average motor and aviation gasoline demand in Saudi Arabia jumped to 470 thousand barrels per day (kbd) in 2021, compared to 455 kbd in 2020, data compiled by Arab News from Jodi revealed.
Calculations made for 2021 were up to August, the year’s latest data point so far.
The data reflects a recovery in gasoline demand as the effects of the pandemic start to taper off. However, the demand is still below the pre-pandemic levels. Average gasoline demand used to cross 500 kbd before 2020 in the Kingdom.
The data for 2021 is incomplete and a 12-month dataset might lead to a different conclusion.
Saudi motor and aviation gasoline demand reached 471 kbd in August, which was a marginal decline from the previous month's 473 kbd. In annual terms, 2021 recorded a 9kbd fall in demand as compared to last year's August, which stood at 480 kbd.
Similarly, the Kingdom’s average diesel demand slightly increased to 497 kbd in 2021, up from 492 kbd in 2020. Nevertheless, it is still below pre-2020 levels. In 2017-19, average diesel demand was above the 520 kbd mark.
Diesel is mainly used by trucks and hence could be roughly used as a gauge for the intensity of goods shipments across the country.
In August, the demand for diesel reached 532 kbd, which was moderately higher than the same month last year by 11 kbd. It was also noticeably greater than the previous month’s demand as it recorded a monthly increase of 41 kbd.


Bitcoin rises near 6-month high, as ETF launch date approaches: Market wrap

Bitcoin rises near 6-month high, as ETF launch date approaches: Market wrap
Updated 18 October 2021

Bitcoin rises near 6-month high, as ETF launch date approaches: Market wrap

Bitcoin rises near 6-month high, as ETF launch date approaches: Market wrap

RIYADH: ProShares is set to launch a Bitcoin futures exchange-traded fund on the New York Stock Exchange on Tuesday, in what would be a first for institutional investors in the US, New York Times reported.

The ETF will provide institutional investors and retail investors exposure to Bitcoin, who cannot legally or do not want direct exposure, through a brokerage account.

“When we have a Bitcoin ETF in the US, billions and billions of dollars will flow into Bitcoin that under no circumstances would have found their way into Bitcoin otherwise,” MicroStrategy CEO Michael Saylor said.

Stablecoins

Asset-backed stablecoins do not pose a systemic risk to the US financial system and should not face a new set of rules, a major cryptocurrency lobby group told US regulators on Monday, as tighter oversight of the fast-growing technology looms.

Stablecoins — digital tokens usually backed by reserves of dollars or assets from gold to other cryptocurrencies — have ballooned during the COVID-19 pandemic.

As a result, the President’s Working Group on Financial Markets — which comprises top US regulators including the Treasury and Federal Reserve — is focusing on them as part of wider efforts to rein in crypto.

The group is widely expected to publish in the coming months a report detailing the risks and opportunities of stablecoins.

Adoption

The Central Bank of Brazil released a report showing that Brazilians have bought more than $4 billion in cryptocurrency imports since the beginning of the year.

The report also shows that Brazilians have consistently earned more than $350 million in cryptocurrencies every month since January.

However, according to some analysts from the central bank, this number is likely to reach twice its value this year.

Brazilians investing in cryptocurrencies abroad are likely to triple the amount invested in American shares, according to Bruno Serra the director of monetary policy of the Central Bank of Brazil.

Crypto regulation

Nasdaq-listed crypto exchange, Coinbase has published its proposal for crypto regulation after more than 75 meetings with stakeholders in government, industry, and academia.

“Today we’re launching our Digital Asset Policy Proposal, which we hope will help chart a course for clear regulation of cryptocurrency and web 3.0 in the US. It’s critical to bring clarity to this space and ensure America remains a financial leader,” Coinbase CEO Brian Armstrong tweeted.

ATMs

Popular BTM Operator, Bitcoin of America, recently announced their newest addition to their Bitcoin ATM machines.

Ethereum is available now for buy and sell at Bitcoin of America ATM locations due to its growing popularity,  it also offers Bitcoin and Litecoin options online and at their BTM locations.

Trading

Bitcoin, the leading cryptocurrency in trading internationally, traded higher on Monday, rising by 1.62 percent to $61,891 at 6 p.m. Riyadh time.

Ether traded at $3,769, down 1.94 percent, according to data from CoinDesk.