Euro zone’s trade surplus narrows; supply bottlenecks continue: Economic wrap

Euro zone’s trade surplus narrows; supply bottlenecks continue: Economic wrap
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Updated 17 October 2021

Euro zone’s trade surplus narrows; supply bottlenecks continue: Economic wrap

Euro zone’s trade surplus narrows; supply bottlenecks continue: Economic wrap
  • In addition, imports from Russia and the United States rose noticeably as they jumped by yearly rates of 107.1 percent and 18.4 percent respectively

 

The trade surplus of the Euro area steeply shrank to EUR4.8 billion in August, compared to EUR20.7 billion in the previous month. According to Eurostat data, this was mainly driven by a 26.6 percent surge in imports as energy prices rose. 

In particular, imports of fuels and lubricants soared by 84.4 percent year-on-year. Imports of crude materials also grew significantly in August, rising by a yearly rate of 65.4 percent.

In addition, imports from Russia and the United States rose noticeably as they jumped by yearly rates of 107.1 percent and 18.4 percent respectively.

Global inflation risks

Following elimination of pandemic-related restrictions, a rising global demand has been met with supply shortages all over the world. The Wall Street Journal reported that surging costs for energy and raw materials are the result of this clash.

While more than a dozen central banks have raised their interest rates, two of the most influential, the Federal Reserve and the European Central Bank, are yet to raise their rates. 

This likely means that different central banks have different views over the current inflationary fears. Some predict it to be temporary and will gradually taper off; others expect that it will feed into even more inflationary pressures and thus act accordingly with a contractionary monetary policy.

Italy’s growth forecasts

Italy’s business lobby, Confindustria, has favorably revised its growth outlook for the country. The lobby’s research unit now forecasts the economy to grow by 6.1 percent this year and 4.1 percent in 2022. 

In April, the forecast for 2021 was a lower 4.1 percent.

This means that GDP will be above pre-pandemic levels in the first half of 2022. Limited impact of the Delta variant and robust economic indicators were cited as reasons for this revision.

European Inflation 

Official data showed that France's consumer price inflation rate recorded its highest rate since October 2018, as it increased to 2.2 percent year-on-year in September, higher than last month’s 1.9 percent. Energy costs had the highest jump, growing by 14.9 percent. 

Moreover, according to Italy’s National Institute of Statistics, the country’s yearly inflation rate rose to 2.5 percent in September 2021, rising from 2% in August. Higher energy costs drove this increase as they rose by 20.2 percent. This is the highest inflation rate since November 2012.

However, Italian consumer prices declined by 0.2 percent month-on-month compared to a 0.4 percent rise in August.

Indonesian balance of trade 

In the 17th straight month of continued trade surplus, Indonesia's surplus expanded from $2.4 billion in September 2020 to $4.4 billion in this year’s September, data from Statistics Indonesia showed.

This was mainly due to significantly high export growth, as it increased by a yearly rate of 47.6 percent due to larger oil and non-oil exports. Imports also surged, albeit at a slightly slower pace, growing by 40.3 percent. Oil and gas imports soared by 59.2 percent while purchases of non-oil and gas rose by 38.2 percent.


Middle East on close watch as omicron rattles recovery prospects: Daily Virus Update

Middle East on close watch as omicron rattles recovery prospects: Daily Virus Update
Updated 12 sec ago

Middle East on close watch as omicron rattles recovery prospects: Daily Virus Update

Middle East on close watch as omicron rattles recovery prospects: Daily Virus Update
  • Oil prices stumbled in their biggest decline since April 2020

DUBAI: Oil prices gave up gains on Tuesday, falling more than 2 percent along with broader financial markets, after a media report cast doubt on the efficacy of COVID-19 vaccines against the omicron coronavirus variant.

The head of drugmaker Moderna told the Financial Times that COVID-19 vaccines are unlikely to be as effective against the omicron variant of the coronavirus as they have been against the Delta variant.

Both benchmarks tumbled more than $1 on the news. Brent crude futures fell $1.82, or 2.5 percent, to $71.62 a barrel at 0605 GMT, US West Texas Intermediate crude futures dropped $1.61, or 2.3 percent, to $68.34 a barrel.

Oil plunged more than 12 percent on Friday along with other markets on fears the heavily mutated omicron would spark fresh lockdowns and dent global growth, hurting oil demand.

November 30

Amid speculations on the impact of omicron on oil demand, the Saudi energy minister said it was too early to tell, adding OPEC+ was keen to monitor the situation.

The group of oil-producing countries has rescheduled its meetings to later this week to have more time in assessing the impact, Prince Abdulaziz bin Salman, told Arab News in an Aramco ceremony in Dhahran on Monday.

Earlier, Russian Deputy Prime Minister Alexander Novak said, there is “no need for emergency measures in the oil market.”

He added OPEC+ partners did not call to review the current deal.

Oil prices rebounded on Monday after a huge slump last week, which was led by fears brought by the new coronavirus variant.

Brent crude futures climbed $3.11, or 4.3 percent, to $75.83 a barrel by 0355 GMT, after falling $9.50 on Friday.

U.S. West Texas Intermediate (WTI) crude was up $3.47, or 5.1 percent, at $71.62 a barrel, having tumbled $10.24 in the previous session.

Oil prices plunged more than 10 percent on Friday, their biggest one-day drop since April 2020,  as the new variant spooked investors across financial markets.

There are worries the new variant could derail the global economic recovery, potentially hurting oil demand, while it has also added to concerns that a supply surplus could swell in the first quarter.

Economists at Goldman Sachs outlined four scenarios that could happen as the world cautiously navigates the situation. 

If omicron turns out to transmit faster than its predecessor, Delta, it will result in first-quarter global growth slowing to a 2 percent quarter-on-quarter annual rate.

The economists said if both the disease severity and immunity against hospitalizations are worse than for Delta, global economic growth will take a more substantial hit, but inflation impact will be “ambitious.”

On a slightly positive note, if omicron spreads slower than delta, it will have no significant effect on global growth and inflation, Goldman Sachs said.

If the new variant is more transmissible, but causes less severe disease, global growth could be higher than Goldman’s baseline.

November 29

Most Gulf stock markets ended lower on Sunday, with the Saudi and Dubai indexes suffering their biggest single-day fall in nearly two years as fears of a potentially vaccine-resistant coronavirus variant spooked investors.

Opinion

This section contains relevant reference points, placed in (Opinion field)

The World Health Organization on Friday designated the omicron coronavirus variant detected in South Africa as being “of concern” — the fifth variant to be given that designation

Saudi Arabia’s benchmark index slid 4.5 percent, dragged down by a 5.4 percent fall for Al Rajhi Bank and a 6.2 percent decline for Saudi Basic Industries.

The Kingdom halted flights from and to Malawi, Zambia, Madagascar, Angola, Seychelles, Mauritius and the Comoros Islands on Sunday owing to concerns related to the spread of the new COVID-19 strain, state news agency SPA reported on Twitter.

The latest pandemic developments also sent oil prices, a key catalyst for the Gulf’s financial markets, plunging by $10 a barrel on Friday for their largest one-day drop since April 2020. The new variant added to concerns that an oil supply surplus could swell in the first quarter.

“It’s obvious that traders are concerned about the implications of the newly mutated virus which brings back the lock-down memories from last year. If Saudi decides to impose more restrictive measures the economy will be impacted significantly and the growth prospects next year will vanish”, Mohammed Al-Suwayed, chief executive officer of Razeen Capital, said. He said the time is now suitable for investors to reinvest in the market since the share prices are relatively low.

Dubai’s main share index declined 5.2 percent, its biggest intraday fall since March 2020, with most stocks in negative territory.

Blue-chip developer Emaar Properties plunged 9.4 percent and budget carrier Air Arabia retreated by 7.1 percent.

In Abu Dhabi, the index fell 1.8 percent, weighed down by a 3.3 percent drop for telecoms company Etisalat and a 1.4 percent decline for First Abu Dhabi Bank, the country’s largest lender.

The UAE has suspended entry for travelers from South Africa, Namibia, Lesotho, Eswatini, Zimbabwe, Botswana and Mozambique from Nov. 29 over concerns about the new coronavirus variant, the state news agency reported on Friday.

In Qatar, the index slipped by 2.8 percent as investors shunned stocks across board, with petrochemicals group Industries Qatar leading the losses.

Egypt’s blue-chip index lost 1.3 percent, with top lender Commercial International Bank retreating by 0.8 percent.

(With Reuters)


Aramco deploys first $10bn to local, international firms to kickstart Jafurah project

Aramco deploys first $10bn to local, international firms to kickstart Jafurah project
Updated 5 min 56 sec ago

Aramco deploys first $10bn to local, international firms to kickstart Jafurah project

Aramco deploys first $10bn to local, international firms to kickstart Jafurah project
  • The company said it signed 16 subsurface and Engineering, Procurement, and Construction (EPC) contracts

DUBAI: Saudi Arabia’s oil giant Aramco has signed $10 billion worth of contracts to kickstart the development of its massive Jafurah unconventional gas field.

The company said it signed 16 subsurface and Engineering, Procurement, and Construction (EPC) contracts with local and international companies, including US-based Schlumberger and Halliburton. 

Other companies that signed contracts with Aramco include Baker Hughes, NESR, Saudi Taqa, Sinopec, Larsen and Toubro, and Saipem. 

A total of $68 billion is expected to be spent over the first 10 years of the project’s development, Aramco said, as it anticipates more than $100 billion total lifecycle investment. 

By 2030, the Saudi oil giant expects the Jafurah site to produce up to two billion standard cubic feet per day of sales gas, 418 million scfd of ethane, and around 630,000 barrels per day of gas liquids and condensates.


Oil rebounds above $76 on speculation virus fear overrated

Oil rebounds above $76 on speculation virus fear overrated
Updated 30 November 2021

Oil rebounds above $76 on speculation virus fear overrated

Oil rebounds above $76 on speculation virus fear overrated

LONDON: Oil rebounded by more than 5 percent on Monday to above $76 a barrel as some investors viewed Friday’s slump in oil and financial markets as overdone while the world awaits more data on the omicron coronavirus variant.

Brent crude was up $3.66, or 5 percent, at $76.38 a barrel by 1444 GMT, having slid by $9.50 on Friday. US West Texas Intermediate crude was up $4.36, or 6.4%, at $72.51, having tumbled by $10.24 in the previous session.

“We saw some correction as Friday’s plunge in oil prices has been overdone,” said Tatsufumi Okoshi, a senior economist at Nomura Securities.

Friday’s slide, the biggest one-day drop since April 2020, reflected fears that travel bans would hammer demand. The plunge was exacerbated by low liquidity owing to a US holiday and the expected demand hit does not justify such a fall, analysts said.

“The fear factor had its grip on financial markets on Friday,” said Norbert Ruecker of Swiss bank Julius Baer. “Fundamentally, the announced and enacted international air travel constraints cannot explain such a sharp slump.”

A semblance of calm also returned to wider markets on Monday as investors awaited more information about the new variant. European and Wall Street shares rose while safe haven bonds lost ground.

“I can’t help but feel that Friday’s lows were probably the bargain of the year if you were an oil buyer, speculative or physical,” said Jeffrey Halley of brokerage OANDA.


Egypt to issue $604m of treasury bonds

Egypt to issue $604m of treasury bonds
Updated 29 November 2021

Egypt to issue $604m of treasury bonds

Egypt to issue $604m of treasury bonds

CAIRO: The Central Bank of Egypt will issue 9.5 billion Egyptian pounds ($604.3 million) in treasury bonds on Monday to finance the country’s budget deficit.

The T-bonds will be issued in coordination with the Finance Ministry.

In a statement posted on its website, the central bank said the value of the first offering is 8 billion pounds for two years. The value of the second offering is 1 billion pounds for 5 years and the value of the third offering is 500 million pounds for a period of 10 years.

The government borrows through bonds and treasury bills and government banks are the largest purchasers of these financial instruments.

The Ministry of Finance estimated the financing gap for the state’s general budget during 2021/2022 at about 1.06 trillion pounds, compared to 997.733 billion pounds during the last fiscal year, an increase of 6.31 percent, which will be financed through borrowing and issuance of securities.

Egypt had received $2.7 billion from the International Monetary Fund.

The Monetary Policy Committee of the Central Bank of Egypt decided to keep the overnight deposit and lending rate and the central bank’s main operation rate unchanged at 8.25 percent, 9.25 percent, and 8.75 percent, respectively.

Last month, the committee announced that the interest rate would be fixed for the seventh time in a row this year.


Saudi Fund for Development signs two agreements with Pakistan worth $4.2 billion

Saudi Fund for Development signs two agreements with Pakistan worth $4.2 billion
Updated 29 November 2021

Saudi Fund for Development signs two agreements with Pakistan worth $4.2 billion

Saudi Fund for Development signs two agreements with Pakistan worth $4.2 billion

RIYADH: The Saudi Fund for Development on Monday signed two agreements worth $4.2 billion with Pakistan. The deals aim to support the Pakistani economy.

The first agreement includes a $ 3 billion deposit to the State Bank of Pakistan to support the country’s foreign currency reserve levels and mitigate the impact of the coronavirus disease pandemic. The second deal seeks to support Pakistan in financing oil derivatives trade with $1.2 billion.

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