Macro Snapshot —Fed expected to fight inflation with rate hike; French services sees strong growth

Macro Snapshot —Fed expected to fight inflation with rate hike; French services sees strong growth
The US Federal Reserve is expected to raise interest rates by half of a percentage point (Shutterstock)
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Updated 04 May 2022

Macro Snapshot —Fed expected to fight inflation with rate hike; French services sees strong growth

Macro Snapshot —Fed expected to fight inflation with rate hike; French services sees strong growth

RIYADH: The US Federal Reserve is expected to raise interest rates as it combats inflation levels, while  India's central bank raised its key rate by 40 basis points for similar reasons. 

Russian manufacturing activity shrank for the third month running in April, whereas Italy and France saw growth in their services activity, according to S&P Global Purchasing Managers’ Index. 

Germany’s exports fell more than expected in March, while Spain’s April unemployment shrank 2.77 percent to 3.02 million.

Australian retail sales sped ahead in Q1

Australian retail sales easily sped past forecasts for a third straight month in March as spending built a head of steam that should help it weather this week’s rise in interest rates.

Data from the Australian Bureau of Statistics showed retail sales jumped 1.6 percent in March to a record A$33.6 billion ($23.9 billion), topping forecasts of a 0.6 percent gain.

That came after hefty gains in January and February and left sales up 9.4 percent on a year earlier. 

While some of that spending would have been eaten up by surging inflation, it still points to an upbeat quarter for economic growth.

“Even allowing for a strong increase in retail prices, we estimate that volumes rose by a solid 1.5 percent q/q,” said Marcel Thieliant, a senior economist at Capital Economics.

“While falling consumer confidence amid soaring inflation and rising interest rates poses downside risks, we think that the still high savings rate will allow for further solid gains in spending over coming quarters.”

Fed expected to step up inflation fight with big rate hike

The US Federal Reserve is expected to raise interest rates by half of a percentage point and announce the start of reductions to its $9 trillion balance sheet as central bankers intensify efforts to bring down high inflation.

Fed policymakers have widely telegraphed a double-barreled decision that would lift the Fed’s short-term target policy rate to a range between 0.75 percent and 1 percent, and set in motion a plan to trim its portfolio of Treasuries and mortgage-backed securities by as much $95 billion a month.

The policy statement is due to be released at 1800 GMT following the end of the Fed’s latest two-day meeting.

Markets have priced in further rate increases through this year and into next, including at least a couple more half-percentage-point hikes, as traders bet the central bank moves much more quickly than it had anticipated it would in March to get borrowing costs up to where they will start actively curbing inflation.

With no fresh Fed economic or policy rate projections due until the central bank’s June meeting, most clues on how far and how fast it is prepared to go will come from Fed Chair Jerome Powell’s news conference.

Russian manufacturing activity shrinks again in April 

Russian manufacturing activity shrank for the third month running in April, driven by further output and employment declines, though at a slower pace than in the previous month, a business survey showed on Wednesday.

The S&P Global Purchasing Managers’ Index rose to 48.2 from 44.1 in the previous month, staying below the 50.0 mark that separates expansion from contraction.

The survey did not mention Ukraine, but S&P Global said sanctions had weighed on client demand and firms’ ability to source raw materials.

Western nations have imposed unprecedented sanctions against Moscow over Russia’s actions in Ukraine.

“Logistics delays and material shortages led to longer lead times for inputs, with April seeing the third-steepest lengthening of supplier lead times over 25 years of survey history,” S&P Global said in a statement.

The outlook was gloomy, impacted by expectations of reduced purchasing power among customers. Greater import substitution and hopes of a longer-term improvement of economic conditions kept the reading for future output above the 50.0 mark, but the degree of optimism was at its second-lowest in 23 months.

“Output expectations were historically subdued amid concerns regarding the impact of sanctions on future demand and new orders,” S&P Global said.

French services activity growth strongest in over four years in April

France’s dominant services sector enjoyed its sharpest increase in activity in more than four years in April as fewer COVID-19 restrictions gave businesses a boost, although inflation remained a concern, a survey showed on Wednesday.

S&P Global said its final services PMI was 58.9 points last month, up from 57.4 in March and broadly in line with a flash estimate.

Any reading above the 50 point mark indicates growth. The final services PMI number in April was the highest in any month since January 2018.

A final April reading of France’s composite PMI index, which includes both the services and manufacturing sectors, meanwhile rose to 57.6 points from 56.3 in March, broadly in line with an earlier flash forecast.

“It was another positive month for France’s services firms in April as business activity in the largest sector of the economy increased at the fastest rate in over four years,” said S&P Global senior economist Joe Hayes.

“The economy is still reaping the benefit of reduced COVID-19 restrictions as many companies linked strong and sustained growth in their order books to the pandemic recovery.”

Italian services activity expands in April amid stronger demand 

Italy’s services sector expanded in April at the strongest pace since November, a survey showed on Wednesday, brightening hopes for economic growth prospects in the second quarter amid reports of stronger domestic and foreign demand.

S&P Global’s PMI for services rose to 55.7 in April from 52.1 in March, pushing further above the 50 mark that separates growth from contraction.

The reading beat the median forecast of 54.5 in a Reuters survey of 14 analysts.

The sub-index for new business in the service sector jumped to 56.0 in April from 52.6 in March.

Italy’s service sector took longer to recover from COVID-19 lockdowns than the smaller manufacturing sector, which has seen growth for nearly two years.

The manufacturing PMI recorded its 22nd consecutive month of expansion in April, though growth slowed from the month before. 

German exports fall more than expected in March

German exports fell more than forecast in March, easing by 3.3 percent, while imports rose by 3.4 percent, according to data released by the Federal Statistical Office on Wednesday.

A Reuters poll had predicted a month-on-month fall in exports of 2.0 percent.

Exports to Russia plunged by 62.3 percent in March compared with February partly because of sanctions imposed as a result of the war in Ukraine, the Office said in a statement.

In March, Germany had a seasonally adjusted trade surplus 3.2 billion euros ($3.4 billion), the Office reported, versus a forecast 9.8 billion euros.

Spain’s April jobless falls 2.77 percent from March to 3.02 mln

The number of people registering as jobless in Spain fell 2.77 percent in April from March, or by 86,260 people, leaving 3.02 million people out of work, Labour Ministry data showed on Wednesday.

Spain added 33,244 net jobs during the month, separate data from the Social Security Ministry showed.

The data marks the third consecutive month of falling jobless figures and the lowest number of unemployment in a month of April since 2008, the ministry said.

Polish central bank to hike rates by 100 bps to tackle inflation

The National Bank of Poland is expected to deliver its second 100 basis point hike in a row on Thursday, a Reuters poll showed, bringing the cost of credit to 5.5 percent as it grapples with the highest inflation in almost a quarter of a century.

Consumer price inflation surged past analysts’ estimates to hit 12.3 percent in April, according to a flash estimate from the statistics office, and analysts expect a sharp rise in rates to counter price growth that has reached its highest level since 1998 in part due to the war in Ukraine. 

UK consumer and mortgage lending rise again in March 

British consumer borrowing rose solidly in March and mortgage lending hit its highest since September as house prices surged, according to Bank of England data that showed no early sign of a hit to the economy from the country’s cost-of-living squeeze.

Lending to consumers rose by £1.3 billion ($1.6 billion) in net terms, as expected in a Reuters poll of economists and following a nearly £1.6 billion increase in February.

Credit card lending accounted for more than half of the increase in March, which was before a sharp rise in energy costs and an increase in taxes in April.

The BoE reported £7 billion of net mortgage lending, up from £4.6 billion in February, and 70,961 mortgage approvals, down slightly from the previous month but still well above the pre-pandemic norm.

Britain’s housing market retained much of its momentum in the first months of 2022, despite the phasing out of temporary tax breaks on property purchases in the second half of 2021.

The BoE is watching for signs of how fast-rising inflation is affecting the economy as it considers how much further it needs to raise interest rates. The central bank is expected to increase its bank rate to 1.0 percent from 0.75 percent on Thursday

India cenbank raises key rate by 40 bps to tame inflation

The Reserve Bank of India’s monetary policy committee raised the key lending rate by 40 basis points on Wednesday, in a surprise move, as it sought to take calibrated steps to exit the extraordinary accommodation and contain rapid inflation.

The MPC raised the key lending rate or the repo rate by 40 basis points to 4.40 percent, Governor Shaktikanta Das said in a virtual address, announcing the decision after an off-cycle meeting of the committee on May 2 and May 4. 


Oil Updates — Brent oil stalls; Dragon Oil extends  $1bn Turkmenistan deal; Ecuador oil output rebounds

Oil Updates — Brent oil stalls; Dragon Oil extends  $1bn Turkmenistan deal; Ecuador oil output rebounds
Updated 19 sec ago

Oil Updates — Brent oil stalls; Dragon Oil extends  $1bn Turkmenistan deal; Ecuador oil output rebounds

Oil Updates — Brent oil stalls; Dragon Oil extends  $1bn Turkmenistan deal; Ecuador oil output rebounds

RIYADH: Brent oil prices were little changed on Tuesday, reversing earlier gains of $1, as investors weighed supply concerns, highlighted by a potential production cut in Norway, and worries about a possible global recession curtailing fuel demand.

Brent crude futures for September settlement edged up 0.2 percent, or 22 cents, to $113.73 a barrel by 0432 GMT.

US West Texas Intermediate crude climbed $1.95, or 1.8 percent, to $110.38 a barrel, from Friday’s close. There was no settlement for WTI on Monday because of the Independence Day public holiday in the US.

Dragon Oil extends Turkmenistan partnership in $1 billion deal

Dubai-based Dragon Oil signed a $1 billion deal to renew its production partnership in Turkmenistan with state-owned Turkmen Oil for 10 years after the current contract expires in May 2025, state news agency WAM said on Monday.

Of the total value, $500 million will be paid in cash while the remaining $500 million will be paid over 13 years.

Ecuador oil output recovers by about 90 percent 

Ecuador’s oil output has recovered by about 90 percent since a deal between the government and demonstrators ended nationwide protests late last week, the ministry of mines and energy said on Monday.

Protests erupted in Ecuador in June to demand lower fuel prices and limits on the expansion of the mining and oil industries. The demonstrations led to at least eight deaths and devastated the country’s oil production.

Last Thursday, the government of President Guillermo Lasso and indigenous leaders signed a pact to end the crisis. At the time, oil output was around 262,000 barrels per day. It has since rebounded to 461,637 bpd, the ministry of mines and energy said in a statement.

“Some 952 oil wells have been reactivated, which means that about 10 percent of the suspended wells still need to be recovered,” Ecuador’s Energy Minister Xavier Vera said in the statement.

State-run oil company Petroecuador on Monday also reported a 90 percent recovery in production.

While the company on Friday estimated it would take a week to recover 90 percent of its output, production had risen to 361,535 bpd as of Sunday, it said.

“Thanks to these efforts, just 82 wells remain closed, of the almost 1,000 that were affected by acts of vandalism,” Petroecuador’s manager Italo Cedeno said in a statement.

The company was forced to issue a wide force majeure declaration across the oil industry on June 18 amid the protests.

The notice, enforced at the end of June, is expected to be lifted on July 7, once the company can assure customers that supply contracts will be fulfilled.

Norwegian oil and gas workers start strike, cutting output

Norwegian offshore workers on Tuesday began a strike that will reduce oil and gas output, the union leading the industrial action told Reuters.

The strike, in which workers are demanding wage hikes to compensate for rising inflation, comes amid high oil and gas prices, with supplies of natural gas to Europe especially tight after Russian export cutbacks.

“The strike has begun,” Audun Ingvartsen, the leader of the Lederne trade union said in an interview.

The Norwegian government has said it was following the conflict “closely.” It can intervene to stop a strike if there are exceptional circumstances.

On Tuesday, oil and gas output will be reduced by 89,000 barrels of oil equivalent per day, of which gas output makes up 27,500 boepd, Equinor has said.

On Wednesday, the strike will deepen the cut to the country’s gas output to a total of 292,000 barrels of oil equivalent per day, or 13 percent of output, NOG said on Sunday. 

From Wednesday oil output will be cut by 130,000 barrels per day, the lobby had said, corresponding to around 6.5 percent of Norway’s production, according to a Reuters calculation.

(With inputs from Reuters) 

 


TASI trades higher, while investors fret about inflation: Opening bell

TASI trades higher, while investors fret about inflation: Opening bell
Updated 49 min 41 sec ago

TASI trades higher, while investors fret about inflation: Opening bell

TASI trades higher, while investors fret about inflation: Opening bell

RIYADH: Saudi stocks opened higher on Tuesday’s opening bell, but investors were still worried about the impact inflation will have on the economy.

The main index, TASI, gained 0.18 percent to reach 11,378, while the parallel market, Nomu, started flat at 20,684, as of 10:09 a.m. Saudi time.

This was led by a 1.29 percent rise in Saudi chemicals maker Petro Rabigh and 0.26 percent gain in Saudi Aramco, the largest player on the Saudi oil market.

In the banking sector, Al Rajhi, the Kingdom’s largest valued bank, rose 0.75 percent, and Saudi National Bank climbed 0.30 percent.

Saudi British Bank lost 1.10 percent of its share price in early trading.

Saudi Research and Media Group and Saudi Fisheries Co. led gainers with 2.25 percent and 3.31 percent gains, respectively.

Ataa Educational Co. topped the decliners in the early morning session, shedding 2.68 percent.

In the energy sector, West Texas Intermediate crude was trading at $110.01 per barrel and Brent crude was trading at $113.36 per barrel as of 10:03 a.m. Saudi time.


Here’s what you need to know before Tadawul trading on Tuesday

Here’s what you need to know before Tadawul trading on Tuesday
Updated 05 July 2022

Here’s what you need to know before Tadawul trading on Tuesday

Here’s what you need to know before Tadawul trading on Tuesday

RIYADH: Saudi Arabia’s stock market extended losses on Monday as recession and inflation risks continue to bother investors.

The main benchmark index TASI lost 0.9 percent to close at 11,358, hit by a 1.3-percent fall in oil giant Aramco, while the parallel market Nomu dropped 1.9 percent to 20,672.

Likewise, the stock exchanges of Abu Dhabi, Dubai, Qatar, and Kuwait all shed between 0.2 and 1.4 percent.

Bahrain and Oman bucked the downward trend to close 0.5 and 0.2 percent higher, respectively.

Apart from the Gulf, Egypt’s blue-chip index EGX30 continued its losing streak as it slipped 3.6 percent.

Oil prices were slightly changed on Tuesday due to lingering supply concerns and worries over a potential global recession.

Brent crude futures edged down to $113.28 a barrel and US West Texas Intermediate rose almost 1.5 percent to $110.02 a barrel by 9:16 a.m. Saudi time.

Stock news

Petro Rabigh’s rump offering generated a total of SR390 million ($104 million) in proceeds after selling over 23 million shares

Middle East Specialized Cables Co. appointed Yahiya Al-Qunaibit as board chairman and Saad Al-Shammari as vice-chairman

Two substantial shareholders in Wataniya Insurance Co. have executed an off-market deal where SNIC Insurance Co. sold a 2.5 percent stake to E.A. Juffali and Brothers for SR16.5 million

Jadwa Investment Co. sold a property located in Riyadh, namely Raud Al Jenan School, for SR27 million

National Industrialization Co. elected Mubarak Al-Khafrah as its chairman and Talal Al-Maiman as its vice-chairman

Gulf General Cooperative Insurance Co. has signed a one-year deal with Al-Rashid Trading and Contracting Co. to provide medical insurance services

Calendar

July 7, 2022

Saudi Exchange will close for the Eid Al Adha holidays and resume trading on July 13


Aramco sets for $44bn profit amid mixed Q2 earnings of Saudi firms: Al-Rajhi Capital 

Aramco sets for $44bn profit amid mixed Q2 earnings of Saudi firms: Al-Rajhi Capital 
Updated 05 July 2022

Aramco sets for $44bn profit amid mixed Q2 earnings of Saudi firms: Al-Rajhi Capital 

Aramco sets for $44bn profit amid mixed Q2 earnings of Saudi firms: Al-Rajhi Capital 

RIYADH: Saudi-listed companies are expected to see mixed earnings in the second quarter of 2022, amid rising oil prices, looming economic slowdown risks, and interest rate hikes, according to Al-Rajhi Capital.

The Riyadh-based financial service firm which has analyzed the performance of all industrial sectors expects the Kingdom’s oil giant Aramco to post SR164.8 billion ($44 billion) in profits in the second quarter of 2022, up 81 percent from a year earlier. It estimates the chemical giant Saudi Basic Industries Corp.’s profit to slightly slip by 1 percent to SR7.6 billion.

Apart from SABIC, petrochemical companies will see pressure on earnings, weighed down by higher feedstock costs amid stable polymer prices, the report added.

In the healthcare sector, Al Rajhi Capital forecasts leaps in performance for two major players on improved capacity utilization, as Dallah Health and Sulaiman Al Habib are expected to see a profit surge of 50 percent and 10 percent respectively.

For the cement sector, however, the outlook is negative. All companies including, but not limited to, Saudi Cement, Southern Cement, and Yamama Cement are expected to see a drop in profit due to lower cement volumes.

The investment bank’s forecast for Saudi Telecom Co., known as stc, revealed an 8-percent increase in net profit, reaching SR3.07 billion.


Saudi non-oil sector sees robust improvement in business conditions in June: S&P Global 

Saudi non-oil sector sees robust improvement in business conditions in June: S&P Global 
Updated 34 min 31 sec ago

Saudi non-oil sector sees robust improvement in business conditions in June: S&P Global 

Saudi non-oil sector sees robust improvement in business conditions in June: S&P Global 

RIYADH: Saudi Arabia has seen a robust improvement in business conditions across the non-oil sector in June, as the Kingdom steadily advances in its path of economic transition, according to the latest PMI data from S&P Global.

It said new business rose at the sharpest rate for eight months, despite evidence that intensifying cost pressures had led companies to mark up their prices. 

David Owen, Economist at S&P Global Market Intelligence, said: "Saudi Arabia's non-oil economy continued to go from strength to strength in June, with the PMI picking up to an eight-month high of 57.0 and posting well above the 50.0 no-change mark. 

He said the upturn was underlined by a robust increase in new business levels, which encouraged firms to expand their output sharply and make greater input purchases.