Macro Snapshot — Bank of England raises rates after US increase; China’s services activity falls sharply 

Macro Snapshot — Bank of England raises rates after US increase; China’s services activity falls sharply 
The Bank of England raised interest rates to their highest since 2009 (Shutterstock)
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Updated 06 May 2022

Macro Snapshot — Bank of England raises rates after US increase; China’s services activity falls sharply 

Macro Snapshot — Bank of England raises rates after US increase; China’s services activity falls sharply 

RIYADH: The central banks of the UK and Brazil have raised their rates by a full percentage point, following the US Fed’s half-point hike on Wednesday.

Saudi Arabia, the UAE, Qatar and Bahrain have also raised their key rates by 0.5 percentage points, while Kuwait's central bank increased its discount rate by 25 basis points. 

Norway has resisted any rise, keeping its rates on hold, and the European Central Bank board member Fabio Panetta has also advised against a hike in rates. 

Bank of England raises rates to 1 percent despite looming recession risk 

The Bank of England raised interest rates to their highest since 2009 at 1 percent on Thursday to counter inflation now heading above 10 percent, as it sent a warning that Britain risks falling into recession.

The BoE’s nine rate-setters voted 6-3 for the quarter-point rise from 0.75 percent. But Catherine Mann, Jonathan Haskel and Michael Saunders called for a bigger increase to 1.25 percent to stamp out the risk of the inflation surge getting embedded in the economy.

Economists polled by Reuters had forecast a more dovish 8-1 vote to raise rates to 1 percent, with one policymaker opposing a hike.

The BoE’s move represented its fourth consecutive rate hike since December — the fastest increase in borrowing costs in 25 years — and it hardened its message about further increases, despite its worries about a sharp economic slowdown.

British consumer price inflation hit a 30-year high of 7 percent in March, more than triple the BoE’s 2 percent target, and the central bank revised up its forecasts for price growth to show it peaking above 10 percent in the last three months of this year.

It had previously said it expected inflation to peak at about 8 percent in April.

The BoE kept its forecast for economic growth this year at 3.75 percent, but slashed its forecast for 2023 to show a contraction of 0.25 percent from a previous estimate of 1.25 percent growth. It cut its growth projection for 2024 to 0.25 percent from a previous 1.0 percent.

Brazil central bank raises rates by 100 bps as expected

Brazil’s central bank on Wednesday raised interest rates by a full percentage point, due to persistent double-digit inflation and evidence of price expectations drifting further from official targets.

The bank’s rate-setting committee, known as Copom, raised its benchmark Selic interest rate to 12.75 percent, a five-year high. All 32 economists polled by Reuters had forecast the decision after policymakers made an increase of 100 basis points in March and signaled the same for this month.

Gulf central banks raise rates as Fed hikes by 50 bps 

The central banks of Saudi Arabia, the United Arab Emirates, Qatar and Bahrain have raised their key rates by 50 bps. 

The Central Bank of Kuwait said it increased its discount rate by 25 basis points to 2 percent, in a move less hawkish than the Fed’s.

All Gulf countries have their currencies pegged to the US dollar, except Kuwait, which pegs the Kuwaiti dinar to a basket of currencies that includes the dollar.

The Saudi Central Bank raised its repo rate and reverse repo rates by 50 bps each to 1.75 percent and 1.25 percent, respectively.

The Central Bank of the UAE said its base rate would increase by 50 basis points, which would take it to 2.25 percent, effective from Thursday.

The bank said it would maintain the rate on borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 bps above the base rate.

The Central Bank of Qatar said it would raise, effective on Thursday, its deposit and repo rates by 50 bps to 1.5 percent and 1.75 percent, respectively. Its lending rate will increase by 25 bps to 2.75 percent.

The Central Bank of Bahrain said it raised its key policy rate, on its one-week deposit facility, by 50 bps to 1.75 percent, in lockstep with the Fed’s hike.

The CBB also increased its overnight deposit rate and lending rates by 50 bps to 1.5 percent and 3 percent, respectively, and its four-week deposit rate was increased by 75 bps to 2.5 percent.

The Central Bank of Oman — the other member of the Gulf Cooperation Council — is widely expected to follow with a similar move.

Norway keeps rates on hold, remains on track for June hike

Norway’s central bank kept interest rates on hold on Thursday, as widely expected, and reiterated its plan to raise the cost of borrowing in June amid rapidly rising inflation.

Norges Bank’s monetary policy committee unanimously agreed to keep the rate on hold at 0.75 percent for now, as expected in a Reuters poll of economists. 

ECB should not raise rates in July before Q2 GDP data: Panetta 

The European Central Bank should not raise interest rates in July, even though the inflation outlook suggests it can gradually reduce support for the economy, ECB board member Fabio Panetta told Italian newspaper La Stampa.

While an increasing number of ECB policymakers are making the case for a rate hike at the July 21 policy meeting, Panetta pointed to the availability after it of data on the euro zone’s second-quarter economic growth.

“It would be imprudent to act without having first seen the hard numbers on GDP for the second quarter and to discuss further measures without a full understanding of how the economy could develop,” La Stampa on Thursday quoted Panetta as saying.

“It does not make much of a difference whether it is two or three months earlier or later,” he said in the interview with the newspaper.

Spain’s inflation peaked, to start falling in second half of 2022, minister says

Spain’s Economy Minister Nadia Calvino said on Thursday inflation has peaked in the country and is likely to start falling in the second half of this year.

The 12-month inflation rate in Spain had increased to a three-decade high of 9.8 percent in the period through March though the most recent data in April showed a slight decrease to 8.4 percent.

Calvino added her government had to prepare itself for an upcoming interest rate increase. She said her ministry has already reduced risks by extending the maturity of its outstanding debt to more than eight years.

Turkey’s inflation surges to 70 percent, putting Erdogan in bind 

Turkey’s annual inflation jumped to a two-decade high of 69.97 percent in April, according to data on Thursday, fueled by the Russia-Ukraine conflict and rising energy and commodity prices after last year’s lira crash.

The surge in prices has badly strained households just over a year before presidential and parliamentary elections that could bring the curtain down on President Tayyip Erdogan’s long rule.

Erdogan first came to power as prime minister in 2003 before switching the country to a presidential system, and the unorthodox interest rate cuts made last year under pressure from him have been blamed for lighting a fire under inflation.

Month-on-month, consumer prices rose 7.25 percent, the Turkish Statistical Institute said, compared to a Reuters poll forecast of 6 percent. Annually, consumer price inflation was forecast to be 68 percent.

“It’s about food and energy price increases but also the spectacular failure of monetary policy in Turkey — and it’s about the abject and total failure of Erdogan’s unorthodox monetary policy,” said strategist Timothy Ash at Bluebay Asset Management.

Presidential and parliamentary elections are due by June 2023 and opinion polls show Erdogan’s support declining.

Swiss inflation rises to 2.5 percent in April

The Swiss consumer price index rose 0.4 percent in April versus March and advanced 2.5 percent year on year, the highest since 2008 and taking inflation further above the Swiss National Bank’s definition of price stability. 

The 0.4 percent month-on-month increase reflected several factors including rising prices for heating oil, new cars and air transport, the Federal Statistics Office said.

China’s services activity falls at second sharpest rate on record — Caixin PMI

China’s services sector activity contracted at the second-steepest rate on record in April, as COVID curbs halted the industry, leading to sharper reductions in new business and employment, a private-sector survey showed on Thursday.

The Caixin services purchasing managers’ index stood at 36.2 in April, the second-lowest since the survey begun in November 2005 and down from 42 in March. The index hit a record low of 26.5 in February 2020 during the onset of the pandemic.

The 50-point mark separates growth from contraction on a monthly basis.

The pessimistic findings from the survey, which focuses more on small firms in coastal regions, are in line with the government’s official PMI, pointing to the fast deterioration in a key sector that accounts for about 60 percent of the economy and half of the urban jobs.

The Caixin PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in China.


China in focus — Expenditure on Russian imports hits $6bn in April

China in focus — Expenditure on Russian imports hits $6bn in April
Updated 18 sec ago

China in focus — Expenditure on Russian imports hits $6bn in April

China in focus — Expenditure on Russian imports hits $6bn in April
  • The People’s Bank of China has reduced its five-year loan prime rate by 15 basis points

RIYADH: China spent a significant sum on Russian imports despite Western countries drifting away from purchases.

Coal imports in the country almost doubled between March and April.

In addition to this, Apple Inc announced that it intends to boost production outside the Asian country due to slowing production and slumping demand.

Meanwhile, The People’s Bank of China has cut its five-year loan prime rate to help alleviate the country’s struggling housing market.

·China has spent a total of $6 billion on imports from Russia during the month of April including oil, gas, and coal. Liquified natural gas imports surged 80 percent when compared to a year ago to reach 463,000 tons, Bloomberg reported, citing Chinese customs data. On the other hand, crude imports increased 4 percent year-on-year to reach 6.55 million tons. 

·China’s coal imports surged by around 50 percent between March and April to reach 4.42 million metric tons, CNN reported. This comes despite Western nations cutting off supplies from Moscow in response to its invasion of Ukraine. In addition to this, the Asian country is set to benefit Russian suppliers by removing import tariffs on all types of coal. 

·Apple Inc. has announced that it intends to boost production outside of China, Reuters reported, citing the Wall Street Journal. This comes as lockdown restrictions hindered production as well as demand in the Asian country last month. Among the countries short-listed by the firm are India and Vietnam, both of which already entail sites of Apple production. 

·The People’s Bank of China has reduced its five-year loan prime rate by 15 basis points — as opposed to analysts’ projected cut of five basis points - to stand at 4.45 percent, CNN reported. This comes in an attempt to levitate the tumbling housing market affected by the country’s slowing economy. This cut poses the second and largest reduction in 2022. 


Aramco awards $26m steel pipes deal to Saudi pipe manufacturer

Aramco awards $26m steel pipes deal to Saudi pipe manufacturer
Updated 4 min 37 sec ago

Aramco awards $26m steel pipes deal to Saudi pipe manufacturer

Aramco awards $26m steel pipes deal to Saudi pipe manufacturer

RIYADH: Saudi Steel Pipe Co. was awarded a deal worth SR97 million ($26 million) for the supply of oil and gas steel pipes to oil giant Aramco.

The contract will be valid for 10 months, a statement by the pipe manufacturer revealed.

The company expects the transaction to impact its financial statements in the first half of 2023.


Mastercard announces partnership to launch integrated wallet in MENA region 

Mastercard announces partnership to launch integrated wallet in MENA region 
Updated 13 min 32 sec ago

Mastercard announces partnership to launch integrated wallet in MENA region 

Mastercard announces partnership to launch integrated wallet in MENA region 

RIYADH: Mastercard, One Global and i2c have announced a partnership to provide tailored financial solutions that will enable the issuance of digital mobile wallets in the MENA region. 

One Global is a digital transformation and innovation company, specialized in fintech, while i2c is a global provider of highly configurable payment and banking solutions. 

Through this partnership, banks, fintech, merchants and wallet providers can offer consumers in the region easy access to digital-first payment solutions and services.

Mastercard and i2c will also provide an exchange to exchange solution for fintechs to go to market faster and in a more agile way.

“This announcement is an excellent example of collaboration to solve for speed, service and scale, while accelerating financial inclusion and innovation in the region,” Amnah Ajmal, executive vice president of Mastercard said. 


Financing ESG projects a challenging task: Goldman Sachs MD

Financing ESG projects a challenging task: Goldman Sachs MD
Updated 13 min 52 sec ago

Financing ESG projects a challenging task: Goldman Sachs MD

Financing ESG projects a challenging task: Goldman Sachs MD

LONDON: Finding finance for exciting environmental, social, and governance projects that have huge potential to achieve sustainability is now turning out to be a challenging task, according to Goldman Sachs Managing Director Bertie Whitehead.  

“The big challenge is; we see a lot of exciting projects coming, big developments. And it is challenging to find finances for them,” he said during the Future Investment Initiative Institute regional summit in London on Friday. 

Speaking at the same summit, Cathrine de Coninck-Lopez, global head of ESG, Invesco noted that adapting to climate change is very important. She also added that her firm is the first company to launch ESG Funds in India. 

According to Coninck-Lopez, small steps make big differences, and she urged everyone to get on the journey for a sustainable future. 


Saudi stocks lower amid inflation concerns: Closing bell

Saudi stocks lower amid inflation concerns: Closing bell
Updated 11 sec ago

Saudi stocks lower amid inflation concerns: Closing bell

Saudi stocks lower amid inflation concerns: Closing bell

RIYADH: Saudi stocks closed lower on Sunday as inflation concerns rattled global stock markets, causing investors to remain cautious.

The main index, TASI, dropped 0.75 percent to reach 12,334, while the parallel market, Nomu, lost 0.80 percent to reach 22,329.

The Kingdom Holding Co. soared 9.90 percent, after Saudi Arabia's PIF acquired a 16.87 percent stake in the firm from Saudi billionaire Prince Alwaleed bin Talal.

Gainers included Lazurde Co. for Jewelry, which gained 4.57 percent, after its first-quarter profit rose 34 percent.

Saudi Home Loans Co. shed 0.30 percent, despite reporting an increase in the company's first-quarter profit of 9.8 percent.

The National Agricultural Development Co., known as NADEC, added 1.00 percent after reporting a 137 percent increase in profit for the first quarter.

Al-Baha Investment and Development Co. slipped 4.17 percent following its proposal to reduce its capital by 25 percent.

In the financial sector, the Kingdom’s largest valued bank Al Rajhi edged down 0.64 percent, while Alinma Bank shed 1.95 percent.

In the pharma sector, both companies reversed the morning's gains. Aldawaa Medical Services Co. fell 1.68 percent, and Nahdi Medical Co. lost 1.40 percent.

Saudi Aramco, the largest player on the Saudi oil market, closed today’s trading down 1.38 percent.

Shares of Buruj Cooperative Insurance Co. plunged 10 percent to lead the fallers list.

Oil prices settled slightly higher on Friday. Brent crude rose to $112.55 a barrel and US West Texas Intermediate crude reached $110.28 a barrel.