US stocks rebound following inflation scare

Tokyo’s main stocks index closed down 2.5 percent and European stocks also suffered sharp losses but recovered as the opening bell in New York approached. (AFP)
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Updated 14 May 2021

US stocks rebound following inflation scare

  • Rebound comes despite worries that soaring inflation could trigger interest rate rises

LONDON: US stocks rebounded on Thursday, a day after slumping on worries that soaring US inflation could trigger interest rate rises sooner than expected, and in turn harm global economic recovery.

Focus was also on bitcoin, which resumed sharp falls after Tesla’s Elon Musk stopped allowing people to pay for his electric cars with the cryptocurrency.

While US stocks opened higher, with the Dow adding 0.3 percent, their sharp losses on Wednesday pulled Asian and European stocks along with them on Thursday.

Tokyo’s main stocks index closed down 2.5 percent and European stocks also suffered sharp losses but recovered as the opening bell in New York approached.

With little in the way of news to spur the reversal, this invites “the notion that the scope of recent losses has gone far enough to whet the appetite of buy-the-dippers who have successfully feasted over the last year or so on down moves like the one that has recently unfolded,” said analyst Patrick J. O’Hare at

Stock markets were already awash with red this week owing to growing fears that the blockbuster global economic recovery and vast stimulus measures will see cashed-up consumers go on a pent-up spending spree that will strain supplies and push up costs.

And those concerns were given oxygen Wednesday by figures showing US consumer inflation spiked at 4.2 percent in April, far higher than estimates and the highest since 2008 just before the global financial crisis kicked in.

That was followed on Thursday by data showing that producer prices jumped by 6.2 percent in April, the highest pace since 2010.

The advances were driven by a rally in commodity prices such as widely used copper, iron and lumber, which are sitting at record or multi-year highs.

“For stocks this might be an even tougher moment, given that companies may find themselves struggling to pass on price increases to customers, hitting profitability and putting the year-long earnings recovery in jeopardy,” noted Chris Beauchamp, chief market analyst at IG trading group.

Tech firms, which blossomed during lockdowns as people were forced to stay home, have led the share-price losses as they are more susceptible to higher interest rates.

The Fed has repeatedly insisted it expects such sharp price spikes but they will be transitory owing to last year’s low base and policymakers will not make any adjustments until they are happy unemployment is under control and inflation is running hot for some time.

However, investors are not convinced and there is growing unease that the central bank could lose control of the situation if it does not act in time, with analysts warning it could risk people’s confidence in the institution.

Tai Hui, at JP Morgan Asset Management, remained broadly upbeat about the outlook for equities, saying that while the sell-off was heavy, the gain in US Treasury yields — a gauge of future interest rates — was less severe.

“The market’s reaction ... (was) mild, reflecting the belief that this jump in inflation will eventually calm and revert closer to the Fed’s long-term target,” he said.

Regarding Bitcoin meanwhile, after Musk cited the environmental impact caused by the computing-intense mining process of creating new units, the cryptocurrency slumped around 16 percent.

It later recovered before trading down around 10 percent at $50,400 on Thursday.

Sterling set for worst week since Sept. 2020

Updated 19 June 2021

Sterling set for worst week since Sept. 2020

LONDON: Sterling extended its fall against the US dollar on Friday, dropping below $1.39, hurt by the US Federal Reserve’s hawkish surprise and an unexpected fall in Britain’s retail sales.
The pound dropped against a strengthening dollar on Thursday after the Fed surprised markets by signaling it would raise interest rates and end emergency bond-buying sooner than expected.
On Friday, it fell further against both the dollar and the euro. It was down 0.3 percent on the day at $1.389, having touched as low as $1.38555 — its weakest since May 4. It was on track for its worst week since September 2020.
Versus the euro, it was down around 0.3 percent at 85.78 pence per euro, on track for a small weekly fall.
“GBPUSD remains bogged down below the 1.39 handle by a confluence of broad USD strength and a slight deterioration in near-term data,” said Simon Harvey, senior FX market analyst at Monex Europe.
“The limited impact of the data on sterling is largely because retail sales volumes remain above pre-pandemic levels and a shift in consumption patterns toward services after the May 17th reopening was always likely.”
For cable, market participants are weighing up the Bank of England and the Fed’s relative pace of possible monetary policy tightening. The BoE next meets on June 24.
BofA strategists said in a note to clients that it changed its view on the central bank’s tightening trajectory.
and now expects a 15 basis point rate hike in May 2022, compared to previously expecting no hikes in 2022.
“Brussels’ patience with London’s having its cake and eating it is wearing thin. Indeed, there is a risk of protocols being triggered and tariffs being threatened more seriously,” wrote ING strategists in a note to clients.
“The next few weeks could thus be a vulnerable period for Cable, where a break of 1.3890 opens up 1.3800/3810 — the last stop before an extension to the March/April lows of 1.3675.”

Bahrain’s Batelco could be first stock to be dual listed on Tadawul

Updated 18 June 2021

Bahrain’s Batelco could be first stock to be dual listed on Tadawul

  • Samba has been hired as an adviser on the deal

RIYADH: Bahrain Telecommunications Co. (Batelco) is planning to become the first company to have a dual listing of shares on Saudi Arabia’s stock exchange (Tadawul), Bloomberg reported citing people familiar with the matter.

The investment arm of Samba Financial Group has been hired as an adviser on the deal, the people said, asking not to be identified for information privacy.

No decision has been made and the company may decide against the dual listing, they said.

A spokesperson at Batelco declined to comment, while Samba Capital didn’t respond to messages seeking comment, Bloomberg said.

Tadawul has been trying to encourage Middle Eastern firms to dual list for years, without success. Aluminium Bahrain had considered a dual listing in 2014, but it never occurred.

Saudi Arabia’s National Debt Management Center wins global awards for second year

Updated 18 June 2021

Saudi Arabia’s National Debt Management Center wins global awards for second year

  • Saudi office won Middle East and emerging market awards

RIYADH: Saudi Arabia won the Best Sovereign Public Debt Office in the Middle East and the Most Impressive Emerging Market Issuer Award at the 2021 Global Capital Bond Awards, for the year 2021, for the second year in a row, SPA reported.

The Global Capital Bond Awards honors the achievements of governments and companies of all sizes in the field of sovereign and regional finance, banking services, hedge funds, and many other areas within the financial services sector.

It also highlights the most prominent innovations and achievements within the financial services sector, globally.

Saudi Arabia sold SR8.27 billion ($2.20 billion) of riyal-denominated sukuk in June, up from $941 million in May, bunt down from $3.1 billion April, National Debt Management Center data show.

“Driving growth of the Kingdom’s capital markets will be an increase in bond issuance to help fund the SR12 trillion Vision 2030," said Khalid Al-Bihlal, head of S&P Global Ratings KSA. "We project a gradual rise in the use of Saudi Arabian riyal-denominated bond issuance as the local capital markets develop. The US dollar is currently the currency of choice for such bonds."

Saudi MoF electronically linked to SAMA

Updated 18 June 2021

Saudi MoF electronically linked to SAMA

RIYADH: The Saudi Central Bank (SAMA) announced the completion of an electronic link with the Ministry of Finance to process requests relating to the bank accounts of government agencies held at Saudi commercial banks through the online portal Hesaab.

SAMA is seeking to improve and accelerate the procedures related to requests of government agencies’ bank accounts received from the Ministry of Finance, by implementing technical solutions with minimal human intervention, it said in a statement on Thursday.

The Hesaab portal is one of the National Transformation Program 2020 initiatives that improves the level of financial services, in line with Vision 2030.

Oil falls amid dollar strength; demand picture still bullish

Updated 18 June 2021

Oil falls amid dollar strength; demand picture still bullish

  • Prices remain close to multi-year highs
  • Dollar jumped since Fed moved rate-hike forecast forward

LONDON: Oil prices fell for a second straight session on Friday as the US dollar soared on the prospect of interest rate hikes in the United States, but they were on track to finish the week little changed and only slightly off multi-year highs.
Brent crude futures were down 64 cents, or 0.9 percent, at $72.44 a barrel as of 9:00 a.m. GMT, extending a 1.8 percent decline on Thursday. The contract is set to be largely steady for the week.
US West Texas Intermediate (WTI) crude futures were down 53 cents, or 0.8 percent, at $70.51 a barrel, after retreating 1.5 percent on Thursday and is also set to be flat on the week.
On Wednesday, Brent settled at its highest price since April 2019 while WTI settled at its highest since October 2018.
“Oil markets retreated sharply overnight as a stronger US dollar and falling commodity prices elsewhere saw the overbought technical correction continue,” said Jeffrey Halley, senior market analyst at OANDA.
The dollar has rocketed in the two sessions since the US Federal Reserve projected possible rate hikes in 2023, earlier than market watchers previously expected. A rising dollar makes oil more expensive in other currencies, curbing demand.
The prospect of rate hikes also weighed on the longer-term growth outlook, which would eventually hurt oil demand, in contrast to the near-term outlook for growth in demand as COVID-19 related curbs on movement and business activity ease and road and air travel pick up, said Westpac senior economist Justin Smirk.
“The near term’s all very positive. The question is how much further can it rise, how much scope is there if you’re looking at an environment where interest rates are going to rise,” Smirk said.
Oil prices also fell after Britain on Thursday reported its biggest daily rise in new cases of COVID-19 since Feb. 19, with government figures showing 11,007 new infections versus 9,055 a day earlier.
Adding to negative sentiment were remarks from Iran’s top negotiator on Thursday saying talks between Tehran and Washington on reviving the 2015 Iran nuclear deal have come closer than ever to an agreement.