October 2018 Monthly Insights

Global growth appears to be approaching an inflection point, whereby the consequences of monetary policy tightening, fading support from US tax cuts and rising trade and geopolitical tensions threaten to slow activity in 2019. Regionally, however, growth should benefit from the tailwind of increased oil production even as other headwinds remain challenging.

• Global macro: Rising volatility is spreading from emerging to developed markets, raising questions about the sustainability of strong growth in 2019, with risks likely to outweigh opportunites for the foreseeable future.
• GCC macro: The UAE has approved a long-awaited law allowing the federal government to issue sovereign bonds, even though we expect the consolidated budget to run a surplus in 2019.                 
• MENA macro: Iraq is edging closer to forming a government following elections in May, which could provide some much-needed policy direction.
• Sub-Saharan Africa: Rapid political and economic change in Ethiopia will spur continued interest in one of Sub-Saharan Africa’s fastest-growing economies.
• Interest Rates: UST yield curve to maintain its upward march despite rising trade tensions.
• Credit Markets: Rising benchmark yields left GCC bonds weaker despite stable credit spreads.
• Currencies: The dollar has run out of steam over the last month, proving unable to hold onto gains. The risk of a monthly close below the 50-month moving average for the first time since April, could signal the start of a longer downward trend for USD.
• Equities: Global equities were lower over the last month as investors’ became wary of the lack of progress on key issues confronting markets since the start of the quarter.
• Commodities: Gold markets have rallied in the wake of escalating diplomatic risks and a short-term correction in equity markets. We expect that recent gains will be sustained and increased going into 2019.

Equity markets sink as yields soar

Source: Bloomberg,Emirates NBD Research

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