21 November 2022
5 mins clock icon

COP 27 concludes with landmark loss and damage fund agreement

By Daniel Richards

  • The COP27 climate talks concluded in Egypt over the weekend, as participants reached a deal for a fund to be set up that will pay less wealth countries for climate change damage. The so-called ‘loss and damage’ fund will be set up by the time of the COP28 summit which is scheduled to be held in Dubai next year. However, an agreement on curbing the use of fossil fuels sooner was not reached.
  • The FIFA World Cup began in Qatar over the weekend and is set to run until December 18. The event is expected to bring some 1.2mn visitors to the Gulf over the duration of the tournament in a major boost for the Qatari economy, but the UAE and Dubai in particular will also benefit with many visitors attending the games expected to pass through the emirate.
  • ECB head Christine Lagarde made hawkish comments with regards the need to raise rates further on Friday, saying in Frankfurt that a recession would not be sufficient to bring down inflation alone. CPI inflation hit 10.6% in October, but with the growth outlook for the single currency bloc deteriorating sharply, the most likely move by the ECB at its December meeting will be a smaller 50bps hike.
  • UK retail sales excluding auto fuel grew 0.3% m/m in October, falling short of consensus projections of 0.6%. Sales were down -6.7% y/y and are lower than prior to the pandemic. Even the m/m gain was in part driven by the base effect of September’s -1.5% contraction on the back of the unscheduled bank holiday for Queen Elizabeth II’s funeral. The FIFA World Cup tends to give retailers a boost, but with the event taking part in the autumn rather than the usual summer months, and the OBR cautioning that the Conservative Party’s new fiscal plan will weigh heavily on households, this might be more lacklustre this time around.
  • US existing home sales declined -5.9% m/m to 4.43mn in October, smaller than the predicted -6.6% drop. Nevertheless, this was the ninth consecutive fall in sales and at 4.4mn was the lowest level since May 2020 at the peak of the pandemic crisis, as slowing growth and rising interest rates dampened demand.

Key Economic Data and Events

  • 12:00 Turkey foreign tourist arrivals, % y/y
  • 18:00 Israel base rate, %. Forecast: 3.25%

Fixed Income

  • US Treasuries drifted lower last week as Federal Reserve officials kept up the hawkish rhetoric after the softer than expected October CPI print. The Fed likely wants to avoid jumping too quickly to a more accommodative stance following just a single month’s improvement in the inflation narrative and will probably err on the side of more tightening at the December FOMC, albeit at a slower pace with a 50bps hike seemingly locked into markets. Yields on the 2yr UST closed the week up 20bps at 4.5329% while the 10yr added less than 2bps to 3.8288%.
  • Markets are still pricing in the Fed cutting rates in H2 2023 with the net change likely to be close to 0bps over the year as a whole. Market pricing is for a peak in the Fed funds of about 5% mid-way through next year.
  • European markets closed the week on a relatively quiet footing with bund yields showing no substantial change. Gilt markets weakened, however, with yields up 4bps to 3.228% on the 10yr.
  • Emerging market bonds were generally stronger in local currency terms. South African 10yr yields dropped 4bps to 10.877% while Turkey 10yr yields fell 21bps to 11.28%.
  • In central banks this week, the Bank of Israel is expected to hike by 75bps on Nov 21st, the RBNZ to hike by 75bps on Nov 23rd, Turkey is expected to cut by 150bps on Nov 24th and the SARB may hike by 75bps on Nov 24th.


  • The dollar managed to avoid a second weekly loss in a row with the broad DXY index up 0.6% last week after having dropped more than 4% a week earlier. The hawkish rhetoric from Fed officials should help to keep a bid under the dollar even if the inflation narrative is improving. EURUSD dropped by 0.2% last week to 1.0325 while USDJPY moved back solidly above the 140 handle, rising by 1.1% over the course of the week. GBPUSD was the relative outperformer among majors with a 0.5% gain to 1.189 over the week even as the chancellor outlined a tough few years of economic performance ahead.
  • Commodity currencies settled more mixed with USDCAD adding 0.7% to 1.3374 in favour of the greenback over the loonie and AUDUSD dropped by 0.4% last week to 0.6673. NZDUSD was the relative outlier with a 0.7% gain to 0.6148.


  • Some East Asian equity markets had a positive week last week, buoyed by news around Chinese support for the property sector and the potential easing off of zero-Covid restrictions. The Hang Seng added 3.9% w/w, while the Shanghai Composite closed up a more modest 0.3%. However, the Nikkei ended the week -1.3% lower, with pushback from Fed officials around the timing of any potential pivot weighing on sentiment.
  • In the US, modest gains at the close of the week were insufficient for w/w gains, with Fed pushback dampening optimism. The NASDAQ was the biggest loser, falling -1.6%, while the S&P 500 closed down -0.7%. The Dow Jones ended the week flat.
  • Locally, the DFM ended the week - % lower w/w, while the ADX dropped - %, weighed down by the fall in global oil prices. Saudi Arabia’s Tadawul also closed down as a result last week, dropping -0.6%. On the other hand, Egypt’s EGX30 added 6.5%, still being buoyed by the news of a new IMF deal and the associated reforms.


  • Oil prices fell sharply last week, their second weekly loss in a row. Brent futures fell 8.7% to USD 87.62/b while WTI was down almost 10% to USD 80.08/b. A seeming escalation of demand worries helped to push prices lower last week as did a substantial withdrawal of long positions. Front month prices have fallen enough that WTI futures pushed into a modest contango at the end of last week, albeit barely below the neutral levels.

Click here to download charts and tables

Written By

Daniel Richards Senior Economist

There was an error during your feedback!

Your feedback is valuable to us and will help us improve.

More from Daniel Richards

Related Articles

Subscribe to our newsletter and stay updated on the markets

There was an error during your newsletter subscription!

Please try again to stay updated with all the latest financial news and valuable insights.

Thank you for newsletter subscription!

To stay updated with all the latest financial news and valuable insights.