UAE to invest USD 35bn in Egypt

A UAE consortium has signed an agreement to purchase and develop land in Egypt, in a deal worth USD 35bn. Abu Dhabi’s ADQ will purchase the Ras El Hekma area along the Mediterranean coast for USD 24bn and invest a further USD 11bn (which is currently already held by the Central Bank of Egypt as UAE deposits) in real estate projects in Egypt. USD 10bn of fresh capital is expected to be paid this week, along with USD 5bn of deposits held at the central bank, with the balance to follow within two months. The new funds should allow the government to move ahead with the final steps needed to unlock additional IMF funding, including a move to a more flexible exchange rate regime. EGP 12m NDFs rallied sharply to close at 57.5 on Friday, the lowest level since 6 February.

The UAE has been removed from the Financial Action Task Force “grey list” after implementing the recommendations to strengthen anti-money laundering measures and combat financial crime.

Data from Germany at the end of last week was in-line with forecasts but confirmed a weak start to the year for Europe’s largest economy. Final Q4 GDP data showed a contraction of -0.3% q/q and -0.4% y/y, due to collapsing investment. Both private and government consumption rose slightly q/q while net exports were flat. The IFO business climate index showed a slight improvement in February but remains weak overall and suggests little, if any, growth in Q1 2024.

Today’s Economic Data and Events

19:00 US new home sales (Jan) forecast 684k (3.0% m/m)

Fixed Income

US bond yields fell at the longer end of the curve last week with the 30y yield down almost -7bp w/w and the 10y yield down -3bp w/w to 4.25% ahead of month-end rebalancing. 2y yields declined slightly in Friday’s session but ended the week up almost 5bp at 4.69%.

In Europe, benchmark 10y bond yields also ended the week lower with Italy and Greece seeing the biggest declines on Friday. German bunds were down -4.8bp w/w to 2.36% while 10y gilt yields fell -7bp w/w to 4.1%.

FX

The US dollar index declined slightly last week as EUR and GBP gained against the dollar. CHF was little changed w/w while JPY weakened 0.2%. Among the commodity currencies, AUD gained 0.5% w/w while NZD gained 1.2% w/w. CAD was a touch weaker last week.

Equities

US equities enjoyed another strong week, boosted by better-than-expected earnings from key tech companies. The S&P 500 index gained 1.2% w/w to end the week above 5000 points, while the DJIA rose 0.9% w/w and the Nasdaq 100 rose 0.5% w/w.

In other markets the Shanghai composite rose almost 5% w/w, while both the CAC 40 and the Dax gained 2.5% w/w.

UAE equity markets underperformed with the ADXGI down -1.6% w/w and the DFMGI down -0.8% w/w. The Tadawul ASI rose 1.3% w/w last week.

Commodities

Qatar has announced it will build a new 16mn tons per year LNG project by 2030, boosting its total capacity to 142mn tons per year by the end of the decade. The decision was made after new gas deposits were discovered in Qatar’s North Field. Qatar expects demand to grow in Asia and also expects Europe to continue using LNG for some time even as it transitions away from hydrocarbons. The US temporarily halted new LNG export licenses in January while it assesses the impact of higher shipments on climate change. The assessment could take over year to conclude.

Brent closed -2.2% lower w/w at USD 81.62/b while WTI declined -3.4% w/w to end the week at USD 76.49/b. Comments from Fed officials have dampened expectations for early rate cuts, and this has weighed on energy prices.