Egypt secures more IMF funding

The IMF’s executive board have ratified Egypt’s third review of its extended fund facility, which the country had passed last month. This unlocks a further USD 820mn in support from the Fund, which along with the investment funds from the UAE, and previous transfers from the IMF and other multilateral partners, will contribute to Egypt’s ongoing recovery from its recent financial crisis. The Fund’s statement noted that conditions have improved since the first and second reviews of the programme were belatedly approved in March, as inflation has fallen and investor confidence has returned. It also noted regional tensions, however, and urged greater efforts on the divestment programme.

New UK Chancellor of the Exchequer, Rachel Reeves, addressed the House of Commons yesterday, where she claimed that the outgoing Conservative government had left a GBP 22bn hole in the public finances, and started laying out her plans to fill it. These included scrapping a number of transport projects, and stopping winter fuel support for millions of elderly households, although on the expenditure side she also announced a 6% pay rise for many public sector workers. With more savings still to be found, the prospect of tax rises in the October budget appears likely.

Negotiations between the GCC and Turkey on a free trade agreement (FTA) started yesterday in Ankara, following an agreement reached back in March that the two parties would look to broker such a deal. Trade relations between Turkey and the GCC have been growing in recent years and Turkish trade minister Omer Bolat has said previously that an FTA between the two parties could be worth as much as USD 2.4tn. The deal would follow on from FTAs the GCC agreed with South Korea and Pakistan over the past year. Dubai signed its own CEPA agreement with Turkey in March 2023.

Key Economic Data and events

• 13:00 Eurozone real GDP growth, % q/q, Q2 preliminary. Forecast: 0.2%
• 16:00 Germany CPI inflation, % y/y, July preliminary. Forecast: 2.2%
• 18:00 US consumer board confidence index, July. Forecast: 99.7

Fixed Income

• There was little movement in USTs yesterday as traders wait for the major central bank decisions due to start on Wednesday.
• Yields on the 2yr rose 2bps to 4.3997%, while the 10yr yield fell 2bps to 4.1744%.

FX

• The dollar index closed up 0.2% on Monday, its first gain against its basket of peers since last Tuesday.
• The gains came against the JPY, which fell 0.2% to 154.02, perhaps reflecting a diminishing expectation from traders that the BoJ would hike rates when it meets this week, and against the EUR which closed down 0.3%.
• GBP closed almost flat, down less than 0.1% at 1.2862.

Equities

• US equity indices were little changed yesterday, although there was some positive movement amongst the big tech stocks that had been under pressure over the previous week. The Dow Jones closed down 0.1%, but both the S&P 500 and the NASDAQ both ended the day 0.1% higher.
• In Europe, the UK’s FTSE 100 closed up 0.1% but it was an outlier, with the other major indices closing down. The composite STOXX 600 lost 0.2% on the day, with the DAX dropping 0.5% and the CAC 1.0%.
• Locally, the DFM added 0.7% and the ADX 0.8%, while the Tadawul ended 0.4% lower.

Commodities

• Oil prices were under more pressure at the start of the week, with both benchmarks registering significant declines as demand concerns weighed them down.
• Brent futures fell 1.7% to USD 79.78/b, the first close under 80 in seven weeks, while WTI ended the day 1.8% lower at USD 75.8/b, another multi-week low.