Global economic activity gains momentum

• Global macro: It feels as if there is a greater degree of confidence about the world economy after the first two months of the year, with monthly PMI data reporting improving activity readings for both manufacturing and service sectors in many of the key countries of the world, including here in the Middle East..
• GCC macro: Oman and Kuwait tapped international capital markets ahead of the Fed rate hike and Saudi Arabia is expected to follow suit sooner rather than later.  Non-oil sector acitivity gains momentum in February even as oil production eases.   
• Sector Focus: An overview of Dubai’s travel & tourism sector.
• MENA macro: Across much of North Africa and the Levant, central bank holdings of FX reserves have continued to come under pressure at the start of 2017.
• Emerging Market Focus: Turkey

• Interest Rates: The US interest rate curve moved higher albeit with some flattening in the long end as expectations of tighter monetary policy rose consistently throughout the month, finally culminating in the 25bps rate hike on March 15.
• Credit Markets: Although bond prices fell in tandem with rising UST curve, credit spreads were largely resilient last month. Despite the sudden shift in market expectations of a rate hike in the US, the VIX index remained subdued and fluctuated in a narrow band of 10 -12 through out the month.
• Currencies: The FX markets spent the last month anticipating a Fed tightening, but they also feared a more hawkish bias to the Fed’s forecasts which did not materialize. This has prompted the dollar to soften, with the Euro also benefiting from the Dutch election results.
• Equities: Notwithstanding the political rhetoric and firming expectations of more interest rate hikes in the US, equity markets have broadly remained positive. The strength in global equities can be attributed to better than expected corporate earnings and upbeat economic data.
• Commodities: Industrial commodities have recovered on signs of stable performance in China's economy but supply restrictions are also helping to set a floor under prices.

Rising inflation puts pressure on central banks

Source: Bloomberg, Emirates NBD Research

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