Monthly Insights

Global macro: After a fraught start to the summer when volatility rose to its highest levels since January ahead of the Brexit referendum, conditions have calmed down significantly in the second half of it to the point where the global environment appears to be much more benign.

• GCC macro: PMI data for July and August suggests that economic growth in the GCC’s largest economies gained momentum over the summer.   However, margins have remained under pressure and firms remain reluctant to boost employment.  Household consumption is slowing on the back of weak employment growth and increased utilities and fuel costs.

• MENA macro: Latest Purchasing Manager Indices (PMIs) for MENA’s non-GCC economies point to relatively tepid private sector growth in Q3.

• Fixed Income: Global sovereign bonds performed well through the month as prevalent QE supported the bid for bonds and yields remained low amid muted inflation across the globe.  Continued hunt-for-yield lifted EM cash corporate bonds and range-bound oil prices saw GCC bond prices grinding higher over the month.

• Currencies: The last 30 days have seen the dollar underperform as doubts have resurfaced about how quickly the Fed will continue to normalize monetary policy. Although prominent Fed officials have recently indicated that another rate hike will soon be on its way, the markets have taken this to mean that December is the most likely month with 52% seeing a hike by then.

• Equities: Global equity markets have had a stellar run since the start of 2H 2016 as search for income-generating assets intensified post-Brexit, with both implied and realised volatility drifting lower. It does appear that conditions remain ripe for equity markets to trend higher as transitory factors become structural in nature.

• Commodities: A bear-to-bull round trip for oil prices as markets contend with whether OPEC will come to an agreement to freeze production.