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IMF cuts global growth forecast

Published Date: 24 July 2019


The IMF cut its global growth outlook again, trimming it to 3.2% for 2019, versus its prior 3.3% projection. The Fund sees a pick-up to 3.5% in 2020, but this is also down from its previous estimate of 3.6%. The IMF said that global growth is ‘subdued’ and that the expected improvement next year is ‘precarious’ suggesting that policy ‘missteps’ on trade and Brexit could derail a projected rebound. Forecast risks are mainly to the downside, and include ‘further trade and technology tensions that dent sentiment and slow investment’, while a ‘protracted increase in risk aversion …..constrain monetary policy space to counter downturns, and make adverse shocks more persistent than normal.’ The expansion in advanced economies is seen slowing to 1.9% this year,  versus the 2.2% pace in 2018, and slipping to 1.7% in 2020. The U.S. is projected to grow 2.6% this year before slowing to 1.9% in 2020. Most of the downward adjustments were to emerging markets, with China’s growth projected to expand 6.2% this year and 6% next year, both down 0.1 percentage point.

Boris Johnson was confirmed as leader of the UK's Conservative Party yesterday, which means he will simultaneously become the new occupant of No 10 Downing Street today as Theresa May steps down as Prime Minister. Johnson won 66% of the vote of Conservative Party members, but faces far more uncertain support in Westminster, and indeed within his parliamentary party. A number of Conservative ministers have tendered their resignations in the past several days, citing the risk of the no-deal Brexit which Johnson professes to be prepared to push through if a new agreement with the EU is not forthcoming by the October 31 deadline. Aside from the longstanding fallout from Brexit - which has seen UK business confidence fall to levels last seen immediately after the mid-2016 referendum in data released yesterday - Johnson will also face challenges from rising tensions with Iran as he assumes office today.

Saudi Arabia’s annualised CPI inflation remained in negative territory for the sixth consecutive reading in June, with the headline index down -1.4% y/y. On a monthly basis, inflation was 0.2%. Falling rents have been the primary driver of deflation so far and this trend continued with the housing/fuel/water component of the basket down -7.2% y/y.

UK CBI business confidence falls to multi-year low

Source: Bloomberg, Emirates NBD Research

Fixed Income

Treasuries closed lower following reports over the restart of trade talks between the US and China. The curve bear steepened with yields on the 2y UST, 5y UST and 10y UST closing at 1.83%, 1.83% and 2.08% respectively.

Regional bonds continued to trade in a tight range. The YTW on Bloomberg Barclays GCC Credit and High Yield index hovered at 3.43% while credit spreads remained flat at 148 bps.

Emirates Strategic Investments Co raised USD 600mn in a 5 year sukuk which was priced 215 bps over midswaps.


The dollar posted fresh highs against the euro, yen, and pound yesterday, amid more mixed views about Fed easing.  Boris Johnson's confirmation as the next prime minister of the UK also kept sterling under pressure, especially with BoE MPC member Michael Saunders describing UK growth as ‘weak and below trend’ in an interview. Cable dropped to a three-day low at 1.2418 and the euro also came under particular pressure, posting new lows against the dollar, Swiss franc and some other currencies. EURUSD hit a low at 1.1143 and EURCHF a new two-year low at 1.0971 before recovering. Elsewhere, USDJPY reached a six-day high at 108.29, and NZDUSD fell to a six-day low at 0.6692 amid reports that the RBNZ is taking a fresh look into its unconventional stimulus measures.


Developed market equities closed higher amid better than expected corporate earnings and optimism over trade talks restarting between the US and China. The S&P 500 index and the Euro Stoxx 50 index added +0.7% and +1.2% respectively.

UAE bourses continued to outperform their regional peers. The DFM index added +2.1% to close at its eight month high. Emaar-related names continued their positive run following announcements about project in China. Emaar Properties and Emaar Malls gained +4.0% and 4.6% respectively. Aldar Properties rallied +6.0% after the company raised its annual profit guidance by 50% for the next three to four years.


Oil markets were supported overnight by large decline in US inventories reported by the API. Brent futures gained 0.9% while WTI rose almost 1%. Stocks declined by 11m bbl according to the API, much larger than markets had been expecting.

As Brent front month futures near expiry they are dwindling closer to a contango with the next active contract. The 1-2 month spread closed at just USD 0.08/b overnight compared with closer to USD 0.50/b at the start of last week.

The prospect of more China-US trade talks helped to take one of the supports for gold out of the market as it dropped for a third consecutive day. Gold prices fell 0.5% to close below USD 1,420/troy oz.

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