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IMF set to revise down global growth projection

Daniel Richards - MENA Economist
Published Date: 06 October 2021


  • IMF head Kristalina Georgieva has said that the Fund is going to revise down their global growth forecast. The new World Economic Outlook is scheduled for publication next week; in July the Fund forecast growth of 6.0% in 2021 and 4.9% in 2022. She also called on wealthy countries to share their surplus vaccines with the poorer countries of the world, saying that the global economy remains ‘hobbled’ by the Covid-19 pandemic.
  • We had more regional PMI data releases yesterday, following on from those of Egypt, Saudi Arabia and the UAE earlier in the day. In Lebanon, the headline reading ticked up modestly, rising from 46.6 in August to 46.9 in September. The Lebanese PMI index is perennially in sub-50.0 contractionary territory, and the economic situation in the country remains parlous even as the resumption of discussions with the IMF this week offers some hope for an improvement. By contrast, Qatar’s PMI rose from 58.2 in August to 60.6 last month, an all-time record for the index since it began in 2017.
  • The final reading for the US ISM services PMI was 54.9 according to yesterday’s release, a modest upgrade from the flash reading of 54.4. Nevertheless, this was still the weakest reading since December, and while there have been 14 consecutive months of 50.0-plus expansionary readings, it appears that the expansion is weakening, with employment issues and the Delta variant likely weighing on performance. There was an improvement in the employment sub-component, which was the strongest since July, potentially pointing towards a robust ADP jobs print today, and NFP on Thursday.
  • US Treasury Secretary Janet Yellen has called for a resolution to the debt ceiling issue before October 18, when the US is due to run out of money without an extension. Talking to CNBC she said that not doing so would cause a recession through the disruption it would cause and would jeopardise the dollar’s status as a reserve currency.
  • The RBNZ raised its benchmark interest rate by 25bps to 0.50%. The decision was widely expected after the move upward was postponed at the previous meeting after a case of Covid-19 was discovered in the country.

Today’s Economic Data and Events

  • 13:00 Eurozone retail sales, August m/m. Forecast: 0.8%
  • 15:00 US MBA mortgage applications, October.
  • 16.15 US ADP employment change, September. Forecast: 430,000

Fixed Income

  • Benchmark government bond yields continue to push higher as inflation breakeven rates rise globally and near to their highest levels in the past year. The UST curve bear steepened overnight with yields on 2yr USTs rising less than 1bp to 0.2836% while the 10yr yield added almost 5bps to close at 1.5258%. Gilt yields also remain on an upward trend with 2yr gilt yields closing up 5bps to 0.448% and the 10yr adding 7bps to 1.083%.
  • Emerging market bonds continue to be waylaid by the upward move in USD yields. Indian 10yr bond yields added almost 2bps overnight to settle at 6.264% while South African yields rose 10bps to 9.848% and Turkish bond yields added 7bps to 17.76%.
  • Local markets are waiting for the debut of the first federal USD bond from the UAE government which may price today.


  • Markets returned to a risk-on footing overnight although that failed to dent the dollar. The DXY index added 0.2% to move just shy of the 94 level, which it has already broken above in early trade today. EURUSD was the main contributor to dollar gains with the pair slipping 0.2% to close to the 1.16 level. USDJPY rallied strongly, gaining almost 0.5% overnight to push up to almost 111.50 although it has gone past that in early trade so far. GBPUSD added to recent gains, moving up 0.14% to 1.3629.
  • Commodity currencies showed a mixed performance overnight with USDCAD slipping marginally in favour of the loonie, down 0.05% to 1.2583 while AUD added 0.15% to 0.7292. NZD was the outlier, declining overnight ahead of today’s RBNZ meeting. The bank did raise the Official Cash Rate by 25bps as expected and indicated more would be on the way. However, NZD has been falling since the RBNZ’s decision early today.


  • Global equity markets rebounded yesterday after the losses of last week continued into Monday. The positivity started in Asia where most key indices closed higher, with the Hang Seng gaining 0.3% and India’s Sensex 0.8%. That said, Japanese stocks remained under pressure as the Nikkei lost -2.2% on the day, with investors seemingly unimpressed by the prospect of new Prime Minister Fumio Kishida. The index is almost in correction territory as it continues to decline from its recent September high.
  • US and Europe both saw a return in risk-on sentiment also. In the US, the Dow Jones (0.9%), the S&P 500 (1.1%) and the NASDAQ (1.3%) all closed higher. In Europe, the CAC was the major gainer as it added 1.5%.
  • Locally, both the DFM and the ADX lost ground yesterday, dropping -1.0% and -0.1% respectively. Despite this, the ADX is still up 52.4% ytd, with the DFM trailing, up 11.7%. In Saudi Arabia, the Tadawul closed up 0.8% yesterday while Egypt’s EGX 30 closed flat.


  • Oil prices continue to grind higher with Brent move above USD 83/b in the US session and WTI falling just shy of USD 80/b. Brent settled up 1.6% at USD 82.56/b while WTI added 1.7% to USD 78.93/b.
  • Data from the API showed a near 1m bbl build in US crude inventories last week along with a large build in gasoline stocks and modest increase for distillates. EIA data will be released later today with the markets watching if it will be a second week in a row of inventory builds.

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