Don’t breathe a sigh of relief about US inflation just yet, say economists

Economists think the Fed’s 2% inflation target is a way off: Economists are voicing skepticism that US inflation will soon fall to the Fed’s 2% target despite signs that the peak of the shock has passed, the Financial Times writes. Headline CPI slowed to itslowest level in two years last month on the back of the Federal Reserve’s aggressive rate hikes and weaker energy prices, but the core measure of inflation has remained sticky, raising concerns about how long it will take for price pressures to ease.

“It is not only going to be a bumpy road, but what we worry about are the sticking pointsbecause [those] make it all the much harder to derail what could be more entrenched inflation,” said Diane Swonk, chief economist at KPMG. Meanwhile, Omair Sharif, head of forecasting group Inflation Insights, doesn’t expect core inflation to return to target before 2024.

Inflation uncertainty = rate uncertainty: Slowing inflation rates in recent months have enabled the Fed to start signposting an end to its tightening cycle, which has pushed borrowing costs to their highest levels in 15 years. Markets are now pricing in a pause when the Fed meets next month, though pressure to continue raising rates will return should underlying price pressures reflected by the core figure refuse to come down in the coming months.

Another Saudi company kicks off IPO: Saudi pharma player Jamjoom is expecting to raise up to SAR 1.26 bn (USD 336 mn) in its IPO on the Saudi stock exchange in what will be the country’s largest listing so far this year. The company has priced the 21 mn shares on offer at SAR 56-60 apiece, it said in a statement (pdf) yesterday. The book building process kicked off yesterday and the company is already seeing high demand, with its entire order books covered, Bloombergreports citing private documents. The company is yet to disclose when it will make its Tadawul debut.

That makes two: The news comes at the same time as Morabaha Marina Financing Company is doing bookbuilding on its smaller IPO. The Saudi non-bank lender wants to raise up to USD 83.4 mn in its share sale, which is running through to the end of the month.

Two major listings in Riyadh were recently postponed: ADES International and Aramco’s energy trading arm were both reported last week to have shelved their listing plans due to current market conditions.

Saudi sukuk sale sees huge demand: A fresh sovereign sukuk issuance from Saudi Arabia has drawn more than USD 17 bn worth of bids, according to a bank document seen up by Reuters. The government is selling USD-denominated six-year and 10-year securities in what is its first debt sale since raising USD 10 bn in a sale of conventional bonds in January. The yield on the six-year sukuk was around 110 bps above US treasuries and the 10-year note was around 135 bps above, according to initial pricing guidance.

ALSO WORTH NOTING- EU says yes to Microsoft’s Activision takeover: The EU has approved Microsoft’s USD 69 bn acquisition of games developer Activision Blizzard, a few weeks after the UK’s competition regulator blocked the merger due to concerns that it could hurt competition. (Statement | Reuters)

THE CLOSING BELL-

The EGX30 fell 1.3% at yesterday’s close on turnover of EGP 2.24 bn. Local investors were net sellers. The index is up 17.4% YTD.

In the green: Credit Agricole (+8.30%).

In the red: Oriental Weavers (-4.3%), Rameda Pharma (-4.2%) and Ibnsina Pharma (-4.0%).