Federal Reserve officials were “less certain” about the need for further interest rate hikes after their last meeting though left the door open to additional tightening if necessary, according to the meeting minutes out yesterday. The central bank decided to raise rates by another 25 bps during the meeting but a number of officials thought it might be the final time they would need to do so amid signs that tighter financial conditions are bringing inflation under control.

Rate cuts though? Bond traders are dialing back expectations that the Fed could begin to reverse its aggressive stance later this year due to sticky underlying inflationary pressures and strong economic data, the Financial Times reports. Following April’s inflation figures — which dropped to their lowest level in two years of 4.9% — investors were expecting the Fed to cut interest rates to 4.2% by the end of the year but have since revised their forecast to 4.7%.

Confusion is in the air: “If you are feeling confused about the macro outlook, it is important to realize that you are not the only one,” one analyst wrote in a note. “I would not be surprised if the confusion continued for a while longer, with a global macro environment that continues to frustrate both the bulls and the bears.”

Also worth noting this morning:

  • UK inflation stays sticky: Inflation came in higher than expected at 8.7% in April, likely putting the Bank of England on course to hike interest rates again in June. (Bloomberg)
  • The bond market didn’t take this well: The inflation print triggered a sharp sell-off of UK gilts, sending yields soaring to their highest level since the country’s bond market crisis last September. (Financial Times)
  • It’s a different picture in the US: Institutional and retail investors are returning to the bond market to take advantage of higher yields resulting from the steep rise in US interest rates over the last year. (Financial Times)
  • Microsoft to fight UK decision to block Activision takeover: Microsoft has filed an appeal against the UK competition regulator’s decision to block its USD 69 bn acquisition of gaming firm Activision Blizzard. (Bloomberg)

EGX30

17,091

+1.8% (YTD: +17.1%)

USD (CBE)

Buy 30.83

Sell 30.96

USD at CIB

Buy 30.85

Sell 30.95

Interest rates CBE

18.25% deposit

19.25% lending

Tadawul

11,236

-0.4% (YTD: +7.2%)

ADX

9,464

-0.3% (YTD: -7.3%)

DFM

3,530

-0.1% (YTD: +5.8%)

S&P 500

4,115

-0.7% (YTD: +7.2%)

FTSE 100

7,627

-1.8% (YTD: +2.4%)

Euro Stoxx 50

4,264

-1.8% (YTD: +12.4%)

Brent crude

USD 78.29

+1.9%

Natural gas (Nymex)

USD 2.40

+3.6%

Gold

USD 1,979.30

-0.7%

BTC

USD 26,438

-2.8% (YTD: +59.5%)

THE CLOSING BELL-

The EGX30 rose 1.8% at yesterday’s close on turnover of EGP 1.83 bn. Foreign investors were net sellers. The index is up 17.1% YTD.

In the green: Orascom Construction (+6.6%), Eastern Company (+6.5%) and Mopco (+5.2%).

In the red: Ibnsina Pharma (-5.3%), Taaleem Management Services, (-1.7%) and Juhayna (-1.7%).

Asian markets are mainly in the red this morning, though shares in Japan and Taiwan are bucking the trend with slight gains. It’s a similar picture in Europe and US, where equity futures are currently pointing to a mixed open.

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