EMs are not ready for further Fed rate hikes: Emerging markets, including Brazil, Chile, and China have started reversing their steep rate hikes, putting the asset class at greater risk should the US Federal Reserve raise interest rates further than expected in the coming months, Reuters wrote.

This is what the IMF’s chief economist, Pierre-Olivier Gourinchas, had to say: “If we get to a point where there is a need for … doing more than what's already priced in, at some point markets might start getting nervous ... Then you see a big increase in the risk premia in different asset classes including emerging markets, including the rest of the world … The risk of a financial tightening, a very sharp financial tightening, I think we cannot rule that out.”

Higher for longer? In a highly anticipated speech last week, Fed chair Jerome Powell left the door open to further rate hikes in the coming months in order to get inflation down to target. Last month’s weaker-than-expected inflation data had fuelled expectations that the central bank would soon bring its tightening cycle to an end and offer guidance about when it could begin to lower rates. The sell-off in the bond market accelerated in the days before the speech, pushing yields to their highest levels since 2007, as investors bet that the Fed will wait longer before beginning to cut rates.

ALSO WORTH NOTING-

  • Weak demand continues to drag on China’s industrial sector: Profits at Chinese industrial firms fell for the seventh consecutive month in July, as weak demand continued to weigh on companies. (Reuters)
  • KSA now has a real estate exchange: Saudi Arabia has launched a real estate exchange, a digital platform that will allow traders to buy or sell real estate assets in addition to offering electronic mortgage finance and sukuk issuance services. (Saudi Press Agency)

EGX30

18,517

+1.7% (YTD: +26.8%)

USD (CBE)

Buy 30.83

Sell 30.96

USD at CIB

Buy 30.85

Sell 30.95

Interest rates CBE

19.25% deposit

20.25% lending

Tadawul

11,470

+0.6% (YTD: +9.5%)

ADX

9,765

-0.1% (YTD: -4.4%)

DFM

4,099

-0.2% (YTD: +22.9%)

S&P 500

4,406

+0.7% (YTD: +14.8%)

FTSE 100

7,338

+0.1% (YTD: -1.5%)

Euro Stoxx 50

4,236

+0.1% (YTD: +11.7%)

Brent crude

USD 84.48

+1.3%

Natural gas (Nymex)

USD 2.54

+0.8%

Gold

USD 1,939.90

-0.4%

BTC

USD 26,073

+0.3% (YTD: +58.0%)

THE CLOSING BELL-

The EGX30 rose 1.7% at yesterday’s close on turnover of EGP 2.1 bn (2.1% above the 90-day average). Regional investors were net sellers. The index is up 26.8% YTD.

In the green: Alexandria Containers and Cargo Handling (+5.6%), Credit Agricole (+4.0%) and E-Finance (+3.4%).

In the red: Heliopolis Housing (-0.7%), Palm Hills Development (-0.7%) and Abu Qir Fertilizers (-0.6%).

Asian markets are very comfortably in the green this morning. CNBC says the rally comes after US Federal Reserve boss Jay Powell “said that inflation remains ‘too high’ and that the central bank is ‘prepared to raise rates further if appropriate.’”

The LSE is closed today for the summer bank holiday, but futures suggest other Western markets will follow Asia by opening in the green later today.

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