Manufacturing is slowing across the world

Manufacturing data out yesterday is pointing to a global slowdown: Glob al manufacturing activity continued to expand at its weakest pace since the height of the covid-19 pandemic in July amid a sharp contraction in the eurozone and factories in China going into reverse, Reuters reports. Purchasing managers’ index figures out yesterday showed euro area factory activity sinking to its strongest downturn since May 2020 while data out of Asia showed the Japanese, South Korean, Taiwanese and Vietnamese manufacturing sectors all contracting. Factories in China declined for the first time since April, missing expectations for slight growth during the month.

Fed to press pause on rate hikes next month, say economists: Falling inflation, easing consumer spending and weakening wage growth mean that the US Federal Reserve can afford to take its foot off the gas at its next policy meeting in September and leave interest rates unchanged, economists tell Bloomberg. “I suspect the data will be mild enough to meet with the Fed’s approval,” said Douglas Porter, chief economist at Bank of Montreal. “Our core view is that the Fed has done enough, with short-term rates now solidly in positive real terrain, core inflation beginning to come down, and the labor market softening around the edges.”

Remember: The Fed raised its benchmark interest rate to its highest level since 2001 last month despite a softer-than-expected June inflation print.

Yes, but: Much will depend on this month’s inflation and jobs data. Fed chair Jerome Powell has not ruled out further rate hikes in the coming months should data point to a revival of inflationary pressures.

A “soft landing” in the US isn’t guaranteed: Markets may be rebounding in optimism that the Fed’s tightening cycle has avoided triggering a downturn in the US economy, but a sharp drop in excess savings triggered by higher borrowing costs and inflation may yet provoke a drop-off in business spending and rising unemployment, according to Reuters. Excess savings in the US have fallen more than 75% over the past two years, a trend that is also taking place in Europe and the UK. “As soon as [domestic consumption] starts to fall apart these economies can become very, very fragile very quickly,” one asset manager told the newswire.

ALSO WORTH NOTING-

• KSA is getting ready for its maiden sovereign sukuk sale: The Public Investment Fund has hired HSBC, Standard Chartered, Emirates NBD and Al Rajhi Capital to manage its debut sovereign sukuk issuance, according to people familiar with the matter. ( Bloomberg)
• Dubai hands first full crypto license to Nomura subsidiary: Dubai awarded a full cryptocurrency license to Laser Digital Middle East, a subsidiary of Japanese financial giant Nomura. This allows the company to offer virtual asset brokerage and investment management services in the local market. ( Bloomberg)
• Uber delivers first-ever operating profit: Ride-hailing app Uber reported its first-ever operating profit of USD 326 mn in 2Q 2023. This was overshadowed by a slowdown in revenue growth, which saw its share price fall 5.7% during trading yesterday. ( Bloomberg | Uber)
• The UK housing market is going into reverse: UK house prices declined at their fastest annual rate in 14 years in July as rising interest rates weighed on the market. ( Nationwide)

THE CLOSING BELL-

The EGX30 fell 0.5% at yesterday’s close on turnover of EGP 3.55 bn (85.6% above the 90-day average). Foreign investors were net buyers. The index is up 19.97% YTD.

In the green: Beltone Financial Holding (+9.9%), Alexandria Containers and Cargo Handling (+2.8%) and Juhayna (+1.4%).

In the red: Eastern Company (-6.1%), Alexandria Mineral Oils Company (-5.3%) and TMG Holding (-3.5%).