US Fed may reconsider larger rate cut as inflation persists

US Fed looks more likely to go for a smaller rate cut as inflation persists: US consumer prices rose 0.2% in August, matching July's increase, while the annual CPI advanced 2.5%, the smallest rise since February 2021, according to Bureau of Labor Statistics figures (pdf). The index grew 0.3% without counting volatile items like food and energy — the most in four months.

The persistent growth points to the likelihood of a smaller rate cut at the Fed’s meeting next week, analysts say. Traders now see an 85% chance of a quarter-point cut next week, according to CME Group’s FedWatch.

Start slow, and upsize later? “The Fed may start rate cuts a lot like how they started the hikes: 25 bps at first and then have the option to upsize the cuts as necessary,” chief economist at Annex Wealth Management Brian Jacobsen told Reuters.

Market reax: US markets exhibited cautious movements following the latest inflation data, dipping slightly before paring gains on the back of a tech rally. The S&P 500 fell 0.3%, before closing up 1.1%, while the Nasdaq rallied 2.17%.

ALSO WORTH KNOWING-

• UK-based private equity group Intermediate Capital Group closed a EUR 15.2 bn (USD 16.8 bn) European direct-lending fund, the largest of its kind in Europe, providing loans to private-equity backed companies. (Bloomberg)

• The UK economy stagnated in July, with no growth for the second consecutive month as construction and manufacturing sectors declined. The Bank of England is anticipated to keep interest rates steady at 5% next week, with a potential cut in November. (Financial Times)

THE MARKETS THIS MORNING-

Asian markets tracked Wall Street’s gains, with the Nikkei up 3% and Topiz up 2.48% this morning. South Korea’s Kospi also opened up 1.2%, while the small-cap Kosdaq gained 2.5%. Meanwhile, Wall Street futures opened lower.

THE CLOSING BELL: TADAWUL-

The TASI fell 1.8% yesterday on turnover of SAR 6.2 bn. The index is down 1.7% YTD.

In the green: Al Baha (+5.6%), Mesc (+5.2%) and Al Istithmar Reit (+5.1%).

In the red: Sfico (-10.0%), Artex (-5.1%) and Red Sea (-5.1%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.6% yesterday on turnover of SAR 40.9 mn. The index is up 5.0% YTD.

In the green: Leaf (+18.8%), Qomel (+6.9%) and Edarat (+6.7%).

In the red: Meyar (-4.5%), Fad (-4.4%) and Al Hasoob (-4.0%)

CORPORATE ACTIONS-

Saudi Enaya Cooperative Ins. has received the go-ahead from the Capital Market Authority for a SAR 150 mn capital hike, the authority said in an announcement. The move would bring the company’s total capital to SAR 380 mn by way of rights issue as per the board’s earlier recommendation.

The board of Nomu-listed Qomel recommended a 100% capital hike to SAR 70 mn through issuing bonus shares, according to a disclosure to Tadawul. The move will be financed by capitalizing SAR 32.6 mn from the balance of share premium and by SAR 2.4 mn from retained earnings and comes in a bid to boost the outfit’s plans for strategic growth and strengthen its financial base.

Savola Group’s rights issue was 94.2% covered, with 565 mn shares subscribed for SAR 5.7 bn, according to a disclosure to Tadawul. The remaining 35.1 mn rump shares will be offered to institutional investors, with shares allocated based on the highest bids. Riyad Capital and ANB Capital will underwrite any shares that remain unsubscribed after the rump offering, which runs next Sunday and Monday, 15-16 September.

Petrol Nass Factory Company has completed its liquidity plan and met the liquidity requirements for Nomu, according to a disclosure to Tadawul. The liquidity provider, Yaqeen Capital, has sold all shares to meet requirements to qualified investors in Nomu.

Al Baha Investment and Development Company submitted a request to the Capital Market Authority to reduce its capital by 26.5% to SAR 218.3 mn, by reduction of shares at a rate of one share for every four shares, according to a disclosure to Tadawul. The reduction is meant for covering SAR 78.7 mn in accumulated losses.

The Arab National Bank completed the purchase of 5 mn shares valued at SAR 98.3 mn for its employees shares program, as of yesterday, it said in a disclosure to Tadawul. The shares are worth SAR 19.7 a piece.