Nour Eldeen Al-Hammoury
Last quote by Nour Eldeen Al-Hammoury
Nour Eldeen Al-Hammoury quotes
Extending the QE expiration date further might not have that big negative impact on the euro as there is no new money supply from the ECB. Therefore, the euro might stabilise for a while. Finally, keeping the current policy unchanged would be a positive factor for the euro as everyone was pricing in further easing measures by the ECB. Therefore, the euro may stabilise ahead of the Federal Reserve decision.
Last week we saw the formation of death cross in the dollar index. Could it be good news for the stock market?
The EGX30 Index is still under pressure following the recent sell-off in global equities. We don't think the Central Bank decision is good news for the market, especially as the uncertainty remains toward global equities. Moreover, the declining Egyptian pound with the continuous global economic slowing down would not be good news for corporate earnings.
It's definitely possible. As we know Q3 has been the worst in years, which of course leads companies to cut their estimates, especially in terms of global demand and earnings estimates as well. However, we still need to wait for further evidence and to look at the Q3 earnings. Estimates can be right or wrong. Moreover, we shouldn't forget that capital investment companies around the world cut their estimates and also took the decision to lay off some of their workforce, which also fuels market uncertainty.
For the moment, the uncertainty mode is still controlling the markets, especially after the release of the US jobs report last week. The outlook remains unclear for the next few months, as there are no solid economic numbers on which to build estimates. However, the situation that we have seen in Q3 of this year, might still have a negative effect on Q4. So traders need to be very cautious in the coming weeks.
Gold usually rallies on two factors, uncertainty and inflation fears. In the past few months, uncertainty over the global outlook has kept bids on gold for some time, but it has only stopped the sharp decline in gold, which happened this year. As for inflation, the estimates for future inflation are sharply on the downside and there's no hedge bid in this situation. When inflation estimates improve again, gold may benefit more than now.
Of course, the Fed is not in a good position right now. This is also what we noted a year ago, that the Fed might not raise rates. The Fed delayed the rate hike many times from March to June to September and now September is likely to be delayed until December. Therefore, the statement is very important and will be key for forthcoming trends.
To explain, the Gold/Oil Ratio is a way of showing how many barrels of gold you can buy when you own an ounce of gold. The pattern that we have seen last week looks like the pattern that we saw in January. Last week the Gold/Oil Ratio reached the same level of January around of 25.30 before declining again, leading oil to rise significantly on Thursday and Friday.
Meanwhile most of the fundamentals are already priced in, as we have said in previous episodes of the show, therefore we need to look at new fundamentals and catalysts that could drive the prices in the coming weeks. But for now, all we can say is that signs of stabilization are growing gradually.
Its possible to say that the panic is over or has at least eased, especially as most of the global equities trimmed their loses incurred on that Black Monday. However, the current rally seems to be cautious and it's very important to keep an eye on the economic releases ahead, especially those from the US and Asia, which will be the key in the coming days and weeks.
In the meantime, and after the Bank of England statement that the rate hike will be data dependent, the upcoming economic releases will have a notable and significant impact on the markets and the British pound much more than before, as positive figures would allow investors and traders to start pricing in a rate hike by the Bank of England – which might be the same as what happened to the US dollar this year.
This stabilisation shows the strength of the pound, contrary to other currencies like the euro – which dropped against the US dollar again.
Of course, lifting the sanctions on Iran opens the door for opportunities all over the world, not only for middle east countries. But it's worth mentioning that the geographical proximity is one of the positive factors for UAE. Moreover, the deal between Iran and the West may ease fears of geopolitical tension in the region. Therefore, trade, business and financial opportunities are likely to be significant between Iran and the region.
The global markets have priced in such move. However, we are looking at the bonds markets lately and so far traders seem not sure that the Fed will be able to raise the rates and the US 10 Yr yields remain lower despite all the talks of raising the rates next year. Furthermore, the housing market does not support such a move anytime soon.