US equity markets have rallied over the past month and a half, with the S&P 500 index up about 16 per cent since its mid-June low, and the tech-heavy Nasdaq composite index up by more than 20 per cent over the same period — the technical definition of a bull market.
The rally has confounded many analysts, coming as it has against a backdrop of slowing growth and high inflation.
Recession fears have increased in recent weeks, with economic data showing a slowdown in manufacturing activity, rising jobless claims and a second quarter of declining gross domestic product in the US.
This is reflected in the most inverted yield curve since 2000. In the US, an inverted yield curve where 10-year treasuries yield less than two-year ones, has historically predicted an economic recession with a high degree of accuracy.
The rally in equities even as macroeconomic conditions are seemingly worsening reflects the market’s belief that the US Federal Reserve will have to cut rates in 2023, as inflation slows and unemployment rises.
July’s inflation data, which came in better than expected last week, provided further support for this view. The headline Consumer Price Index fell to 8.5 per cent in July, down from a multi-decade high of 9.1 per cent in June, although this was largely owing to lower energy prices.
Core inflation, which excludes volatile food and energy prices, was unchanged at 5.9 per cent year on year last month, reflecting sustained inflation in housing, health care and other services.
Fed officials quickly pushed back against the market’s rosy interpretation that the central bank will not have to raise rates as much as previously thought, now that consumer inflation has seemingly peaked.
Several Fed presidents noted that they still expect rates to rise into 2023, and that although the July inflation print was a good one, they will need more evidence of a sustained decline in price pressures before they consider a change in policy.
The argument that inflation has peaked also assumes no further supply shocks with respect to energy and food. While global oil and food commodity prices have eased in recent weeks, and there are indications that food exports from Ukraine are resuming, any further disruptions to supply or a recovery in demand could again put upward pressure on these key commodities.
Opec+ has limited capacity to increase production, and the war in Ukraine means that energy supplies from Russia to the EU remain constrained and could be disrupted further, potentially causing shortages this winter.
China’s demand for oil is also expected to rebound as Covid-19-related restrictions on activity are eased, and the International Energy Agency recently increased its forecast for oil demand growth this year, saying that high natural gas prices are encouraging companies and power generators to switch from gas to oil, particularly in Europe and the Middle East.
While Emirates NBD is optimistic that inflation will continue to ease in the coming months, the pace of decline is likely to be slow. Indeed, headline and core CPI will remain well above the Fed’s 2 per cent goal by year-end.
Meanwhile, the US labour market still looks exceptionally strong, with another 528,000 jobs added in July and a further decline in the unemployment rate to 3.5 per cent.
Consequently, we expect the Fed will continue tightening monetary policy in order to cool demand and forecast another 150 basis points in rate hikes over the rest of this year.
Khatija Haque is chief economist and head of research at Emirates NBD.
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DUNE%3A%20PART%20TWO
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MATCH INFO
What: 2006 World Cup quarter-final
When: July 1
Where: Gelsenkirchen Stadium, Gelsenkirchen, Germany
Result:
England 0 Portugal 0
(Portugal win 3-1 on penalties)
Dengue%20fever%20symptoms
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The specs
Engine: 6.2-litre V8
Power: 502hp at 7,600rpm
Torque: 637Nm at 5,150rpm
Transmission: 8-speed dual-clutch auto
Price: from Dh317,671
On sale: now
Nepotism is the name of the game
Salman Khan’s father, Salim Khan, is one of Bollywood’s most legendary screenwriters. Through his partnership with co-writer Javed Akhtar, Salim is credited with having paved the path for the Indian film industry’s blockbuster format in the 1970s. Something his son now rules the roost of. More importantly, the Salim-Javed duo also created the persona of the “angry young man” for Bollywood megastar Amitabh Bachchan in the 1970s, reflecting the angst of the average Indian. In choosing to be the ordinary man’s “hero” as opposed to a thespian in new Bollywood, Salman Khan remains tightly linked to his father’s oeuvre. Thanks dad.
The%20BaaS%20ecosystem
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US tops drug cost charts
The study of 13 essential drugs showed costs in the United States were about 300 per cent higher than the global average, followed by Germany at 126 per cent and 122 per cent in the UAE.
Thailand, Kenya and Malaysia were rated as nations with the lowest costs, about 90 per cent cheaper.
In the case of insulin, diabetic patients in the US paid five and a half times the global average, while in the UAE the costs are about 50 per cent higher than the median price of branded and generic drugs.
Some of the costliest drugs worldwide include Lipitor for high cholesterol.
The study’s price index placed the US at an exorbitant 2,170 per cent higher for Lipitor than the average global price and the UAE at the eighth spot globally with costs 252 per cent higher.
High blood pressure medication Zestril was also more than 2,680 per cent higher in the US and the UAE price was 187 per cent higher than the global price.
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The 12 Syrian entities delisted by UK
Ministry of Interior
Ministry of Defence
General Intelligence Directorate
Air Force Intelligence Agency
Political Security Directorate
Syrian National Security Bureau
Military Intelligence Directorate
Army Supply Bureau
General Organisation of Radio and TV
Al Watan newspaper
Cham Press TV
Sama TV
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
At Eternity’s Gate
Director: Julian Schnabel
Starring: Willem Dafoe, Oscar Isaacs, Mads Mikkelsen
Three stars
Business Insights
- As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
- SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income.
- Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
Evacuations to France hit by controversy
- Over 500 Gazans have been evacuated to France since November 2023
- Evacuations were paused after a student already in France posted anti-Semitic content and was subsequently expelled to Qatar
- The Foreign Ministry launched a review to determine how authorities failed to detect the posts before her entry
- Artists and researchers fall under a programme called Pause that began in 2017
- It has benefited more than 700 people from 44 countries, including Syria, Turkey, Iran, and Sudan
- Since the start of the Gaza war, it has also included 45 Gazan beneficiaries
- Unlike students, they are allowed to bring their families to France
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
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Profile box
Founders: Michele Ferrario, Nino Ulsamer and Freddy Lim
Started: established in 2016 and launched in July 2017
Based: Singapore, with offices in the UAE, Malaysia, Hong Kong, Thailand
Sector: FinTech, wealth management
Initial investment: $500,000 in seed round 1 in 2016; $2.2m in seed round 2 in 2017; $5m in series A round in 2018; $12m in series B round in 2019; $16m in series C round in 2020 and $25m in series D round in 2021
Current staff: more than 160 employees
Stage: series D
Investors: EightRoads Ventures, Square Peg Capital, Sequoia Capital India
Anghami
Started: December 2011
Co-founders: Elie Habib, Eddy Maroun
Based: Beirut and Dubai
Sector: Entertainment
Size: 85 employees
Stage: Series C
Investors: MEVP, du, Mobily, MBC, Samena Capital
THE BIO
Born: Mukalla, Yemen, 1979
Education: UAE University, Al Ain
Family: Married with two daughters: Asayel, 7, and Sara, 6
Favourite piece of music: Horse Dance by Naseer Shamma
Favourite book: Science and geology
Favourite place to travel to: Washington DC
Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
SPEC%20SHEET
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The biog
Name: Atheja Ali Busaibah
Date of birth: 15 November, 1951
Favourite books: Ihsan Abdel Quddous books, such as “The Sun will Never Set”
Hobbies: Reading and writing poetry
Quick%20facts
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UAE currency: the story behind the money in your pockets
Company%20Profile
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Polarised public
31% in UK say BBC is biased to left-wing views
19% in UK say BBC is biased to right-wing views
19% in UK say BBC is not biased at all
Source: YouGov
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
