Investors this week will turn their focus to the looming fiscal cliff in the United States after Barack Obama secured a second term as president. With American elections out of the way, equity global markets are bracing for more volatility.
"There is no magic fix," said Tariq Qaqish, the deputy head of asset management at Al Mal Capital in Dubai. "The US and its economy is in a difficult situation."
Policymakers in Washington must avert a fiscal cliff of nearly US$600 billion (Dh2.2 trillion) worth of spending cuts and tax increases due in January. "The re-election of president Obama removes one uncertainty that has been weighing on the markets over the last few months," said Julian Jessop, the chief global economist at Capital Economics in a note to clients.
"With congress still split, president Obama will struggle to garner bipartisan support for a more comprehensive agreement that addresses the longer term issue of how to put the nation's finances back on a sustainable path," said Mr Jessop.
US equity markets declined sharply and global markets followed suitafter Mr Obama's victory. Many hedge-fund managers were betting on his rival Mitt Romney to win, believing that Mr Obama has demonised Wall Street and the rich. "The market is trying to signal a warning for Obama," said Mr Qaqish.
The Dow Jones Industrial Average Index fell 2.3 per cent to 12,932.70 late on Wednesday, while the Standard & Poor's 500 Index lost 2.3 per cent to 1,394.53.
In Asia, Hong Kong's Hang Seng Index declined 2.2 per cent to 21,609.60 points on Thursday, while Japan's Nikkei lost 1.5 per cent to 8,837.15.
In the UAE, the Abu Dhabi Securities Exchange General Index moved 0.08 per cent lower to 2,674.39, while the Dubai Financial Market (DFM) General Index rose 0.7 per cent to 1,617.47.
"The world economies are highly correlated, and we will be affected. Any policy the US takes will impact growth potential for Europe and China and will indirectly affect oil prices," said Mr Qaqish.
The ratings agency Fitch warned that the failure to tackle the fiscal cliff and raise the debt ceiling could mean a downgrading next year for the world's largest economy.
S&P removed its AAA rating for the US last year after a long-running deadlock between legislators and politicians finally eased and a deal was struck at the 11th hour to lift the debt ceiling.
Mr Jessop suspects the same will happen with the fiscal cliff, with decision-makers striking agreement just before the deadline.
"The fiscal position will need fixing at some point and the persistent uncertainty will remain a drag on confidence, including in the equity market," said Mr Jessop.
"Monetary policy will have to remain very loose and, along with a renewed escalation of the crisis in the euro zone, this should anchor 10-year Treasury yields at around 1.5 per cent," he added.
"US economic prospects will at least look good relative to the recession descending on Europe, which should keep the dollar on an appreciating trend against the euro."
Closer to home, the final wave of third-quarter results are expected in the UAE this week. Despite corporate earnings exceeding analyst expectations so far, equity momentum has been subdued because of macroeconomic themes abroad.
On the DFM, Air Arabia, the region's biggest budget carrier, will hold its board of directors meeting tomorrow, to approve the release of its financial statements for the period ended September 30.
Agility, the Kuwaiti logistics firm with a secondary listing in Dubai, will hold its meeting on Tuesday, while Salama Insurance and the contracting firm Drake & Scull International will hold their meetings on Wednesday. On theADX, the energy firm Taqa and Union Insurance will hold their meetings on Tuesday.
"The sentiment in our market remains broadly positive," said Anastasios Dalgiannakis, the head of institutional trading at Mubasher Financial Services in Dubai. "But people may be worried, watching international developments and if we have an adverse situation with the fiscal cliff, then it could impact us negatively."
halsayegh@thenational.ae
Name: Peter Dicce
Title: Assistant dean of students and director of athletics
Favourite sport: soccer
Favourite team: Bayern Munich
Favourite player: Franz Beckenbauer
Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates
UAE currency: the story behind the money in your pockets
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Killing of Qassem Suleimani
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Racecard:
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8.50pm: Balanchine | Group 2 (TB) | $250,000 (T) | 1,800m
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10pm: Handicap (TB) | $175,000 (T) | 2,410m.
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
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AT4 Ultimate, as tested
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How will Gen Alpha invest?
Mark Chahwan, co-founder and chief executive of robo-advisory firm Sarwa, forecasts that Generation Alpha (born between 2010 and 2024) will start investing in their teenage years and therefore benefit from compound interest.
“Technology and education should be the main drivers to make this happen, whether it’s investing in a few clicks or their schools/parents stepping up their personal finance education skills,” he adds.
Mr Chahwan says younger generations have a higher capacity to take on risk, but for some their appetite can be more cautious because they are investing for the first time. “Schools still do not teach personal finance and stock market investing, so a lot of the learning journey can feel daunting and intimidating,” he says.
He advises millennials to not always start with an aggressive portfolio even if they can afford to take risks. “We always advise to work your way up to your risk capacity, that way you experience volatility and get used to it. Given the higher risk capacity for the younger generations, stocks are a favourite,” says Mr Chahwan.
Highlighting the role technology has played in encouraging millennials and Gen Z to invest, he says: “They were often excluded, but with lower account minimums ... a customer with $1,000 [Dh3,672] in their account has their money working for them just as hard as the portfolio of a high get-worth individual.”
The specs: 2019 BMW i8 Roadster
Price, base: Dh708,750
Engine: 1.5L three-cylinder petrol, plus 11.6 kWh lithium-ion battery
Transmission: Six-speed automatic
Power: 374hp (total)
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A MINECRAFT MOVIE
Director: Jared Hess
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Other must-tries
Tomato and walnut salad
A lesson in simple, seasonal eating. Wedges of tomato, chunks of cucumber, thinly sliced red onion, coriander or parsley leaves, and perhaps some fresh dill are drizzled with a crushed walnut and garlic dressing. Do consider yourself warned: if you eat this salad in Georgia during the summer months, the tomatoes will be so ripe and flavourful that every tomato you eat from that day forth will taste lacklustre in comparison.
Badrijani nigvzit
A delicious vegetarian snack or starter. It consists of thinly sliced, fried then cooled aubergine smothered with a thick and creamy walnut sauce and folded or rolled. Take note, even though it seems like you should be able to pick these morsels up with your hands, they’re not as durable as they look. A knife and fork is the way to go.
Pkhali
This healthy little dish (a nice antidote to the khachapuri) is usually made with steamed then chopped cabbage, spinach, beetroot or green beans, combined with walnuts, garlic and herbs to make a vegetable pâté or paste. The mix is then often formed into rounds, chilled in the fridge and topped with pomegranate seeds before being served.
Volvo ES90 Specs
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ALL THE RESULTS
Bantamweight
Siyovush Gulmomdov (TJK) bt Rey Nacionales (PHI) by decision.
Lightweight
Alexandru Chitoran (ROU) bt Hussein Fakhir Abed (SYR) by submission.
Catch 74kg
Omar Hussein (JOR) bt Tohir Zhuraev (TJK) by decision.
Strawweight (Female)
Seo Ye-dam (KOR) bt Weronika Zygmunt (POL) by decision.
Featherweight
Kaan Ofli (TUR) bt Walid Laidi (ALG) by TKO.
Lightweight
Abdulla Al Bousheiri (KUW) bt Leandro Martins (BRA) by TKO.
Welterweight
Ahmad Labban (LEB) bt Sofiane Benchohra (ALG) by TKO.
Bantamweight
Jaures Dea (CAM) v Nawras Abzakh (JOR) no contest.
Lightweight
Mohammed Yahya (UAE) bt Glen Ranillo (PHI) by TKO round 1.
Lightweight
Alan Omer (GER) bt Aidan Aguilera (AUS) by TKO round 1.
Welterweight
Mounir Lazzez (TUN) bt Sasha Palatkinov (HKG) by TKO round 1.
Featherweight title bout
Romando Dy (PHI) v Lee Do-gyeom (KOR) by KO round 1.
hall of shame
SUNDERLAND 2002-03
No one has ended a Premier League season quite like Sunderland. They lost each of their final 15 games, taking no points after January. They ended up with 19 in total, sacking managers Peter Reid and Howard Wilkinson and losing 3-1 to Charlton when they scored three own goals in eight minutes.
SUNDERLAND 2005-06
Until Derby came along, Sunderland’s total of 15 points was the Premier League’s record low. They made it until May and their final home game before winning at the Stadium of Light while they lost a joint record 29 of their 38 league games.
HUDDERSFIELD 2018-19
Joined Derby as the only team to be relegated in March. No striker scored until January, while only two players got more assists than goalkeeper Jonas Lossl. The mid-season appointment Jan Siewert was to end his time as Huddersfield manager with a 5.3 per cent win rate.
ASTON VILLA 2015-16
Perhaps the most inexplicably bad season, considering they signed Idrissa Gueye and Adama Traore and still only got 17 points. Villa won their first league game, but none of the next 19. They ended an abominable campaign by taking one point from the last 39 available.
FULHAM 2018-19
Terrible in different ways. Fulham’s total of 26 points is not among the lowest ever but they contrived to get relegated after spending over £100 million (Dh457m) in the transfer market. Much of it went on defenders but they only kept two clean sheets in their first 33 games.
LA LIGA: Sporting Gijon, 13 points in 1997-98.
BUNDESLIGA: Tasmania Berlin, 10 points in 1965-66
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
