The past fortnight has been one of continued uncertainty about the global economic outlook, with mixed data and mixed news about the coronavirus, increasing anxiety about US-China relations and the fate of the White House’s fiscal stimulus bill.
While equity markets’ overall defiance of economic fundamentals remains, we are beginning to see some hesitancy as the all-time high for the S&P 500 Index comes into view. Other markets are also capturing attention including gold, which is seeing strong gains on the back of global liquidity and uncertainty about the outlook for more traditional markets in a coronavirus-dominated world.
Such outflows amid record price highs suggest that concerns about corporate earnings, fresh stimulus measures, US-China relations and the US election in November may finally catch up with the bull market.
Although last week ended with better-than-expected US jobs data, the past fortnight contained dreadful second quarter gross domestic product figures in most major economies, a result of the global lockdowns that occurred during the quarter. Annualised quarter-on-quarter growth in the United States showed the economy contracted by a whopping 32.9 per cent, with consumption falling 34.6 per cent, and the year-on-year rate down by 9.5 per cent. The story was even worse in the eurozone, with a year-on-year contraction of 15 per cent.
After these shocks, the fact that the US unemployment rate fell to 10.2 per cent in July was certainly welcome, dropping from 11.1 per cent in June and the record high of 14.7 per cent in April.
However, in common with recent counter-intuitive market behaviour, the good news was interpreted somewhat cautiously by the markets, with stocks on Friday muted on the assumption it would lessen the urgency in Washington to reach a fiscal stimulus deal. Indeed, the week ended without a fresh aid package, with the uncertainty compounded by worries over relations with China after President Donald Trump issued executive orders against transacting with Tencent and ByteDance.
After gains earlier in the week, Friday’s caution was also driven by profit-taking, especially with the S&P 500’s all-time highs now within sight. Such hesitancy was not only in evidence in Friday’s price action, but also present underneath the headlines of the S&P 500 having its best month in a decade in July.
Despite rallying to just short of its February all-time highs, fund flows reported by Bloomberg showed investors withdrawing $42 billion (Dh154.2bn) from exchange-traded funds and mutual funds last month – the most since 2008 – with a further $3.7bn being withdrawn over the past week alone.
Such outflows amid record price highs suggest that concerns about corporate earnings, fresh stimulus measures, US-China relations and the US election in November may finally catch up with the bull market, which should not come as a surprise considering how long these issues have been overlooked.
With money starting to exit equities and bonds offering slim returns, it comes as no surprise that other markets have moved into the limelight, with the gold price reaching a record high last week of $2,070 per ounce. As funds withdrew money from equities in July, it was reported that investors put nearly $3bn into gold towards the end of that month, one of the largest inflows on record.
Gold’s attractions are not difficult to identify in a Covid-obscured world. Some of the most obvious sources of uncertainty include doubts about the global economic outlook, concerns for an eventual upturn in inflation, the debasement of the dollar and fiat currencies by zero, and negative interest rates.
But in a world of almost infinite central bank quantitative easing, gold is not the only safe-haven asset where the liquidity will end up. The same conditions that are favourable for gold are also likely to be positive for other alternative assets. Bitcoin and other cryptocurrencies, for example, also saw sharp rallies in July and, according to some analysts, could be on the cusp of overcoming its “credibility hump” with institutional investors.
But until there is a clearer picture about the shape of the global recovery, gold and some other alternative assets could continue to prosper. The risk to them will come when the Covid-19 threat dissipates, but even then it may take a while to reverse sentiment until the overhang of central bank liquidity is withdrawn, something that could take many more years.
Tim Fox is a prominent regional economist and financial market analyst
Brief scores:
Day 1
Toss: South Africa, field first
Pakistan (1st innings) 177: Sarfraz 56, Masood 44; Olivier 4-48
South Africa (1st innings) 123-2: Markram 78; Masood 1-4
The BIO:
He became the first Emirati to climb Mount Everest in 2011, from the south section in Nepal
He ascended Mount Everest the next year from the more treacherous north Tibetan side
By 2015, he had completed the Explorers Grand Slam
Last year, he conquered K2, the world’s second-highest mountain located on the Pakistan-Chinese border
He carries dried camel meat, dried dates and a wheat mixture for the final summit push
His new goal is to climb 14 peaks that are more than 8,000 metres above sea level
MATCH INFO
Inter Milan 2 (Vecino 65', Barella 83')
Verona 1 (Verre 19' pen)
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
Ultra processed foods
- Carbonated drinks, sweet or savoury packaged snacks, confectionery, mass-produced packaged breads and buns
- margarines and spreads; cookies, biscuits, pastries, cakes, and cake mixes, breakfast cereals, cereal and energy bars;
- energy drinks, milk drinks, fruit yoghurts and fruit drinks, cocoa drinks, meat and chicken extracts and instant sauces
- infant formulas and follow-on milks, health and slimming products such as powdered or fortified meal and dish substitutes,
- many ready-to-heat products including pre-prepared pies and pasta and pizza dishes, poultry and fish nuggets and sticks, sausages, burgers, hot dogs, and other reconstituted meat products, powdered and packaged instant soups, noodles and desserts.
Get inspired
Here are a couple of Valentine’s Day food products that may or may not go the distance (but have got the internet talking anyway).
Sourdough sentiments: Marks & Spencer in the United Kingdom has introduced a slow-baked sourdough loaf dusted with flour to spell out I (heart) you, at £2 (Dh9.5). While it’s not available in the UAE, there’s nothing to stop you taking the idea and creating your own message of love, stencilled on breakfast-inbed toast.
Crisps playing cupid: Crisp company Tyrells has added a spicy addition to its range for Valentine’s Day. The brand describes the new honey and chilli flavour on Twitter as: “A tenderly bracing duo of the tantalising tingle of chilli with sweet and sticky honey. A helping hand to get your heart racing.” Again, not on sale here, but if you’re tempted you could certainly fashion your own flavour mix (spicy Cheetos and caramel popcorn, anyone?).
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Scotland v Ireland:
Scotland (15-1): Stuart Hogg; Tommy Seymour, Huw Jones, Sam Johnson, Sean Maitland; Finn Russell, Greig Laidlaw (capt); Josh Strauss, James Ritchie, Ryan Wilson; Jonny Gray, Grant Gilchrist; Simon Berghan, Stuart McInally, Allan Dell
Replacements: Fraser Brown, Jamie Bhatti, D'arcy Rae, Ben Toolis, Rob Harley, Ali Price, Pete Horne, Blair Kinghorn
Coach: Gregor Townsend (SCO)
Ireland (15-1): Rob Kearney; Keith Earls, Chris Farrell, Bundee Aki, Jacob Stockdale; Jonathan Sexton, Conor Murray; Jack Conan, Sean O'Brien, Peter O'Mahony; James Ryan, Quinn Roux; Tadhg Furlong, Rory Best (capt), Cian Healy
Replacements: Sean Cronin, Dave Kilcoyne, Andrew Porter, Ultan Dillane, Josh van der Flier, John Cooney, Joey Carbery, Jordan Larmour
Coach: Joe Schmidt (NZL)
Tightening the screw on rogue recruiters
The UAE overhauled the procedure to recruit housemaids and domestic workers with a law in 2017 to protect low-income labour from being exploited.
Only recruitment companies authorised by the government are permitted as part of Tadbeer, a network of labour ministry-regulated centres.
A contract must be drawn up for domestic workers, the wages and job offer clearly stating the nature of work.
The contract stating the wages, work entailed and accommodation must be sent to the employee in their home country before they depart for the UAE.
The contract will be signed by the employer and employee when the domestic worker arrives in the UAE.
Only recruitment agencies registered with the ministry can undertake recruitment and employment applications for domestic workers.
Penalties for illegal recruitment in the UAE include fines of up to Dh100,000 and imprisonment
But agents not authorised by the government sidestep the law by illegally getting women into the country on visit visas.
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
Killing of Qassem Suleimani
MATCH INFO
Day 1 at Mount Maunganui
England 241-4
Denly 74, Stokes 67 not out, De Grandhomme 2-28
New Zealand
Yet to bat
UAE currency: the story behind the money in your pockets
MATCH INFO
Uefa Champions League final:
Who: Real Madrid v Liverpool
Where: NSC Olimpiyskiy Stadium, Kiev, Ukraine
When: Saturday, May 26, 10.45pm (UAE)
TV: Match on BeIN Sports
F1 The Movie
Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem
Director: Joseph Kosinski
Rating: 4/5
Things Heard & Seen
Directed by: Shari Springer Berman, Robert Pulcini
Starring: Amanda Seyfried, James Norton
2/5
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
COMPANY PROFILE
Name: Mamo Year it started: 2019 Founders: Imad Gharazeddine, Asim Janjua Based: Dubai, UAE Number of employees: 28 Sector: Financial services Investment: $9.5m Funding stage: Pre-Series A Investors: Global Ventures, GFC, 4DX Ventures, AlRajhi Partners, Olive Tree Capital, and prominent Silicon Valley investors. RESULTS FOR STAGE 4
Stage 4 Dubai to Hatta, 197 km, Road race.
Overall leader Primoz Roglic SLO (Team Jumbo - Visma)
Stage winners: 1. Caleb Ewan AUS (Lotto - Soudal) 2. Matteo Moschetti ITA (Trek - Segafredo) 3. Primoz Roglic SLO (Team Jumbo - Visma)
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