Markets racing as 2017 counts down

In this “News That Moves” series, we take a look at “news that moves” markets either up or down.
By Markets Chimp

10/7/17 9:06 PM

As we are getting closer to the end of the year, the pace of change in market conditions, realities, calculations and reactions is becoming faster and faster. And as we are on the cast for a new opportunistic week ahead, here are the hot stories of this past week:

  • Starting with latest of them all, and the non-farm jobs data came with the US economy actually losing, not gaining, jobs for the first time since 2010 as Hurricanes Harvey and Irma threw their shadows on the labor forces during the time of the survey. If it weren’t for the hurricanes, such data could have meant troubles ahead. But the market in fact was able to digest this, thanks to the perception of the hurricanes effect and the fact that markets already priced it in the last two months.
  • What made it even easier to think about was that wage growth topped expectations, rising by 2.9% year-on-year vs. an estimated 2.7%.
  • In Europe, Catalonia’s independence put some heavy pressure on the euro, losing 0.7% this past week. Such an independence could be costly for Spain’s economic health.
  • Still in Europe, the British pound snipped too after rumors surrounding the continuity of Theresa May as prime minister due to the lack of approval through the political climate.
  • Back to the Middle East, we had good news for the UAE as S&P assigned Abu Dhabi’s foreign bonds a credit rating of AA, boosting demand for them.
  • In Egypt, a very vital position concerning the banking sector took place as the Central Bank of Egypt (CBE) raised the reserve ratio from 10% to 14%. The reason for such a decision could be the exhaustion of the interest rate tool to curb inflation, so using the reserve ratio as tool might be a better solution from the central bank’s point of view.
  • However, the banks listed on the Egyptian Exchange have seen notable declines after the decision to raise the reserve ratio. The higher reserve ratios will limit usage of deposits and hence will put a lid in money supply, which may suggest interest rate hikes on the horizon by end of year.

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