The euro-zone economy may be roaring ahead but a rapidly strengthening euro may see European Central Bank President Mario Draghi pour cold water on the view the bank is speeding toward an interest rate hike.
Mr Draghi is expected to keep the ECB’s €2 trillion (Dh9.13tn) asset buying programme in place for now at Thursday’s ECB governing council meeting, while acknowledging Europe’s unexpectedly strong run of growth.
The real trick facing policymakers will be how to address the euro’s surge to a three year high against the dollar, which could dampen inflation and endanger the work done by years of unprecedented stimulus.
It will be a delicate balancing act: the euro’s 5 per cent rise since December holds back inflation which the ECB wants to see climb. But rapid economic growth and the expected end of the bond buys later this year justify some currency strength.
Wanting to keep all options on the table, Mr Draghi will likely seek to stop the euro from firming further, keeping markets in a holding pattern until policymakers are ready to unveil their blueprint for winding down stimulus, economists said.
Having bought more than €2tn worth of bonds over the past three years, the ECB has almost single-handedly depressed borrowing costs in the euro zone to kick start growth and lift prices. Markets now expect these often controversial asset buys to finally end in the last quarter of this year.
But predictions for tighter ECB policy are putting pressure on the currency and raising market bets for a rate hike as early as December, a move seen as premature even by the most hawkish of policymakers.
Inflation is also years away from rising back to the ECB’s target of 2 per cent, so Mr Draghi can hardly afford any big currency swings.
“We think ECB President Draghi’s priority will be to talk down growing expectations of early interest rate hikes and a strengthening euro,” ABN Amro said in a note to client. “We think the subdued outlook for underlying inflation points to the ECB taking its time with rate hikes.”
The ECB announces its rate decision at 12.45 GMT, followed by Mr Draghi’s news conference at 1330 GMT.
Fears about currency swings appear justified after U.S. Treasury Secretary Steven Mnuchin argued for a weak dollar on Wednesday.
“Obviously a weaker dollar is good for us as it relates to trade and opportunities,” Mr Mnuchin said in the Swiss ski resort of Davos.
___________
Read more:
Gold nears four-month highs after hawkish ECB boosts euro
Sterling soars to highest level since Brexit vote
___________
While the euro’s gain so far has only a modest impact on inflation, the worry is that weaker economies on the bloc’s periphery would be affected by it more, a risk to an economic convergence process that restarted only recently.
Part of his holding pattern approach, Mr Draghi is also likely to keep the bank’s guidance unchanged, maintaining a promise to continue asset buys until a sustained rebound in inflation, even though work to revise the text could begin on Thursday.
Policymakers argued in the December policy meeting that the guidance should be revised in “early” 2018, removing from the text a singular focus on asset buys and raising the role of interest rates in policy accommodation.
“We expect changes in the forward guidance in March and June, to prepare the markets for the end of quantitative easing from October,” Daniele Antonucci at Morgan Stanley said.
“We see the first 15 basis point deposit rate hike to minus 0.25 per cent in March 2019, with a signal from the central bank toward the end of this year,” Ms Antonucci added.
But even a normally cautious Mr Draghi will be unlikely to shoot down market expectations for the ECB to end bond purchases after the scheme, already extended several times, runs out in September.
Growth projections, revised up repeatedly, already look too pessimistic as manufacturing, trade and jobs data all point to superb run for the euro zone economy.
The bloc is about to run out of spare capacity and more hawkish policymakers are already arguing that the ECB was at risk of falling behind the curve in clawing back stimulus for an economy enjoying a five-year growth run.
“The euro area economy is blowing consensus forecasts out of the water,” JP Morgan economist Greg Fuzesi said. “While it is by now widely recognised that euro area growth is strong, the extent of this is still being hugely underappreciated.”
Gulf Under 19s final
Dubai College A 50-12 Dubai College B
UAE currency: the story behind the money in your pockets
Islamophobia definition
A widely accepted definition was made by the All Party Parliamentary Group on British Muslims in 2019: “Islamophobia is rooted in racism and is a type of racism that targets expressions of Muslimness or perceived Muslimness.” It further defines it as “inciting hatred or violence against Muslims”.
57%20Seconds
%3Cp%3E%3Cstrong%3EDirector%3A%3C%2Fstrong%3E%20Rusty%20Cundieff%0D%3Cbr%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3EJosh%20Hutcherson%2C%20Morgan%20Freeman%2C%20Greg%20Germann%2C%20Lovie%20Simone%0D%3Cbr%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E2%2F5%0D%3Cbr%3E%0D%3Cbr%3E%3C%2Fp%3E%0A
MATCH INFO
Iceland 0 England 1 (Sterling pen 90 1)
Man of the match Kari Arnason (Iceland)
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Health Valley
Founded in 2002 and set up as a foundation in 2006, Health Valley has been an innovation in healthcare for more than 10 years in Nijmegen, the Netherlands.
It serves as a place where companies, businesses, universities, healthcare providers and government agencies can collaborate, offering a platform where they can connect and work together on healthcare innovation.
Its partners work on technological innovation, new forms of diagnostics and other methods to make a difference in healthcare.
Its agency consists of eight people, four innovation managers and office managers, two communication advisers and one director. It gives innovation support to businesses and other parties in its network like a broker, connecting people with the right organisation to help them further
PROFILE OF SWVL
Started: April 2017
Founders: Mostafa Kandil, Ahmed Sabbah and Mahmoud Nouh
Based: Cairo, Egypt
Sector: transport
Size: 450 employees
Investment: approximately $80 million
Investors include: Dubai’s Beco Capital, US’s Endeavor Catalyst, China’s MSA, Egypt’s Sawari Ventures, Sweden’s Vostok New Ventures, Property Finder CEO Michael Lahyani
The specs
Engine: 0.8-litre four cylinder
Power: 70bhp
Torque: 66Nm
Transmission: four-speed manual
Price: $1,075 new in 1967, now valued at $40,000
On sale: Models from 1966 to 1970
Ziina users can donate to relief efforts in Beirut
Ziina users will be able to use the app to help relief efforts in Beirut, which has been left reeling after an August blast caused an estimated $15 billion in damage and left thousands homeless. Ziina has partnered with the United Nations High Commissioner for Refugees to raise money for the Lebanese capital, co-founder Faisal Toukan says. “As of October 1, the UNHCR has the first certified badge on Ziina and is automatically part of user's top friends' list during this campaign. Users can now donate any amount to the Beirut relief with two clicks. The money raised will go towards rebuilding houses for the families that were impacted by the explosion.”
Votes
Total votes: 1.8 million
Ashraf Ghani: 923,592 votes
Abdullah Abdullah: 720,841 votes
Black Panther
Dir: Ryan Coogler
Starring: Chadwick Boseman, Michael B Jordan, Lupita Nyong'o
Five stars
