US equity markets have turned in their worst half-yearly performance in more than 50 years.
The three major US indices have dropped from their record highs during the first six months of 2022. The Dow Jones index has fallen 15.6 per cent, while the Nasdaq has plummeted more than 29 per cent, and the S&P 500 has shed more than 20 per cent.
The market turmoil has triggered recessionary alarms — and the case for this continues to gain momentum with deteriorating US economic data on the back of hotter-than-expected inflation and monetary tightening by the US Federal Reserve.
The Atlanta Fed’s GDPNowcast Tracker, an official estimate of gross domestic product growth using similar methodology to the one used by the US Bureau of Economic Analysis, shows that real GDP growth for the second quarter of 2022 is at minus 2.1 per cent, down from minus 1 per cent a month earlier.
Two back-to-back negative GDP prints technically signal a recession.
Once again, the data points due out in July will continue to build on this theme and will give markets more of an idea of how hawkish the Fed will be through the initial stages of the third quarter.
On Wednesday, US data for the services PMI and non-manufacturing PMI will be released.
This will be followed by US inflation data that is due out on July 13 at 4.30pm UAE time.
While expectations are for the core prints to narrow slightly, the overall consumer price index is expected to increase to 8.7 per cent year on year, up from a previous reading of 8.6 per cent.
US industrial production figures and New York Empire State manufacturing are due on July 15 and the month will culminate on July 27 with the Fed's interest rate decision.
Today there is the release of the Federal Open Market Committee (FOMC) meeting minutes for June, where the Fed raised rates by 75 basis points to a range of 1.50 per cent to 1.75 per cent.
While there is no clear indicator as to the size of the rise at the Fed’s July meeting, it is likely that we may be in line for a 50 to 75 basis point rise.
In its latest economic projections, the FOMC had rates at 3.25 per cent to 3.5 per cent by the end of 2022. which would mean that following July’s expected 75 basis points rise, we could be in for another 50 basis point rise in September followed by another 25 basis points in November and December.
On the other hand, If the Fed only raises the rate by 50 basis points in July, we would see 50 basis point increases in September and November, followed by 25 basis points in December.
We also have the all-important non-farm payrolls report scheduled for this Friday.
Markets expect the US labour sector to show more signs of slowing, with 270,000 jobs expected to have been created in June.
This is down from the 390,000 jobs added in May and also below the three-month and six-month averages at 408,000 and 505,000, respectively.
The overall unemployment rate is expected to come in at 3.6 per cent, while year-on-year average hourly earnings are expected to drop to 5 per cent in June, down from a reading of 5.2 per cent in May.
Also due out on Thursday is the meeting minutes from the European Central Bank’s last policy meeting, where rates were held at negative 0.5 per cent for the deposit rate, zero per cent for the main refinancing rate and 0.25 per cent for the marginal lending rate.
The ECB is expected to increase rates by 25 basis points at its July meeting but it will be interesting to see its views on longer-term rates.
The US Dollar Index, a measure of the value of the greenback against a weighted basket of major currencies, crossed 105 for the first time in 20 years.
That’s a gain of almost 10 per cent in the first six months of 2022. I expect the upside move to continue through the summer months — technically, I am seeing a move towards 106.90 levels through the next two months.
Finally, July 11 sees the start of earnings season, where we will get a clearer insight into how companies are dealing with record high inflation.
Gaurav Kashyap is risk manager at Equiti Securities Currencies Brokers. The views and opinions expressed in this article are those of the author and do not reflect the views of Equiti Securities Currencies Brokers
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Director: Magizh Thirumeni
Stars: Ajith Kumar, Arjun Sarja, Trisha Krishnan, Regina Cassandra
Rating: 4/5
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Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem
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Stars: Brad Pitt, Tommy Lee Jones
Five out of five stars
The National Archives, Abu Dhabi
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en
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”.
TEACHERS' PAY - WHAT YOU NEED TO KNOW
Pay varies significantly depending on the school, its rating and the curriculum. Here's a rough guide as of January 2021:
- top end schools tend to pay Dh16,000-17,000 a month - plus a monthly housing allowance of up to Dh6,000. These tend to be British curriculum schools rated 'outstanding' or 'very good', followed by American schools
- average salary across curriculums and skill levels is about Dh10,000, recruiters say
- it is becoming more common for schools to provide accommodation, sometimes in an apartment block with other teachers, rather than hand teachers a cash housing allowance
- some strong performing schools have cut back on salaries since the pandemic began, sometimes offering Dh16,000 including the housing allowance, which reflects the slump in rental costs, and sheer demand for jobs
- maths and science teachers are most in demand and some schools will pay up to Dh3,000 more than other teachers in recognition of their technical skills
- at the other end of the market, teachers in some Indian schools, where fees are lower and competition among applicants is intense, can be paid as low as Dh3,000 per month
- in Indian schools, it has also become common for teachers to share residential accommodation, living in a block with colleagues
The specs: 2019 Haval H6
Price, base: Dh69,900
Engine: 2.0-litre turbocharged four-cylinder
Transmission: Seven-speed automatic
Power: 197hp @ 5,500rpm
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Fuel economy, combined: 7.0L / 100km
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
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7.05pm: Handicap Dh170,000 (D) 1,600m. Winner: Trenchard, Pat Dobbs, Doug Watson.
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8.50pm: Handicap Dh210,000 (D) 2,000m. Winner: Tried And True, Pat Dobbs, Doug Watson.
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What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
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Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
Rating: 4.5/5
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A State of Passion
Directors: Carol Mansour and Muna Khalidi
Stars: Dr Ghassan Abu-Sittah
Rating: 4/5
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Graduated from the American University of Sharjah
She is the eldest of three brothers and two sisters
Has helped solve 15 cases of electric shocks
Enjoys travelling, reading and horse riding
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Profile
Company: Justmop.com
Date started: December 2015
Founders: Kerem Kuyucu and Cagatay Ozcan
Sector: Technology and home services
Based: Jumeirah Lake Towers, Dubai
Size: 55 employees and 100,000 cleaning requests a month
Funding: The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.
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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.”
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