Risk sentiments have improved in the past few weeks with many markets, particularly equity markets, continuing to consolidate. At the time of writing, the Dow Jones index futures contract, set to expire on June 19, was trading at 24,000 levels, which is just off this month's highs of 24,323.
This represents a more than 32 per cent move higher from those 18,000 lows of a month ago. It was a similar picture for the S&P Index, which is now trading just below the 2900 handle, up more than 11 per cent on the month and 32 per cent higher than the March lows.
First quarter revenue is expected to be lower when compared to the fourth quarter of last year and keep an eye on the variance in the earnings per share, which are all expected to come in worse.
With a lot of the recent upward momentum derived from central bank easing measures, this week will be a key test of the equity markets. As we enter the first quarter earnings season, watch for a few key releases from tech heavyweights such as Alphabet, Amazon, Apple and Microsoft. Also set to announce are plane maker Boeing and oil and gas company Exxon.
First quarter revenue is expected to be lower when compared to the fourth quarter of last year and keep an eye on the variance in the earnings per share, which are all expected to come in worse. While the US went into lockdown towards the end of the first quarter, the results will no doubt paint a more accurate picture of the economic situation for corporations and should stall some of the recent rises seen in the major US stock indices.
This week also sees the release of the first quarter US gross domestic product data. Quarter-on-quarter growth during the first three months of the year is expected to contract by 4 per cent compared to a year ago. The decline should come as no surprise and there are expectations for a slower contraction in the US than China. The second largest economy showed a drop of 6.8 per cent in their first-quarter growth. Note, however, that the pandemic dominated more of China's first quarter than it did for the US, so expect this data to be another hindrance in the recent US stock market rally.
The other key release for US markets this week will be the US Federal Reserve's rate decision. Perhaps the most critical Federal Open Market Committee meeting in recent memory, markets will keenly wait for Fed chairman Jerome Powell’s comments. The Fed have remained rather tight-lipped since the outbreak, and while I don’t foresee any changes in overall rates, further easing measures could be on the table.
In March, I wrote that the US Dollar Index would consolidate at about 100 and that’s what it has done in April. Further easing measures from the Fed could see some short-term weakness for the dollar, but overall I see the index holding above 100 through the weeks ahead.
The European Central Bank is also announcing rates this week. ECB president Christine Lagarde has already said the eurozone economy could contract by as much as 15 per cent, so expect a bearish press conference on Thursday with more easing measures unveiled. April has not been favourable for euro long positions; the Dubai Gold and Commodities Exchange (DGCX) EUR/USD contract was trading at more than 2 per cent lower on the month. I continue to favour short positions in the euro and expect a move towards as low as $1.0632 before the end of the second quarter.
With the recent risk rally, gold has come off its seven-and-a-half year high, however, gold still remains the safest play along with the US dollar. On March 31, I gave a buy call in the precious metal with a target of $1,703 which was easily filled by April 13. I continue to like long positions in the commodity, and expect another run towards the channel between $1,735 and $1,750 in the next two weeks. Long-term support kicks in between $1,580 and $1,600 levels.
And finally, all eyes will move back to WTI, with the June contract set to expire on May 19. Last week, the May contract famously traded in negative territory – printing as low as minus $37 a barrel – because traders sold off the contract to avoid delivery as a result of storage strains.
With Cushing, Oklahama, the delivery point of the CME’s WTI contract already filled to 70 per cent of capacity, the storage strain will continue to rile crude-long positions leading up to delivery. The largest US crude exchange traded fund, the United States Oil Fund, dumped its June positions this week which has seen the June crude contract move towards $10 a barrel at the time of writing, down more than 64 per cent on the month. Expect further downsides as we move towards the middle of May, with a test of $5 a barrel very much on the cards.
Gaurav Kashyap is a market strategist at Equiti Global Markets. The views and opinions expressed in this article are those of the author and do not reflect the views of Equiti
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The specs
Engine: 6.2-litre V8
Transmission: ten-speed
Power: 420bhp
Torque: 624Nm
Price: Dh325,125
On sale: Now
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
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.”
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
UAE SQUAD FOR ASIAN JIU-JITSU CHAMPIONSHIP
Men’s squad: Faisal Al Ketbi, Omar Al Fadhli, Zayed Al Kathiri, Thiab Al Nuaimi, Khaled Al Shehhi, Mohamed Ali Al Suwaidi, Farraj Khaled Al Awlaqi, Muhammad Al Ameri, Mahdi Al Awlaqi, Saeed Al Qubaisi, Abdullah Al Qubaisi and Hazaa Farhan
Women's squad: Hamda Al Shekheili, Shouq Al Dhanhani, Balqis Abdullah, Sharifa Al Namani, Asma Al Hosani, Maitha Sultan, Bashayer Al Matrooshi, Maha Al Hanaei, Shamma Al Kalbani, Haya Al Jahuri, Mahra Mahfouz, Marwa Al Hosani, Tasneem Al Jahoori and Maryam Al Amri
The candidates
Dr Ayham Ammora, scientist and business executive
Ali Azeem, business leader
Tony Booth, professor of education
Lord Browne, former BP chief executive
Dr Mohamed El-Erian, economist
Professor Wyn Evans, astrophysicist
Dr Mark Mann, scientist
Gina MIller, anti-Brexit campaigner
Lord Smith, former Cabinet minister
Sandi Toksvig, broadcaster
Electric scooters: some rules to remember
- Riders must be 14-years-old or over
- Wear a protective helmet
- Park the electric scooter in designated parking lots (if any)
- Do not leave electric scooter in locations that obstruct traffic or pedestrians
- Solo riders only, no passengers allowed
- Do not drive outside designated lanes
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The specs: 2019 Mini Cooper
Price, base: Dh141,740 (three-door) / Dh165,900 (five-door)
Engine: 1.5-litre four-cylinder (Cooper) / 2.0-litre four-cylinder (Cooper S)
Power: 136hp @ 4,500rpm (Cooper) / 192hp @ 5,000rpm (Cooper S)
Torque: 220Nm @ 1,480rpm (Cooper) / 280Nm @ 1,350rpm (Cooper S)
Transmission: Seven-speed automatic
Fuel consumption, combined: 4.8L to 5.4L / 100km
