Looking back at the first six months of 2015 we see mixed fortunes in US and Middle East markets. Contrary to expectations, the United States had so-so economic figures in the first half of 2015, though disappointment was limited. The last of these mixed figures, for example, showed unemployment declining to 5.3%.
Point of view
The most important factors for the pressure on the markets are geopolitical and developments in the wars in Syria, Iraq and Yemen. They might continue to affect the markets.
Fed statements also periodically caused a wide range of fluctuations in the markets.
Though initial market expectations were high for the year, economic reports since the end of quantitative easing show estimates well below predictions.
Mixed 6 months for US
Forecasts for US growth in 2015 dropped from 3.1% at the end of 2014, to 2.4% in March, according to a group of American economists.
There was good and bad news in the most recent US jobs report. This became apparent as US stock earnings in the first quarter were lower due to a higher dollar value.
The US added 223,000 jobs in June, 10,000 less than had been forecast initially. However, unemployment fell to 5.3 percent from 5.5 percent, due in large part to a sharp decline in labour force participation, which sank to its lowest level since October 1977.
For more insight into the US economic data from the first half of the year, Daleen Hassan spoke to to Nour El deen al Hammoury, chief market strategist at ADS securities ABU DHABI .
Daleen Hassan: “Let’s start with the latest jobs report in the US, What was significant about this report?
Nour El deen al Hammoury:“The US jobs report showed positive and negative outcomes. The economy added less than expected jobs, while unemployment declined sharply, as the participation rate dropped significantly. The most important point in this report was wages growth. The estimates were to rise further but unfortunately it eased back to the lowest level since last year, which means that the slack that the Fed is talking about is still there, therefore the speculation for a rate hike in September has weakened further.
Daleen Hassan: “What are your predictions for the US economy in the second half of the year?
Nour El deen al Hammoury: “The outlook is neutral especially after Janet Yellen’s remarks on the latest Fed decision, as it failed to raise rates in June as promised, which raises new questions. However, it’s worth mentioning that the rising US dollar a negative factor for the economy and corporate earnings, which have already weakened and might even weaken further. This is what we will be watching next week as the earning season begins. Therefore, we would wait for further evidence before upgrading or downgrading our outlook.”
Stable amid a storm
Despite geopolitical tensions in the Middle East and the sharp decline of oil prices during the first half of the year, the region’s markets managed to remain stable, except for Egypt.
Many events have had a significant impact on Middle East and North African markets including turmoil in global stock markets and interest rate speculation in the US.
Saudi Arabia made significant gains in the first quarter, rising by 21%, but began a downward turn due to the Yemen war.
Dubai and Abu Dhabi markets have remained stable. However, they too slid at the beginning of Ramadan.
Saudi Arabia ended the first half up only 9%, despite opening its market to foreign investors. Egypt’s stock market fell to 6%, in spite of earlier optimism after the Sharm el-Sheikh conference.
The market saw losses after controversy over a new tax on capital gains in stock exchange transactions.
To find out why MENA markets remained relatively stable Daleen Hassan spoke to Nour al Hammoury in Abu Dhabi:
Daleen Hassan “Nour, as we mentioned MENA markets remain stable, but results from last year’s first half were better. How do you explain this, and do you think that the Egyptian market could recover in the second half?
Nour al Hammoury:“The global economy has had a choppy ride since the beginning of the year, compared with last year. But the events during this year heightened uncertainty across the Arab region. The most important factors for the pressure on the markets are geopolitical and developments in the wars in Syria, Iraq and Yemen. They might continue to affect the markets.
As for Egypt, we still believe that the market will be able to overcome the current declines. We should not forget that the situation in Egypt led investors to pull out their investments for a while, and, with the loss of revenue tax the market began to drop. However, the recent decline is seen as a normal correction before the upside trend resumes.”