After a week that began with talk of nuclear war and ended with Hurricane Irma, investors are not surprisingly struggling to deal with the deluge of risks that are now confronting them on an almost daily basis, and to price them correctly.
With the summer behind us but with only 10 days of September gone, the challenge of anticipating and calibrating the key factors that will define where markets go through the rest of this year is already immense. Geopolitical risks on the Korean peninsula and natural disasters across large areas of United States and the Caribbean may be at the extreme ends of the scale in terms of what markets usually think about, but it is perhaps no exaggeration to say that the most difficult challenge they face today is in making sense of events in Washington DC and what they will mean for fiscal policy, growth and interest rates.
Perhaps out of the wish to prioritise funds for dealing with the damage caused by Hurricane Harvey, the US president Donald Trump made a surprise intervention into the debt ceiling debate by agreeing to a Democratic Party proposal to extend the US$19.8 trillion debt limit for three months, against the wishes of his own Republican Party and overriding his own Treasury secretary Steve Mnuchen. In the process he has probably created more confusion and uncertainty than he has alleviated, and has aggravated existing concerns about his suitability to be in the White House.
While the avoidance of debt cliff at the end of this month might normally be seen as something to be welcomed, its mere postponement for just three months to the year-end is arguably a much worse scenario for markets and for the economy. Markets would rather get the issue over with now than have it hanging around for the rest of the year. It will only extend the period of uncertainty among investors, corporations and consumers; it will complicate the process of delivering meaningful tax reform; and it will reduce the chances of other key legislation being achieved this year and perhaps even next.
All of this will cast renewed doubt on the outlook for the economy, which also now has severe hurricane damage to deal with, and which will in turn make the job of the Fed much harder when it comes to setting an appropriate level for interest rates. This job had already gotten more complicated by the departure of senior Fed officials, including now its vice chair Stanley Fischer.
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Furthermore, it will probably make worse the already deteriorating relationship between Mr Trump and his own Republican Party, and will cast renewed doubt on his ability to withstand the findings of the Russia investigation which looks set to come to a head in 2018. Overlaying all of this with enormous geopolitical tensions and grave ecological challenges makes the job of pricing these risks very difficult.
With so much noise and uncertainty emanating from the US and especially Washington, it was probably a relief towards the end of week for the markets to be able to focus on a more dependable institution such as the European Central Bank (ECB). Monetary policy setting by the ECB is seldom exciting, and this time it did not have to be as the markets already had enough excitement from events elsewhere. In the event the ECB president Mario Draghi said very little beyond what was known already or was guessed at; that the ECB will set out its plans to end its €60 billion (Dh290.99bn) per month QE stimulus programme next month, and that the euro-zone economy is gathering strength. A nod was made to the problems posed by a strong euro, with a slightly downgraded inflation outlook, but the fact that the ECB appears to be in control of its own destiny with an orderly tapering of QE purchases anticipated was sufficient for the euro to rally.
However, it was the contrast with the uncertainty in the US that was probably the real reason for EUR/USD’s positive response, as the dollar’s weakness is not just a euro phenomenon. EUR/USD strength has more to do with US yields going down, causing broad dollar selling, rather than anything that Mr Draghi said or did not say about monetary policy. And until the US picture becomes less noisy, chaotic and confused it is hard to imagine that the dollar’s predicament is going to change anytime soon.
Tim Fox is Chief Economist and Head of Research at Emirates NBD
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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The Facility’s Versatility
Between the start of the 2020 IPL on September 20, and the end of the Pakistan Super League this coming Thursday, the Zayed Cricket Stadium has had an unprecedented amount of traffic.
Never before has a ground in this country – or perhaps anywhere in the world – had such a volume of major-match cricket.
And yet scoring has remained high, and Abu Dhabi has seen some classic encounters in every format of the game.
October 18, IPL, Kolkata Knight Riders tied with Sunrisers Hyderabad
The two playoff-chasing sides put on 163 apiece, before Kolkata went on to win the Super Over
January 8, ODI, UAE beat Ireland by six wickets
A century by CP Rizwan underpinned one of UAE’s greatest ever wins, as they chased 270 to win with an over to spare
February 6, T10, Northern Warriors beat Delhi Bulls by eight wickets
The final of the T10 was chiefly memorable for a ferocious over of fast bowling from Fidel Edwards to Nicholas Pooran
March 14, Test, Afghanistan beat Zimbabwe by six wickets
Eleven wickets for Rashid Khan, 1,305 runs scored in five days, and a last session finish
June 17, PSL, Islamabad United beat Peshawar Zalmi by 15 runs
Usman Khawaja scored a hundred as Islamabad posted the highest score ever by a Pakistan team in T20 cricket
MATCH INFO
Europa League final
Marseille 0
Atletico Madrid 3
Greizmann (21', 49'), Gabi (89')
The specs
Engine: 3.0-litre six-cylinder MHEV
Power: 360bhp
Torque: 500Nm
Transmission: eight-speed automatic
Price: from Dh282,870
On sale: now
Everton%20Fixtures
%3Cp%3EApril%2015%20-%20Chelsea%20(A)%3Cbr%3EApril%2021%20-%20N.%20Forest%20(H)%3Cbr%3EApril%2024%20-%20Liverpool%20(H)%3Cbr%3EApril%2027%20-%20Brentford%20(H)%3Cbr%3EMay%203%20-%20Luton%20Town%20(A)%3Cbr%3EMay%2011%20-%20Sheff%20Utd%20(H)%3Cbr%3EMay%2019%20-%20Arsenal%20(A)%3C%2Fp%3E%0A
Brief scoreline:
Tottenham 1
Son 78'
Manchester City 0
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
Specs
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Company%20Profile
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Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
Joker: Folie a Deux
Starring: Joaquin Phoenix, Lady Gaga, Brendan Gleeson
Director: Todd Phillips
Rating: 2/5
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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Playing records of the top 10 in 2017
How many games the top 10 have undertaken in the 2017 ATP season
1. Rafael Nadal 58 (49-9)
2. Andy Murray 35 (25-10)
3. Roger Federer 38 (35-3)
4. Stan Wawrinka 37 (26-11)
5. Novak Djokovic 40 (32-8)
6. Alexander Zverev 60 (46-14)
7. Marin Cilic 43 (29-14)
8. Dominic Thiem 60 (41-19)
9. Grigor Dimitrov 48 (34-14)
10. Kei Nishikori 43 (30-13)
Company%20profile
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Thank You for Banking with Us
Director: Laila Abbas
Starring: Yasmine Al Massri, Clara Khoury, Kamel El Basha, Ashraf Barhoum
Rating: 4/5
More from Armen Sarkissian
The specs
Engine: 1.5-litre 4-cylinder petrol
Power: 154bhp
Torque: 250Nm
Transmission: 7-speed automatic with 8-speed sports option
Price: From Dh79,600
On sale: Now
ICC T20 Rankings
1. India - 270 ranking points
2. England - 265 points
3. Pakistan - 261 points
4. South Africa - 253 points
5. Australia - 251 points
6. New Zealand - 250 points
7. West Indies - 240 points
8. Bangladesh - 233 points
9. Sri Lanka - 230 points
10. Afghanistan - 226 points