Colors: Orange Color

Commodities remained exposed to broad-based selling this past week. For a third consecutive week, the sector struggled to put up a defence against the challenging combination of rising US interest rates, a strong dollar and the global equity rout, which has now spread to the US market.

The trading activity in the UAE markets ended on a negative note, as both Dubai and Abu Dhabi closed lower by 0.4% and 0.5%, respectively for the day. Investors are awaiting earnings announcement from leading corporates to gauge the economic environment and accordingly position themselves in both the indexes. On a YTD basis, Dubai stands as the worst performing index in the region with losses of 19.4%, while Abu Dhabi is the second-best performing index with gains of 10.8%.

Bahrain’s headline real growth rate increased sharply in the second quarter of 2018 to an annual rate of 2.4%. The data published in the Bahrain Economic Quarterly Report (BEQ), produced by the Bahrain Economic Development Board (EDB), shows a significant acceleration of growth from the previous quarter. This rebound was underpinned by both the normalisation of oil production and markedly faster non-oil growth.

The US Treasury market set the investment world on edge in early October when long US Treasury yields climbed to new multi-year highs – the US 10-year benchmark cleared 3.13% for the first time in more than seven years, and the big 30-year T-bond yield passed the massive 3.25% yield for the first time since early 2014, a level it had approached on no less than four occasions since late 2016. Driving the move was a spate of strong US data and Federal Reserve chair Jerome Powell suggesting that the Fed funds rate is “nowhere near neutral” in offhand comments. The reactivity of the US dollar to developments in US yields has been an on-again, off-again affair, but a sharp rise in US yields in late Q3, after strong wage inflation data were reported for August, resulted in a weaker dollar for much of September.

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