SAUDI'S BUDGET DOWN
Most Middle Eastern stock markets declined amid mounting concern the region's largest economy will cut spending after oil prices slumped to the lowest since 2009.
The Tadawul All Share Index in Saudi Arabia, OPEC's biggest oil exporter, retreated as much as 2.4 percent before trading 0.4 percent lower at 1 p.m. in Riyadh. Al Rajhi Bank, which has the highest weighting on the gauge, led the drop with a 2.7 percent loss. Dubai's DFM General Index retreated 1.4 percent after gaining the most since December on Tuesday.
The Saudi government is working with advisers to reduce investments, two people familiar with the matter said yesterday, as the drop in oil prices over the last year has put a strain on the nation's finances. Crude sales generate about 90 percent of the government's revenue, which is then pumped back into its economy and serves as the main driver of company growth.
"The market is in a downtrend anyway because of already existing fears of a contractionary fiscal policy, and the news on the budget cuts from yesterday reaffirms that the outlook is still cloudy," said Riyadh-based Mohammed Al-Suwayed, the head of capital and money markets at Adeem Capital. "We still don't know what the fiscal policy for next year is going to be as the new king hasn't revealed his fiscal plans yet and might not do so till the end of the year."
One-year currency forward options for the riyal dropped 14 basis points, as traders reduced bets that the currency will weaken. The Saudi central bank pledged this week to keep the riyal's peg at 3.75 riyals per dollar, quieting speculation that the country would devalue its currency.
Brent crude has fallen 58 percent in the past 12 months to $43.28 a barrel, near the six-year low. The six-nations of the Gulf Cooperation Council are home to about 30 percent of the world's proven reserves and rely on income from oil to fund government spending.
Kuwait's measure fell 0.4 percent while Abu Dhabi's ADX General Index retreated 0.1 percent and Bahrain's BB All Share Index lost less than 0.1 percent. Oman's MSM30 Index rose 0.4 percent and Qatar's QE Index added 0.8 percent.
"We're in sell-first-ask-later season," said Ibrahim Masood, a money manager who helps oversee about $400 million at Aventicum Capital Management Qatar. "So cuts to the Saudi budget are as good a bet as any in this environment" to explain the drop, he said.
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IEA - For the third consecutive year, global energy investment declined, to USD 1.8 trillion (United States dollars) in 2017 – a fall of 2% in real terms. The power generation sector accounted for most of this decline, due to fewer additions of coal, hydro and nuclear power capacity, which more than offset increased investment in solar photovoltaics.
EIA - Crude oil production from the major US onshore regions is forecast to increase 143,000 b/d month-over-month in July from 7,327 to 7,470 thousand barrels/day , gas production to increase 1,066 million cubic feet/day from 69,466 to 70,532 million cubic feet/day .
U.S. FRB - Industrial production rose 0.6 percent in June after declining 0.5 percent in May. For the second quarter as a whole, industrial production advanced at an annual rate of 6.0 percent, its third consecutive quarterly increase. Manufacturing output moved up 0.8 percent in June.
U.S. DT - The sum total in May of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a net TIC inflow of $69.9 billion. Of this, net foreign private inflows were $58.8 billion, and net foreign official inflows were $11.1 billion.