Markets

Markets have been driven in opposite directions by the Irish bail out and some positive news on US jobs and German Ifo. However the net result is still negative. Regional markets also mirrored the global trend, with only the Abu Dhabi market registering a small 0.5% rise from last week. The euro came under renewed pressure with investor concerns on Portugal and Spain debt while oil and gold prices rose on renewed contagion worries.

Global Developments

Americas:

• US Q3 GDP was revised up to 2.5% qoq annualized, from an earlier estimate of 2.0%.
• Weekly jobless claims dropped to 407K against expectation 435K and a previous figure of 441K.
• US core inflation rose a record low of 0.9% yoy in October; core PCE index remained flat.
• US real disposable income rose 0.3% mom in Oct against a 0.2% drop in Sep., while personal income rose 0.5%, slightly above expectations, and up from flat a month earlier.
• Sales of new single-family homes in the US fell 8.1% in Oct. to a seasonally adjusted annual rate of 283,000 while durable goods orders dropped 3.3% mom — the largest decline since January 2009 — as a result of a slump in transportation items, which offsets the 5.0% increase recorded a month earlier.
• US Consumer sentiment in Nov. rose to 71.6 from 69.3 in Oct., beating expectations of almost no change.

Europe:

• The EU offered the Irish government a EUR 90bn bailout plan to fend off a speculative attack triggered by the insolvency of the major Irish banks. Eurozone finance ministers meet today in Brussels to discuss the conditions of the loan package.
• Germany Q3 GDP grew 0.7% qoq, while Q2 GDP was revised up to 2.3%. Consumer spending went up 0.4% for the third consecutive quarter, alongside 1.1% rise in government consumption expenditure.
• German Ifo rose for the sixth consecutive month in Nov to a record high 109.3 from a revised 107.7 in Oct, as firms grew more optimistic regarding both the current situation and the six-month outlook.
• Flash PMI in the Eurozone bounced to 55.2 in Nov (Oct: 53.3) largely due to a strong resurgence in private sector growth in Germany and France. Meanwhile, Sep’s new industrial orders fell 3.8% mom - with the largest monthly drop of 6.3% recorded in durable goods orders - compared with Aug’s revised 5.1%.

Asia and Pacific:

• Thailand slipped into a second consecutive quarter of contraction as Q3 GDP shrank by 0.2%, thanks to weak exports and domestic consumption, following a revised drop of 0.6% in Q2.
• Malaysia’s GDP expanded 5.3% yoy in Q3 (Q2: 8.9%), driven by domestic demand amid slowing exports.
• Philippines GDP clocked in 6.5% yoy growth in Q3, a lower rate compared to Q2’s 8.2%. Private consumption grew at a healthy 4.2%, on strong remittance inflows, rising employment and incomes.
• Taiwan’s industrial production climbed 14% yoy in Oct (Sep: 12%) on rising rising demand from China.
• Singapore’s Oct industrial production rose at the fastest pace in five months, growing 31% yoy (Sep: 26.8%), on a surge in the volatile pharma sector (121.4%), offsetting the drop in electronics (12.9%, Sep: 28%).

Bottom line:

The US economy seems to have gained at last some traction in the labor market, while incomes are edging up, but other data continue to portray a mixed picture: specifically, real estate remains depressed. Overall the recovery remains fragile and months of political uncertainty ahead are discouraging investments. In Europe, Germany and its neighboring countries are in full rebound, but the periphery is swept by financial chaos with Ireland taking the brunt and Portugal, Spain and Italy (not to mention Greece) coming closer to the line of fire.

Regional Developments

• High oil prices are hindering economic recovery and it would not be in the interest of the OPEC to see oil above $90 per barrel, the chief economist of the International Energy Agency, Fatih Birol told Reuters.
• KSA King Abdullah is being treated in New York for a blood clot and slipped disc. Crown Prince Sultan, who suffered earlier from unspecified ailments, returned to Riyadh after over two months in Morocco.
• Oman is expected to set a growth target of at least 3% in its upcoming 5-year development plan starting in 2011 after real GDP growth stood at 12.8% in 2008 and nearly 7.3% in 2009 with forecast for 2010 at 6.1%.
• Kuwait's Oct inflation rate stood at 5.1%, as foodstuff soared by 10.6% compared to Oct ‘09.
• The GCC common market is expected to create nearly 2.75 mn new jobs and increase economic growth by 2.15%, also increasing efficiency and competitiveness, reducing production costs, and depressing prices.
• Middle East carriers saw the strongest passenger growth at 18% yoy in Oct, outpacing global demand growth of 10.1%, according to IATA. International freight saw a 14.4% increase in Oct, marginally weaker than the 15.5% recorded in Sept.
• Palestine hopes to issue US dollar-denominated sovereign bonds next spring and sukuk deals before April 2011 through the Palestine Monetary Authority (PMA), targeting primarily Gulf investors.

UAE Focus

• The UAE ranked first in the Gulf region in terms of bonds value traded on the international market, with $55bn worth of bonds. Qatar has ranked second with $23bn, according to a study based on BIS data.
• Dubai Islamic Bank plans to launch UAE's first REIT - its size expected to be at least EUR 1bn during its lifespan - in a move to rekindle the Dubai property market. The REIT will be listed on Nasdaq Dubai and will have a secondary listing either in Europe or Asia, with up to 49% open to overseas investors.
• Al Murjan Real Estate, developer of a $3 bn housing project in Umm Al Quwain, has filed for bankruptcy. This case and its settlement will set important precedents in the UAE creating a framework for what investors and other creditors can expect if other property developers default.
• The Government of Dubai met investors in Malaysia last week on completing a ringgit-denominated transaction. If completed, it would be the first time a sovereign has priced a Sukuk in MYRs.
• A report on Dubai’s debt maturities through 2011 by JP Morgan highlights that the entities can expect limited direct support from the Dubai government as these relate to entities that are engaged in investment or operational activities that do not appear strategic or critical for Dubai.
• UAE banks need to attract nearly AED 40bn in new deposits to expand their financial resources to cut rates and bridge a gap between loans and deposits, according to the UAE Central Bank Governor.

Market Snapshot as of 11/28/2010 at 8:30am (all % figures are weekly changes from Nov 21st (MENA) & Nov 19th (Foreign)

Source: Bloomberg, DIFC Economics.