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Emerging Markets Daily - Sep 26/27
Oil Pops as Energy Crunch Looms, Center-Left Wins German Election, China Risk and Emerging Markets, UAE-India Economic Ties, Nigeria Employment and Covid-19
The Top 5 Stories Shaping Emerging Markets from Global Media - Sept 26-27
Oil Extends Gain as WTI Jumps $75 on Global Energy Crunch
“Oil rallied at the start of the week’s trading on signs that the crude market is tightening amid a global energy crunch.”
“West Texas Intermediate topped $75 a barrel after a run of five weekly gains, while Brent reached the highest level since October 2018. Prices are set to continue rallying as supply struggles to catch up with fast-rising demand, according to Trafigura Group’s co-head of oil trading Ben Luckock. His remarks came on the same day that Goldman Sachs Group Inc. said Brent could hit $90 a barrel by year-end as the market is in a bigger deficit than many realize.”
“Crude is rallying on signs that inventories globally are falling sharply, with demand hotting up ahead of winter and OPEC+ only slowly adding barrels back to the market. As traders eye the prospect of large market deficits, Trafigura said longer-dated oil prices remain cheap at around $70 a barrel. So-called timespreads, which gauge market strength, have rallied sharply in recent weeks in another sign that traders are positive about the outlook.” Saket Sundria and Alex Longley report.
Center-Left Party Wins German Elections As Merkel Era Ends
“Germany's centre-left Social Democrats (SPD) have claimed victory in the federal election, telling the party of outgoing Chancellor Angela Merkel it should no longer be in power.”
“SPD leader Olaf Scholz said he had a clear mandate to form a government, while his conservative rival Armin Laschet remains determined to fight on. The two parties have governed together for years. But Mr Scholz says it is time for a new coalition with the Greens and liberals.”
“Preliminary results gave his party a narrow election win over the conservatives who suffered their worst-ever performance. The Greens and pro-business FDP attracted the most support from the under-30s, in an election dominated by climate change and by differing proposals on how to tackle it. The Greens made history with almost 15% of the vote, even though it was well short of their ambitions.”
“It was the tightest race in years, bringing an end to the post-war domination of the two big parties - Mr Scholz's SPD and his rival's conservative Christian Democratic Union (CDU).” Paul Kirby reports.
China Slowdown Biggest Risk for Emerging Markets
“Emerging-market investors are about to find out whether there’s more to worry about in China than just the Evergrande debt crisis.”
“Official and private gauges of Chinese manufacturing are due out Thursday, with expectations they’ll add to evidence of sputtering growth. Concerns that the world’s second-biggest economy is slowing have hobbled the currencies and stocks of developing nations in recent weeks, erasing gains sparked by the U.S. Federal Reserve’s assurance of a calibrated tapering of its stimulus measures.”
“China has now emerged as their biggest risk. While Evergrande has sparked fears of a property-market slowdown, investors worry even more about the stalling of the broader economy due to virus curbs and spending cuts by consumers. Some are looking to diversify into markets less reliant on China’s growth, such as India and Egypt.”
“‘The risks of contagion and further slowing in the property sector are genuine,’ Goldman Sachs Group strategists, led by London-based Kamakshya Trivedi, wrote in a note last week. ‘However, for the rest of emerging markets, what matters more is the negative impact on Chinese growth, and by extension commodity prices, and whether policy makers step in to offset those downside risks.’”
“This week’s Chinese data will also act as a barometer of demand for commodities such as oil and copper, which exporting nations from Angola to Peru depend on to drive their own growth.”
“The Caixin gauge of China’s factory activity showed a contraction for August, the first reading below 50 since April 2020. The official measure of manufacturing has declined for five successive months. Retail sales, industrial production and investment have all slowed, confirming the deceleration.” Bloomberg reports via Yahoo Finance.
UAE, India Set Goal of $100 Billion Non-Oil Trade in Five Years
“The UAE and India have held ‘productive’ talks on the Comprehensive Economic Partnership Agreement, which aims to boost the value of non-oil trade between the two nations to $100 billion in five years.”
“The UAE delegation, led by Thani Al Zeyoudi, Minister of State for Foreign Trade, began four days of talks in India last week as the two sides seek ways to strengthen economic ties, the Ministry of Economy said on Sunday.”
“UAE officials held several rounds of discussions including talks with India’s Finance Minister Nirmala Sitharaman, Commerce and Industry Minister Piyush Goyal, Minister of Civil Aviation Jyotiraditya Scindia and Minister of Electronics and Information Technology Ashwini Vaishnaw.”
“The CEPA should be seen as a natural extension of the long-standing relationship between the two countries, Mr Al Zeyoudi said…The UAE minister emphasised the rapid growth of the UAE’s FinTech sector during his meeting with Ms Sitharaman and said the two sides should explore how the CEPA can further boost engagement in the sector.” Sarmad Khan reports.
Covid-19 Led to 20% of Nigeria’s Workforce Losing Their Jobs
“The United Nations Development Programme and the National Bureau of Statistics, has said that 20% of Nigeria's full-time workforce lost employment during the Covid-19 pandemic in 2020.”
“The report, ‘The Impact of Covid-19 on Business Enterprises In Nigeria’ surveyed 3,000 businesses across both formal and informal sectors in urban and rural areas. It highlighted the devastating impact the pandemic has had on the nation's unemployment rate.”
“The report found that many businesses, particularly informal ones, said they had difficulty accessing credit and capital to keep their doors open, with many owners having to rely on personal savings, family, and social networks to stay afloat.”
“Prior to the Covid-19 outbreak, the Nigerian economy faced a lingering crisis for years with inflation reaching a four-year high by February 2021. The coronavirus pandemic that hit in 2020, slashing the country's oil revenue and lead to businesses shutting down and the retrenchment of employees.”
“In January 2021, Nigeria launched a much-delayed programme that promises to provide jobs for more than 750,000 young people amid worsening youth unemployment. Experts say the number of people looking for employment will keep rising, as population growth continues to outpace output expansion in Nigeria.” AllAfrica.com reports.
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