Daily Macroeconomic Outlook - 2 November 2016

There was a clear risk-off tone in financial markets overnight, as uncertainty around the outcome of next week’s US elections increased.  A poll by ABC News/ Washington Post put Donald Trump one percentage point ahead of Hillary Clinton following the FBIs announcement last Friday that it was re-opening the Clinton e-mail investigation.  Safe-haven currencies JPY and CHF rallied and gold prices rose while equities sold off.  Markets shrugged off better than expected US manufacturing data, with the ISM Manufacturing index rising to a 3-month high in October.  Today’s big event is the FOMC rate decision, where the probability of a rate hike has declined to just over 16% from more than 20% a month ago. 

Elsewhere the BoJ pushed back the timeframe for achieving their 2% inflation target to 2019, narrowing the gap between the BoJ’s and private sector inflation forecasts.  Despite this, the BoJ kept monetary policy unchanged yesterday, with Governor Kuroda indicating that weaker inflationary pressures were mainly due to external factors such as low oil prices and slower global growth. 

In the GCC, Dubai has reportedly hired HSBC to help raise USD 3bn to finance airport expansion in the coming years.  Plans to expand Al Maktoum Airport to become the new hub for Emirates airlines by 2025 have been approved.  Initial estimates put the total cost of the project at USD 32bn.  Investment in transport, logistics and tourism infrastructure is expected to underpin Dubai’s economic growth over the next 5 years. 

Separately, the King of Saudi Arabia has appointed a new Finance Minister, Mohammed Al Jadaan, who was previously head of the Capital Markets Authority and oversaw the recent opening of the kingdom’s capital markets for direct foreign investment.  Mr Jadaan is expected to push ahead with budget reforms outlined in the Vision 2030 and National Transformation Plan, including spending cuts and increased non-oil revenues.