THREE REA­SONS WHY

Tar­iffs, oil, cur­rency and in­ter­est rates... ev­ery­thing is in flux, and the out­look for 2019 is look­ing soft, if not bleak

Arabian Business English - - CONTENTS -

The out­look for the global econ­omy in 2019 is look­ing set to be soft and chal­leng­ing

Oil’s tur­moil

Oil crossed $80 for the first time in four years in Oc­to­ber. Then, a rag­ing US Pres­i­dent on Twit­ter led to an over-sup­plied and over­sold mar­ket, caus­ing prices to crash by 30 per­cent in seven weeks to un­der $50. Some OPEC members say they are fine with cur­rent prices, but Saudi and Rus­sia have in­di­cated a pro­duc­tion cut could be in or­der. Mean­while, Qatar an­nounced it will quit Opec in Jan­uary, and Iran is threat­en­ing sup­ply lines.

Mul­ti­ple head­winds

Pro­longed weak­ness in emerg­ing mar­kets due to a strong dol­lar and Sino-US trade ten­sions are just two of sev­eral is­sues that en­cour­aged the IMF to down­grade global growth fore­casts for 2019. With the Ger­man econ­omy con­tract­ing for the first time since 2015, there are mul­ti­ple head­winds “that the global econ­omy is ex­pected to en­counter over the up­com­ing pe­riod,” says FXTM an­a­lyst Jameel Ahmed.

Bonds are un­rav­el­ling

The US two-year and five-year yield curve in­verted for the first time since the fi­nan­cial cri­sis in 2007. In­ver­sions of the yield curve have pre­ceded many US re­ces­sions. “Al­though we do see signs of U.S. eco­nomic slow­down, I don’t think we’re near hit­ting a re­ces­sion yet,” says FXTM an­a­lyst Hus­sein Say­eed. How in­vestors will re­main alert as the Fed looks to is near the end of its mone­tary tight­en­ing pol­icy.

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