Saxo Bank Urges Caution for Middle East Amid Global Economic Uncertainty

UAE, 19 July, 2024 : Saxo Bank has urged the Middle East to adopt a cautious approach due to global economic fragility. Damian Hitchen, CEO of Saxo Bank MENA, noted the region faces challenges from persistent inflation and geopolitical uncertainties but sees opportunities in robust demand for energy and agriculture. 

Sector Insights

Saxo Bank's Q3 outlook predicts that metals will consolidate, while the energy and agriculture sectors are expected to drive growth. This forecast is supported by Opec production limits and weather-driven supply issues in grains. Despite a robust economic performance in sectors like defense, AI, and obesity drug manufacturing, Saxo warns of underlying threats such as unsustainable US fiscal spending and geopolitical risks.

Economic Concerns

Peter Garnry, Saxo’s chief investment strategist, describes the current economic growth as a "sandcastle economy," indicating its precarious nature. He highlights the disparity between thriving and struggling sectors, which complicates monetary policy and contributes to persistent inflation.

Commodities and Equities

Saxo Bank anticipates continued support for energy and grains, with a temporary pause in metals like gold and copper. In equities, current market trends resemble the speculative behavior of 2021, raising concerns about potential bubbles. European equities are expected to benefit from recent ECB rate cuts and growth rebounds.

Fixed Income and FX

Fixed income yields are projected to remain stable as inflation trends are monitored. Saxo recommends focusing on high-quality credit and short-term duration bonds. In foreign exchange, high-beta currencies like AUD and NZD may outperform, while low-yielding currencies such as JPY and CHF might underperform against a bearish USD trend. 

Saxo Bank advises a cautious stance amidst these evolving economic conditions.

Source : www.zawya.com