NEW YORK: Stock markets worldwide climbed while safe-haven gold and Treasury bonds fell as investors largely shrugged off the first partial shutdown of the US government in 17 years on bets that it would be short-lived.
Congress missed a midnight deadline to agree on a spending bill, resulting in up to 1 million workers being put on unpaid leave. No signs of compromise emerged immediately as the Democratic-controlled Senate formally rejected an offer by House of Representatives Republicans to break the logjam.
Equities had fallen ahead of the shutdown, and some market participants view any pullback as a buying opportunity. Previous shutdowns haven’t had much of an impact on portfolios.
MSCI’s world equity index, which tracks shares in 45 countries, rose 0.5 percent to 384.08; it has fallen 1.4 percent since its recent high on Sept. 19.
“If this is short like most of them have been, it won’t really change much as far as the fundamentals. Thus we are still pretty bullish on US stocks,” said Mike Serio, regional chief investment officer for Wells Fargo Private Bank in Denver. “However, if this does go on for a long time, we may have to go back and revisit our GDP growth number at some point.”
The picture becomes cloudier as the United States approaches Oct. 17, when the country hits its $16.7 trillion borrowing limit that will force legislators to pass a bill increasing the federal government’s borrowing authority. Failure to do so would technically cause a default. A similar fight that resulted in a late agreement in 2011 ended up sparking a credit rating downgrade and a 19 percent selloff in US stocks.
Concern about the possibility of a default was seen after Tuesday morning’s weak auction of four-week Treasury bills, which sold at their highest rate in 10 months. These bills mature after the debt ceiling would be breached, so the 0.12 percent rate is suggestive of worries.
Some Republicans have vowed to make raising the debt limit conditioned on defunding President Barack Obama’s health care reforms, as they did with the spending bill.
“This is going to be much more important because a failure to extend the debt ceiling would stop coupon payments on bonds, creating a technical default that would cause a riot in bond markets,” said Richard Lewis, head of global equities at Fidelity Worldwide Investment.
The Dow Jones industrial average gained 59.53 points, or 0.39 percent, to 15,189.20. The Standard & Poor’s 500 Index rose 12.87 points, or 0.77 percent, to 1,694.42. The Nasdaq Composite Index added 39.22 points, or 1.04 percent, to 3,810.70.
A review by Bank of America-Merrill Lynch of 17 government shutdowns since 1976 showed that in the month prior to a government shutdown, the stock market gained 0.1 percent.
During a shutdown it dipped 0.8 percent, and then bounced, gaining about 1.1 percent in the month following a shutdown.
BofA-Merrill strategists see any significant decline as a buying opportunity, though they cautioned that a protracted fight over the debt limit could add more short-term risk.
The benchmark 10-year US Treasury note fell 6/32 in price, yielding 2.635 percent as traders reduced their safe-haven bond holdings after recent rallies.
Gold slid below $1,300 per ounce to its lowest level since early August, unwinding much of the gain built up before the shutdown. Spot gold fell to $1,288 an ounce from $1,326.94.
Fitch Ratings reiterated that a partial shutdown of the US government is not itself a trigger for downgrading its AAA sovereign credit rating, but it does undermine confidence in the budget process and raises concerns over whether the debt ceiling will be raised to meet US financial obligations.
If the debt ceiling is not raised in time, Fitch said a formal review of the AAA rating “with potentially negative implications” would be triggered, even though it believes US Treasury securities will be honored in full and on time.
The dollar slipped on concern the shutdown would further delay the US Federal Reserve’s plans to start scaling back its monetary stimulus. The dollar fell to a near eight-month low against a basket of six currencies and hit a 1-1/2-year low against the safe-haven Swiss franc.
The dollar pared most losses after data showed the US manufacturing sector last month expanded at its fastest pace in almost 2-1/2 years.
“We do not know how long this impasse in the US will last. If it persists, there is a chance it will hurt economic growth and affect chances of Fed tapering,” said Daragh Maher, strategist at HSBC. “In the short term, it’s better to avoid the dollar.”
The release of the government’s report on construction spending in August, which had been scheduled for 10 a.m, was delayed because of the shutdown. If no deal is reached by Friday, the closely watched monthly payrolls report will also be delayed.
Oil prices edged lower on concern that a shutdown of the US government will crimp demand, while easing tensions in US-Iran nuclear talks boosted prospects for an increase in supply. Brent crude fell 55 cents to $107.82 a barrel. US crude lost 33 cents to $102.
Europe’s broad FTSEurofirst 300 index gained 0.7 percent to close at 1,255.97.
Stocks rise after US shutdown; gold, Treasuries tumble
Stocks rise after US shutdown; gold, Treasuries tumble
Saudi Arabia launches company to transform Asir into global tourism hub
RIYADH: Saudi Arabia’s Asir region has launched a new tourism venture through a partnership with the aim of creating a holding company to transform the area into a global tourist destination.
The collaboration between Aseer Investment Co., a subsidiary of the Public Investment Fund, and Rikaz Real Estate, aligns with the goal of transforming Asir into a world-class tourist destination that combines authentic heritage with sustainable development, according to the Saudi Press Agency.
The holding company seeks to contribute to enhancing a tourism environment that enriches guests’ experiences with unique offerings, connecting visitors to local culture and community traditions, SPA reported.
It is also committed to promoting sustainable tourism by protecting the environment, developing local communities, and collaborating with artisans and local businesses to preserve the authenticity of Asir’s heritage.
In October, the Kingdom’s Abha city secured a new investment partnership to boost tourism by developing culturally rich dining and retail experiences.
PIF firm Aseer Investment Co. signed the deal with Nimr Real Estate and the National Co. for Tourism, or Syahya, to propel the project, the Saudi Press Agency reported.
This aligns with the objectives of developing Abha, which will offer a range of benefits, including retail stores that reflect the cultural heritage of the Asir region.
The partnership also seeks to be a model for multiple collaborations with private sector investors and create more regional job opportunities.
Investments in the region are expected to create between 14,000 and 18,000 job prospects and contribute to up to 6 percent of the non-oil gross domestic product within 10 years, as outlined by AIC Chief Executive Osama Al-Othman in February.
Saudi Arabia emerged as a leader in tourism growth among G20 nations, experiencing a 73 percent increase in international visitors in the first seven months of 2024 compared to 2019.
According to the UN World Tourism Barometer report in September, the Kingdom welcomed 17.5 million international tourists during this timeframe, showcasing its growing allure as a global travel destination.
This surge is part of the nation’s Vision 2030 initiative, which aims to diversify the economy and reduce dependence on oil revenues.
“Saudi Arabia cements its global leadership and takes the first spot among G20 countries in international tourist arrivals growth, with a 73 percent increase in the first seven months of 2024 compared to the same period in 2019,” stated the Saudi Tourism Ministry on X.
Under the National Tourism Strategy, the Kingdom aims to attract 150 million visitors by 2030 and increase the sector’s contribution to the nation’s gross domestic product from 6 percent to 10 percent.
These goals reflect the country’s commitment to strengthening its tourism sector and enhancing its global appeal.
IMF, Saudi Arabia announce new annual conference tackling global economic challenges
RIYADH: The International Monetary Fund and Saudi Arabia will jointly organize a high-level annual conference in AlUla to discuss global economic challenges, it has been announced.
The AlUla Conference for Emerging Market Economies will bring together a select group of finance ministers, central bank governors, and policymakers, along with leaders from the public and private sectors, representatives from international institutions, and members of academia.
According to a joint statement by Kristalina Georgieva, managing director of IMF and the Minister of Finance Mohammed Al-Jadaan, the first edition of this series will be held from Feb. 16-17, 2025.
“The world is confronting deeper and more frequent shocks, including from conflicts, geoeconomic fragmentation, pandemics, climate change, food insecurity, and the digital divide,” according to the statement.
They continued: “If not addressed adequately, these shocks put at risk emerging market economies’ hard-won improvements in living standards. Such setbacks would affect large segments of the world population and put at risk global growth and macro-financial stability.”
The gathering will offer a platform to exchange views on domestic, regional, and global economic developments and discuss policies and reforms to spur inclusive prosperity and build resilience supported by international cooperation.
Recent economic issues affecting the global landscape include rising inflation rates, driven by supply chain disruptions and increased demand for goods post-pandemic.
Supply chain delays continue to impact the availability of essential products, causing bottlenecks in manufacturing and increasing costs.
Additionally, geopolitical conflicts, such as the war in Gaza, have disrupted energy supplies and food exports, leading to global food insecurity and fuel price volatility.
Concerns over the using the Red Sea shipping lane increased dramatically at the end of 2023, when Houthi militants stepped up attacks on vessels in the wake of the escalation of the Israel-Hamas conflict.
The effects of these challenges pose significant risks to economic stability, especially for emerging markets that are more vulnerable to such global shocks.
The AlUla conference is the latest example of the growing relationship between Saudi Arabia and the IMF, with the organization in April establishing its first office in the Middle East and North Africa region in Riyadh.
The facility was launched during the Joint Regional Conference on Industrial Policy for Diversification, jointly organized by the IMF and the Ministry of Finance, on April 24.
The new office aims to strengthen capacity building, regional surveillance, and outreach to foster stability, growth, and integration, thereby promoting partnerships in the Middle East and beyond, according to the Saudi Press Agency.
The work hub will promote closer collaboration between the IMF and regional institutions, governments, and other stakeholders, according to the SPA report.
The IMF also expressed its gratitude to the Kingdom for its financial contribution aimed at supporting capacity development in member countries, including fragile states.
Closing Bell: Saudi Arabia’s TASI ends in the red, trading volume hits $2.95bn
RIYADH: The Tadawul All Share Index concluded the last session of the week at 11,791.18 points, down by 139.27 points or 1.17 percent.
The MSCI Tadawul 30 Index also saw a decline, dropping 19.18 points to close at 1,481.36, reflecting a 1.28 percent loss. In contrast, the parallel market Nomu finished Thursday’s trading at 29,467.71 points, up 262.18 points or 0.90 percent.
TASI reported a trading volume of SR11.10 billion ($2.95 billion), with 51 stocks advancing and 182 declining. The top performer of the day was Saudi Cable Co., which saw its share price surge by 5.10 percent to SR92.70.
Other strong performers included Shatirah House Restaurant Co., which gained 3.75 percent to reach SR21, and Arabian Mills for Food Products Co., which rose by 3.08 percent to SR53.60. Naseej International Trading Co. and Saudi Real Estate Co. also posted notable gains.
The worst performer was Saudi Real Estate Co., which dropped 4.94 percent to close at SR10. Alkhaleej Training and Education Co. and Red Sea International Co. also suffered significant losses, with their share prices falling by 4.90 percent to SR29.10 and 4.84 percent to SR68.80, respectively. Astra Industrial Group and Al-Omran Industrial Trading Co. were also among the day’s largest decliners.
On the parallel market, Nomu, Alqemam for Computer Systems Co. was the top gainer, rising by 9.57 percent to SR103. Other gainers included Dar Almarkabah for Renting Cars Co., which climbed 9.10 percent to SR42.55, and Horizon Educational Co., which rose by 7.58 percent to SR79.50. Mulkia Investment Co. and Knowledge Tower Trading Co. also saw significant increases.
On the losing side of Nomu, WSM for Information Technology Co. recorded the largest drop, with its share price falling by 6.18 percent to SR44. Osool and Bakheet Investment Co. and Natural Gas Distribution Co. also experienced notable declines, with their shares dropping by 5.37 percent to SR37.85 and 5 percent to SR57, respectively.
Leaders stress urgent need for climate finance at COP29 ministerial dialogue
RIYADH: Global climate finance continues to fall short of expectations, as leaders gathered at the COP29 Ministerial Dialogue on Climate Finance to address ongoing challenges and map out next steps.
The meeting, held in Baku, Azerbaijan, underscored the urgent need for increased and more effective funding mechanisms. COP29 President Mukhtar Babayev emphasized that climate finance plays a central role in the broader negotiations.
“The urgency of the situation is evident,” Babayev remarked, pointing to the severe impacts of climate change observed over the past year. “Recently, we witnessed catastrophic flooding in Spain, and in the Pacific region, island communities are faced with the possibility of being wiped out entirely. We must act now; failure to do so will have grave human and economic costs.”
The president stressed the importance of fulfilling the $100 billion-per-year commitment made in Copenhagen and reiterated in Paris, urging leaders to reflect on lessons learned and consider the quality and allocation of financial resources.
Developing countries once again voiced the need for tangible action, with Fiji’s Deputy Prime Minister Biman Prasad highlighting the importance of aligning climate finance with the goals of the Paris Agreement.
“This is a ‘put your money where your mouth is’ moment,” Prasad said. “The 1.5°C temperature goal and the Paris Agreement itself will not be deliverable from both an economic and scientific perspective if we do not invest right. The New Collective Quantified Goal is critical for aligning our priorities and addressing major inconsistencies,” he added.
The EU reaffirmed its commitment to climate finance, noting that the $100 billion goal was first collectively met in 2022, with contributions reaching $115.9 billion.
“The EU and its member states contributed €28.5 billion, or around $30 billion, in climate finance from public sources,” a representative said. “Almost half of the public funding came in the form of grants, with a significant portion provided on concessional terms. We need to make further efforts to facilitate the mobilization of private funding, as it remains a key source of climate finance,” the representative added.
Simon Stiell, executive secretary of the UN Framework Convention on Climate Change, emphasized the critical juncture at which the global community now finds itself.
“The huge opportunities we have and the terrible risks we face are real,” Stiell said. “It’s time to take action to bridge gaps, solve problems, and come together to ensure climate finance and climate action benefit everyone.”
Sweden also announced a significant new contribution, with Ministerial representatives unveiling an $8 billion Swedish krona ($723.6 million) pledge to the second replenishment of the Green Climate Fund.
“This makes Sweden the largest per capita donor to the GCF among the larger donors,” the Swedish representative noted.
As discussions progressed, leaders acknowledged the widening gap between current financial commitments and the funds required to meet the 1.5°C target. There were calls for more robust mobilization of both public and private finance.
The COP29 president concluded: “Delivering the climate fairness that developing countries need is one of the main metrics of shared success. We can learn from past efforts to inform the road ahead, but significant determination and leadership from all parties are required to bridge these critical gaps.”
IsDB, multilateral banks aim for $120bn in annual climate finance by 2030
RIYADH: Multilateral development banks are aiming to mobilize $120 billion annually by 2030 for climate financing in low- and middle-income countries, according to recent projections.
This ambitious funding goal includes $42 billion dedicated to climate adaptation efforts, with an additional $65 billion expected to come from private sector investments.
The target was unveiled in a joint statement issued during COP29 in Baku, Azerbaijan, by several prominent MDBs, including the Islamic Development Bank, African Development Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, the Development Bank of the Council of Europe, the European Bank for Reconstruction and Development, and the European Investment Bank. Additionally, the Inter-American Development Bank, the New Development Bank, and the World Bank Group are part of the initiative.
The statement emphasized that setting a strong, collective climate finance target is crucial to meeting the goals of the Paris Agreement.
“A new collective quantitative target on climate finance that is both strong and ambitious is essential to achieving the Paris Agreement’s objectives,” the statement read. “We urge parties to reach a robust conclusion on this target.”
For high-income countries, the MDBs have set a target of $50 billion in annual climate finance, including $7 billion specifically for adaptation, with private sector mobilization expected to generate an additional $65 billion. This new target builds on the success of previous climate finance goals, with MDBs already surpassing their climate financing projections for 2025. Since 2019, the MDBs have increased direct climate finance by 25 percent and doubled climate mobilization efforts over the past year.
In response to the urgent need for enhanced climate action, the MDBs also emphasized the importance of establishing a new collective quantitative target for climate finance at COP29. The institutions highlighted their commitment to ensuring that the finance provided leads to meaningful, measurable impacts on both climate mitigation and adaptation.
To further enhance the effectiveness of climate finance, the MDBs released the “Common Approach to Measuring Climate Outcomes,” a framework that provides standardized indicators for tracking global progress on climate mitigation and adaptation. This framework aims to better align MDB activities with global climate goals and improve transparency in measuring outcomes.
Additionally, the MDBs published their “Country Climate Action Platforms,” reaffirming their commitment to strengthening collaboration between host countries, MDBs, donors, and the private sector. These platforms are designed to ensure that climate finance is targeted effectively and that developing countries have the support they need to implement robust climate policies.
COP29 has emerged as a critical moment in global climate negotiations, especially for the Global South, where developing nations are pushing for significant climate financing, stronger adaptation measures, and equitable policy outcomes. These countries continue to advocate for a climate finance framework based on the principle of common but differentiated responsibilities, recognizing that nations’ contributions should reflect their respective capabilities and historical responsibilities.
