Dubai TV Interview, Oct 18, 2021

Speaking to Dubai TV on Monday, Mohamed Hashad, Director of Research and Development at Noor Capital, discussed the current energy crisis and provided anticipation for a number of developments over the course of the week across global markets.

Energy Crisis
Hashad pointed out that an energy crisis obviously exists across several European countries in addition to China and India which are looked upon as the biggest consumers of crude oil worldwide.
In turn, the crisis has led oil prices to surge, for example West Texas Intermediate has jumped to $ 83.60, a level that was last recorded in 2014.

Hashad stressed that there are several factors that contribute to continued surge of oil prices including the paralleling surge in natural gas and coal prices, a development that led to growing dependence on oil for the operation of power plants in addition to the looming winter season and anticipated recovery of demand which could lead to shortage of energy supplies and later on, energy prices could continually surge.

European Central Bank
Amid inflation pressures, Hashad said the the European central Bank is encountering one of the hardest times because of growing inflation and inflation pressures that are increasing. “I think that the ECB could decide to taper asset purchases as expected in the case of the U. S. Federal Reserve Bank, so that interest rates could be raised”, he added. However, Hashad, expects the ECB will not decide on tapering asset purchases in its next fiscal policy meeting, rather the European decision on tapering is expected with the beginning of next year, to be an echo for the Fed’s tapering.

BoE
Inflation has surges and is continuing to surge, what is the expected next step? Hashad suggests that the Bank of England could opt for a policy that is matching the procedures by most other central banks. The said policy is expected to maintain inflation at the targeted levels. Hashad also noted that the financial situation on the U. K. is comparatively better than elsewhere in the continent concerning inflation. It is a bit better than inflation readings in Europe.

Hashad added that the Bank of England could also decide on tapering asset purchases and consequently could be able to raise the interest rate. This could possibly have an obvious impact on the performance of the GBP which is considered as one of the best against the U. S. dollar. Hashad pointed out that the sterling is significantly stronger than the Euro against the USD.

People’s Bank of China
How will the People’s Bank of China act to contain the risks around the Chinese economy?
Hashad thinks that the People’s Bank of China could also exploit all the available means and the necessary instruments so that it could provide support to the country’s economy, given that there is an obvious crisis over the retreat of China’s GDP to 4.6 below expectations and no doubt the GDP indicator is among the leading economic indicators as it provides insight and proof on how much recovery could be achieved. The economic data that is announced give evidence that the Chinese economy is still suffering from the negative consequence of COVID-19 pandemic.

In addition, Hashad thinks that the accelerating energy crisis and the real estate debt crisis that began with reports on the default of Evergrande Group could still move into a wider range to impact other Chinese companies and even other sectors of the global financial markets.