General view of the opening session of Saudi Arabia’s Future Investment Initiative conference in Riyadh, Saudi Arabia, on Oct. 24.SAUDI PRESS AGENCY/Reuters
Wall Street’s top financiers struck a pessimistic tone about the global economy at a flagship gathering in Saudi Arabia aimed at deal brokering, as a violent conflict between Israel and Hamas that has killed thousands of people unfolds.
The annual event is typically used by attendees to build relationships with some of Saudi Arabia’s biggest companies and its $778-billion sovereign wealth fund, drawn by the promise of deals as the kingdom seeks to wean its economy off oil.
But an escalation between Islamist group Hamas and Israel into a broader conflict overshadowed the event dubbed “Davos in the Desert”, a nod to the annual gathering of world leaders and corporate bosses in the Swiss Alps.
JPMorgan Chase Chief Executive Jamie Dimon encouraged Saudi Arabia not to abandon a United States-led initiative for the kingdom to establish official relations with Israel.
“Despite what happened in Israel, I urge you all to keep up that effort,” Dimon told the Future Investment Initiative (FII) in Riyadh. “It is the only way to get there with some leadership from Saudi Arabia, for the folks of the Middle East.”
Saudi Arabia is putting U.S.-backed plans to normalise ties with Israel on ice, two sources familiar with Riyadh’s thinking said, signalling a rapid rethinking of its foreign policy.
Geopolitical tensions heightened by the Middle East conflict pose the biggest threat to the world economy, World Bank President Ajay Banga said.
“There is so much going on in the world and geopolitics in the wars that you’re seeing and what just happened recently in Israel and Gaza. At the end of the day, when you put all this together, I think the impact on economic development is even more serious,” Banga said.
Although the globe’s top financiers dwelt little on the conflict, speaking instead about topics such as artificial intelligence, the economic fallout of war combined with record debts created a bleak backdrop.
“There’s no question if these things are not resolved, it probably means more global terrorism, which means more insecurity, which means society is going to be fearful … and … we see contractions in our economies,” BlackRock Chairman and CEO Laurence Fink said.
Fink was flanked on a panel at FII by bank CEOs including JPMorgan’s Dimon, Goldman Sachs’ David Solomon, and Citi’s Jane Fraser. They spoke about topics including women in the workplace but also the implications of rising interest rates.
Ray Dalio, founder of hedge fund Bridgewater Associates, said he was pessimistic.
“If you take the time horizon, the monetary policies that we’re going to see and so on, will have greater effects on the world,” Dalio said. “And you look at the world gaps, so it’s difficult to be optimistic on that.”
HSBC Group CEO Noel Quinn also warned of the perils of heavy government debts. “I’m concerned about a tipping point on fiscal deficits,” he said. “When it comes, it will come fast and I think there are a number of economies in the world where there could be a tipping point and it will hit hard.”
‘UNRELENTING’
The remarks come as Israel’s military said it was preparing for “unrelenting attacks” to dismantle Hamas. Former U.S. President Barack Obama warned that “any Israeli military strategy that ignores the human costs could ultimately backfire.”
The conflict could upset the stability of the Middle East just as regional powerhouse Saudi Arabia pours hundreds of billions of dollars into a vast economic transformation plan.
But the finance chiefs were mostly focused on business.
The last year has seen Saudi Arabia spend billions on companies, from sports to gaming to aviation. This year, Saudi Telecom Corp took a near 10% stake in Spain’s Telefonica.
“While today’s world seems uncertain, we continue with our mandate to inspire … the future of business and future-proof our societies to create a more stable and resilient world order,” Yasser al-Rumayyan, governor of Saudi Arabia’s sovereign Public Investment Fund, told the conference.
Goldman Sachs’ Salomon addressed the potential for more dealmaking.
“Over time, scale matters enormously in the competitive nature of global businesses,” he said.
Stephen Schwarzman, co-founder, chairman & CEO of the Blackstone Group, flagged the threat to investors in office buildings, now often empty in the wake of the pandemic.
“Say you have 30% unused space in office buildings, that means those office buildings are not survivable as economic entities. So that’s going to have a very bad ending,” Schwarzman said.
More than 5,000 people registered to attend this year’s Future Investment Initiative and only a handful withdrew due to current events.
Saudi Crown Prince Mohammed bin Salman has sought to lift the kingdom’s profile to secure investment and trade alliances, seeking dialogue with former regional foes, and pivoting to Eastern partners amid strains with U.S. President Joe Biden’s administration. This year’s forum is meant to demonstrate that eastward shift. There will be 70 speakers from Asia, of whom 40 will be Chinese, FII Institute CEO Richard Attias told Reuters.
Saudi Arabia is halfway through an ambitious economic transformation plan – Vision 2030 – to wean the economy off oil by creating new industries, generate jobs for citizens, and to lure foreign capital and talent.
FII is partially aimed at attracting investment to fund this, a daunting task as total foreign investment flows in this year’s second quarter were down.
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TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
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