Weekly Update - How trade tensions are affecting the markets

Currencies: The U.S. dollar showed mixed performance amid shifting investor sentiment. Fed and BoE rates remained unchanged; SOFR rose slightly, while EURIBOR dipped marginally.
Equities: Global stocks declined due to tighter financial conditions, weak consumer prices, tariffs, and fading rate-cut optimism. Markets expect a Fed cut in September, but inflation or trade shocks could trigger a pullback.
Fixed Income: Mixed results with investors in a “wait-and-see” mode ahead of central bank decisions. Diverging policies favor selective duration strategies.
Commodities: Improved performance overall.
- Energy: Natural gas prices spiked on seasonal demand; gasoline fell on weak margins.
- Precious Metals: Gold and silver gained on safe-haven demand; industrial metals remain cautious.

China Trade: August exports slowed to 4.4% YoY, the weakest in six months, with a steep 33% drop to the U.S. due to tariffs. Exports to Southeast Asia rose sharply (+22.5%).
- Investor Takeaway: Diversify away from U.S.-China trade lanes; consider Southeast Asian markets and resilient sectors (tech, consumer staples).
ECB–PBOC Swap Extension: Euro-China currency swap line extended to 2028, ensuring liquidity stability and mitigating market volatility.

Currencies: The shilling remained stable with stronger forex reserves (~$10.9B) and 4.8 months of import cover. Inflation rose to 4.5% (from 4.15% in July), driven by food and transport costs.
Equities: Positive performance with market cap up by ~KSh 83B and turnover up by ~KSh 26M. NSE foreign investors recorded a net outflow of KSh 1.18B after August inflows.
- Key Corporate Actions: BAT interim dividend KES 10/share (payable Sept 26).
- Undervalued Stocks: Jubilee (KSh 304.75), KPLC (KSh 14.00), DTB (KSh 103.00), KCB (KSh 50.50).
Fixed Income:
- T-Bills: Yields fell below 10% amid CBK rate cuts and moderate inflation.
- Eurobonds: Yields declined but remain sensitive to U.S. Treasury rates, Kenya’s fiscal health, currency risk, and inflation outlook.
Local News:
- Inflation rose to 4.5%, driven by higher food (+8.3%) and transport (+4.4%) costs.
- Recommendation: Shift to short-dated securities and inflation hedges; monitor CPI trends.
- KESONIA Credit Model: New CBK pricing system ties loan rates to the Kenya Shilling Overnight Interbank Average plus risk premiums. Expected to improve transparency and access to credit, especially for SMEs and underserved groups.

Weekly Updated