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Lebanon debt fears, regional tensions, Fed rate cuts

The widening of Lebanese dollar bond spreads over the past week suggests that investors are coming round to our view that the authorities will need to resort to a debt restructuring. Meanwhile, this morning’s downing of a US drone by Iranian forces adds to the evidence that regional tensions are mounting. Finally, the Gulf countries will have to follow the Fed in cutting interest rates in the coming months. But any boost to growth would be more than offset if, as we expect, lower oil prices result in fiscal policy becoming less supportive.

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