- US PPI inflation hit 9.7% y/y in December, slightly lower than expectations for 9.8%, which was also the (upwardly revised) level the previous month. This is the highest year-end level since the series began in 2010, but there are indications that the price pressures, while elevated, are dissipating somewhat. Compared to the previous month, prices were up only 0.2% as petrol prices declined, along with many foodstuffs. Nevertheless, the Federal Reserve’s focus is now squarely on containing inflation with more officials pledging to tackle it with whatever means necessary. Nominated vice-chair Lael Brainard had her select committee meeting yesterday, where she said that fighting inflation was the Fed’s ‘most important task’.
- The Fed can focus more on inflation now the labour market appears to have largely recovered from the pandemic crisis. Initial jobless claims in the US rose modestly in the week to January 8, coming in at 230,000, compared to 207,000 the previous week, but that is still low by historic standards, and certainly when compared with the past two years.
- Saudi Arabia’s investment minister, Khalid al Falih, has told a mining conference that the kingdom plans to attract USD 3tn in investment over the remainder of the decade, helping to boost its private sector to 65% of the economy. Saudi Arabian inflation data was released yesterday, showing the CPI index climbing 1.2% y/y in December, up from 1.1% in November. Compared to the previous month, prices were down -0.1%.
Today’s Economic Data and Events
11:00 UK industrial production, % m/m, November. Forecast: 0.2%.
US retail sales, % m/m, December. Forecast: -0.1%.
19:00 US University of Michigan consumer sentiment, December. Forecast: 70.0.
- Treasury markets rallied for a second day with fundamental catalysts to push the market in either direction. On the 2yr UST, yields dropped around 3bps to 0.8929% while the 10yr UST yield fell around 4bps to 1.7041%. Among other developed market bonds the moves were broadly similar with bund and gilt yields falling across the curve.
- In emerging markets the readjustment in Turkish bonds continues with 10yr yields falling 20bps to 22.83%. Elsewhere South African yields ticked higher, adding around 3bps to 9.886% while Indian yields fell by around the same amount to 6.564%.
- EIG Pearl Holdings, which owns a 49% stake in Saudi Aramco’s pipeline network, priced USD 2.5bn in two tranches. A 14.5-15 yr USD 1.25bn tranche priced at 3.545% while a 24.5-25yr USD 1.25bn tranche priced at 4.387%.
- Sweihan PV priced a UST 700.8m green bond at 3.625% with a maturity of 2049.
- Fitch revised its outlook on National Bank of Oman to stable from negative and affirmed the bank’s rating at ‘BB-‘.
- The dollar fell a third day running as perhaps markets have already priced in the Fed raising rates several times this year. EURUSD added 0.1% to close at 1.1455 while USDJPY saw another steep drop, falling by 0.4% to 114.20. GBPUSD was relatively stable at 1.3706 on the close.
- Commodity currencies showed a mixed performance overnight with USDCAD and AUDUSD closing little changed. NZDUSD added 0.16% as the largest mover amongst them to settle at 0.6861.
- US equity markets ceded some ground yesterday, with the NASDAQ dropping -2.5%, the S&P 500 -1.4% and the Dow Jones -0.5%. Asian markets are following them into the red this morning, where the Nikkei is down 1.9% so far and the Shanghai Composite -0.4%.
- Locally, there was more positive movement yesterday, where the Tadawul ended the day up 1.0%, the ADX 0.7% and the DFM 0.2%. The EGX 30 lost -0.4% however.
- With little in the way of fundamental data points to affect markets oil prices slipped lower. Brent futures closed down 0.24% at USD 84.47/b while WTI dropped more than 0.6% at USD 82.12/b. Both are pushing lower in early trading today.
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