UAE approves new business support strategy

• The UAE has approved a new Emirates Development Bank (EDB) strategy which allocates AED 30bn (USD 8.2bn) in financial support for SMEs and other businesses in the industrial sector over the next five years.  The EDB strategy follows the announcement last month of a new industrial development strategy to double the size of the sector over the next decade.  EDB was created in 2011 to support the UAE’s economic diversification, and was the first federal entity to issue a bond under the new federal debt framework in 2019, when it raised USD 750mn in a 5y bond.
• Turkish CPI inflation was 16.2% y/y in March, in line with Bloomberg consensus projections but marking a pick-up from the 15.6% recorded in February. This was the sixth month in a row that price growth has accelerated, and given that PPI inflation has risen to a two-year high of 31.2%, and the lira’s depreciation started once again in March following surprise changes at the central bank, it is unlikely to hit the TCMB’s target of 5% any time soon. On a monthly basis, inflation was 1.1%, and the recent rally in oil prices, alongside the ongoing lira weakness, were the principle drivers of the higher prices. The first monetary policy meeting for the new central bank governor, Sahap Kavcioglu, is scheduled for April 15. With the latest rise in price growth, and a pledge last week to keep his predecessor Naci Agbal’s hawkish bias in place, the likelihood of a rate cut looks more unlikely, despite previous statements in support of looser policy.
• Factory output in India decelerated in March with the IHS Markit manufacturing PMI declining to 55.4 from 57.5 a month earlier. While the overall index remains comfortably in expansion territory, the March print was nevertheless the softest since August last year. India is in the midst of a sharp rise of Covid-19 cases with the daily number of new cases exceeding 100k for the first time. Evening curfews have been imposed in the state of Maharashtra while some municipalities have also introduced lockdown measures.
• Following on from a strong manufacturing print, the US ISM services PMI rose to 63.7 in March from 55.3 a month earlier, benefitting from more restrictions being removed and better weather. New orders rose strongly to more than 67 from less than 52 in February while input costs and delivery times also gained, feeding into the narrative that inflation is building strongly in the US. Elsewhere in the US, data from February showed that durable goods orders fell 1.2% month/month while factory orders were down by 0.8%. However, given that February was singularly affected by bad weather conditions, the underperformance may not herald any sustained weakness.

Today’s Economic Data and Events

08:30 AU RBA cash rate target: forecast 0.1%%

13:00 EC Unemployment rate February: forecast 8.1%

18:00 US ISM Services Index March: forecast 59

18:00 US JOLTS job openings February: forecast 6900

Fixed Income

• With many markets still closed for holidays at the start of the week, US treasuries took centre stage. Yields were lower across the curve even as equity markets surged and US data showed considerable strength for March. The 2yr UST yield slipped to 0.1664%, down by around 2bps while the 10yr fell to the 1.70% handle, a drop of slightly more than 2bps.

FX

• It was a clear day of dollar selling to start the week with the greenback weakening across all major peers. The DXY index fell 0.46% to settle at 92.595. Gains were widespread with EURUSD up 0.46% at 1.1813 while USDJPY fell the same amount, pushing the pair further away from 111.
• GBPUSD moved back to 1.39 overnight, a gain of nearly 0.5% while AUD was the standout among commodity currencies, gaining 0.5% to close at 0.7651.

Equities

• With many global equity indices closed for the Easter break it was a fairly quiet start to the week yesterday. US markets were trading however, and started the week on the front foot with gains for the S&P 500, the Dow Jones and the NASDAQ, at 1.4%, 1.3% and 1.7% respectively, bolstered by strong data releases.
• Within the region, the DFM gained 0.9% and the Tadawul closed flat. In Asia, the Nikkei closed 0.8% higher.

Commodities

• Oil prices were off sharply in a low liquidity day as the market digested the full impact of OPEC+ raising production over the next several months. Brent futures closed at USD 62.15/b, down 4.2%, WTI settled at 58.65/b, down 4.6% while Murban fell to 60.81/b, a drop of 4.8%.

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