- China's GDP expanded by 4.8% y/y in Q1 of this year, data from the National Bureau of Statistics showed early this morning, beating analysts' expectations for a gain of 4.4% y/y and picking up from 4.0% y/y in Q4 last year. A robust start in the first two months of the year improved the headline figures, with GDP up 1.3% q/q in January-March compared with expectations for a 0.6% q/q rise and a revised 1.5% q/q gain in the previous quarter. Final consumption accounted for 69.4% of China's Q1 GDP growth, down from its 85.3% share in Q4 2021, The industrial sector held up better than expected with production expanding 5.0% y/y, compared with forecasts for 4.5% y/y gain. That was still down from a 7.5% y/y increase seen in the first two months of the year. Fixed asset investment increased 9.3% y/y in Q1.
- The People's Bank of China said it would cut the reserve requirement ratio (RRR) for all banks by 25bps, effective from April 25, releasing about 530bn yuan in long-term liquidity to cushion a sharp slowdown in economic growth. The central bank said the latest RRR cut would boost the long-term funds for banks, enabling them to step up support for industries and firms affected by Covid-19 outbreaks, and lower costs for banks. It will cut financial institutions' annual funding costs by about 6.5bn yuan. For city commercial banks that do not have cross-provincial business and rural commercial banks that have an RRR of more than 5%, they are entitled to an additional cut of 25bps. The weighted average RRR for financial institutions will be lowered to 8.1% after the cut, the central bank said.
- US industrial production increased 0.9% m/m last month, keeping pace with February's upwardly revised pace, according to figures released by the Federal Reserve. A sharp rebound in automotive output was a key factor in driving the third straight monthly gain in US factory activity. US motor vehicle and parts production shot up by 7.8% m/m last month, the largest increase since October, after a downwardly revised drop of 4.6% m/m in February. Total assemblies of cars and light trucks rose to nearly 9.5mn vehicles at a seasonally adjusted annual rate, the highest since January 2021, up from 8.3mn the month before. Industrial sector capacity utilization, a measure of how fully companies are using their resources, rose to 78.3% last month, the highest in more than 3 years, from 77.7% the month before. It is 1.2pp below its 1972-2021 average.
- The Empire State Manufacturing Index report from the New York Federal Reserve on Friday showed manufacturing activity in New York state has accelerated in April, even as inflationary pressures kept building. It reached a 4-month high of 24.6 after a reading of -11.8 in March. The survey's prices paid index shot to a record high of 86.4 from 73.8 last month. Optimism slipped with the six-month outlook index dropping to 15.2, the lowest in about two years, from 36.6 in March.
- Saudi Arabia’s cost of living index rose 0.3% m/m in March, unchanged from February’s m/m inflation. The annual inflation rate rose to 2.0% y/y from 1.6% in February. On an annual basis, food prices rose 3.0% y/y while transport costs were up 4.7% y/y. Housing costs also increased on a y/y basis for the first time since August 2020, up 0.2% y/y. Other services inflation also accelerated in March, including education, hospitality, recreation & culture and miscellaneous goods & services. We expect consumer inflation in the kingdom to average 3% in 2022, similar to 2021.
Today’s Economic Data and Events
No key events today
Fixed Income
- Developed market bond markets were closed at the end of last week for public holidays. US Treasuries have started the week on a marginally softer footing with the 2yr yields up 2bps at 2.4787% and the 10yr up 3bps at 2.8582%.
- Central banks meeting this week include Bank Indonesia (April 19) where rates are expected to be held at 3.5%.
FX
- Currency markets swung again for the dollar last week with the broad DXY index closing the week at more than 100, up 0.7%. At the start of the trading week, the dollar is being gently bid higher again. EURUSD fell 0.6% last week to 1.081 as anxiety over mounting attacks in Ukraine will take its toll on regional economic confidence. Meanwhile, USDJPY continues to ascend, up 1.7% last week to 126.46 while GBPUSD managed a gain of 0.3% to 1.3060.
- In commodity currencies CAD was the relative outperformer managing to stem its losses to just 0.3% with USDCAD closing up at 1.2610 on the week. AUDUSD fell 0.8% to 0.7395 while NZDUSD closed down 1.2% to 0.6764.
Equities
- Asian equity markets have started on a mixed footing this week with the Nikkei off by more than 1.8% while the Hang Seng has added nearly 0.7%. After a public holiday at the end of last week, developed market equities will open amid seemingly worsening conditions in Ukraine with no sign of any imminent de-escalation in hostilities.
- Domestic equity markets ended last week positively with the DFM up 0.47% on Friday while the ADX leaned toward gains. In Saudi Arabia, the Tadawul index rose 0.45% overnight.
Commodities
- Futures markets were shut at the end of last week thanks to Easter holidays. Brent closed the week at USD 111.70/b and is extending its gains in early trade this morning to USD 113.20/b. WTI also closed the week strongly last Thursday, up almost 9% to USD 106.95/b and is adding more to USD 108.18/b at the start of trading this week
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Emirates NBD Research
