Chinese inflation weaker than expected

The March reading for Chinese consumer price inflation came in weaker than expected, at 0.7% y/y, below the 1% y/y growth seen in February. The slower pace of increase was in large part due to weakness in service sector prices, while food prices in contrast rose 2.4% y/y. Producer prices also remained weak on the month, declining 2.5% y/y in March, following a 1.4% fall in February. Weaker price inflation may be indicative of a smaller and slower bounce back in China’s post-Covid economic activity than had originally been anticipated.  

Egypt’s CPI rose to 32.7% y/y in March, up from 31.9% the previous month. While this marks the fastest annualised pace of price growth since 2017 it was nevertheless moderately lower than the consensus prediction of 34.1% and with some of last year’s currency moves starting to pass through the base there is likely limited upside from here for annual price growth. Monthly inflation was at 2.7%, compared to 6.5% m/m in February. The CBE hiked its benchmark rates by 200bps at its March meeting, its next decision date is May 18.

The Turkish current account remained in deficit in February, but did improve from a value of -USD 10bn in January to reach -USD 8.78bn. The two primary drivers of the deficit remain the cost of energy purchases and gold.

Today’s Economic Data and Events

• 11:00 Turkey Industrial production Feb. Forecast: 2.0% m/m
• 13:00  Eurozone retail sales Feb. Forecast: -0.8% m/m

Fixed Income

• US Treasuries dropped at the start of the week as markets reassess expectations for when the Federal Reserve will start to cut rates. Yields on the 2yr UST added about 3bps to close at 4.0077% while the 10yr yield also added about 3bps to 3.4168%. Bond markets in Europe remained closed overnight.

FX

• The dollar opened the week on a stronger footing as markets price out expectations for rate cuts until later in the year. Also helping the greenback was commentary from new Bank of Japan governor, Kazuo Ueda who gave no signal on tightening policy. USDJPY added 1.1% overnight to close at 133.61 while EURUSD dropped by 0.4% to 1.0859 and GBPUSD dipped 0.3% to 1.2382.
• Commodity currencies closed generally weaker with both AUDUSD and NZDUSD down by about 0.5% to 0.6641 and 0.6218 respectively. USDCAD closed essentially unchanged.

Equities

• It was a slow start to the week in global equity markets, with European exchanges closed altogether and little concrete direction elsewhere. There were modest gains on Wall Street as the NASDAQ closed almost flat, the S&P added 0.1%, and the Dow Jones 0.3%.
• Locally, the DFM closed virtually flat while the ADX added 0.4%. In Saudi Arabia the Tadawul lost 0.6% while Turkey’s Borsa Istanbul 100 closed 3.4% higher.

Commodities

• Oil prices started the week on a softer footing with Brent futures down 1.1% to USD 84.18/b and WTI falling by 1.2% to USD 79.74/b. Assessments for the impact of OPEC+ cuts will come from the EIA and IEA later this week as well as OPEC’s own oil market report.