Core US goods orders rise

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US durable goods orders were unchanged in July though that was largely down to lower orders in the volatile aircraft component. Core capital goods orders, a much better proxy for investment, managed to increase by 0.4% m/m in July, slightly better than expected. Recent price signals from the US economy suggest that some input costs are easing though firms will still be exposed to higher borrowing costs as the Fed continues to hike rates.
Inflation in South Africa was in line with expectations for July, rising by 7.8% y/y and up from 7.4% a month earlier. Core inflation, stripping out more volatile commodity costs, accelerated to 4.6% from 4.4% previously. The headline price growth was the fastest since 2009 and is well above the SARB’s target of 4.5%. The SARB hiked rates by 75bps at its last meeting in July and the persistent high inflation may tilt the bank to maintaining its hawkish stance when it meets again in September.
The value of oil exports from Saudi Arabia rose by 94% y/y in June to roughly SAR 118bn (USD 31bn) as higher oil prices and production helped to see total exports rise by 75% y/y. Nonoil exports were up by almost 27% y/y to SAR 30bn while imports rose by 29% to SAR 13.4bn. total exports in Q2 were nearly SAR 430bn, up 85% y/y thanks mainly to higher oil output and prices. We expect that Saudi Arabia will record a large current account balance of nearly 16% of GDP this year.

Today’s Economic Data and Events

Fixed Income

After some drifting moves early in the day, US Treasuries sold off sharply again in the US session with the 2yr UST yield moving higher by around 10bps. On the close, yields added 9bps to 3.3905%. Moves were roughly similar in the 10yr yield though not as wide with the yield there adding about 6bps to close at 3.1039%, its highest level since June.
European bond markets saw another day of heavy selling with 10yr bund yields up 5bps at 1.364% and the 10yr gilt yield jumping 12bps to 2.693% as the economic outlook in the UK continues to weaken.

It was another day of dollar strength, although relatively muted against most peers. EURUSD slipped by barely 0.03% to 0.9967 while GBPUSD saw much wider moves, falling by 0.3% to 1.1799. USDJPY added about 0.3% to close at 137.12.
Commodity currencies generally closed weaker though CAD showed some relative resilience. USDCAD added less than 0.1% to 1.2967 while AUDUSD fell by 0.3% to 0.6909 and NZDUSD dropped almost 0.5% to 0.6187.

Equities

Equity markets enjoyed some respite yesterday as most major global indices closed higher after days of losses. In the US, the Dow Jones, the S&P 500 and the NASDAQ gained 0.2%, 0.3% and 0.4% respectively, while in Europe the DAX added 0.2% and the CAC 0.4%. By contrast, the UK’s FTSE 100 ended the day down -0.2%.
Locally, the DFM added 0.9% but the ADX ended the day down -0.2%. The Tadawul closed up 0.2%.

Commodities

Oil prices rose for a second day running, closing up 1% in the Brent market to settle at USD 101.22/b and up by 1.2% in WTI to close at USD 94.89/b. Several other OPEC+ members have supported the message from Saudi Arabia’s oil minister earlier in the week that the producers’ bloc may need to step in to cut output to help support prices. OPEC+ next meets on September 5th.
Commercial crude inventories in the US fell by 3.3m bbl last week along with some smaller declines in gasoline and distillate stockpiles. Production fell by 100k b/d to 12m b/d while product supplied, a demand proxy, fell by almost 1.9m b/d.