Industrial production rises in Saudi Arabia

Industrial production in Saudi Arabia rose 5.0% y/y in October, and 0.4% m/m. Annual growth has turned positive as the additional oil production curbs introduced in late 2023 have now passed through the base, meaning the hydrocarbons sector is not exerting the same drag on the headline figure as seen earlier in the year. Mining and quarrying, encompassing oil, was up 0.4% y/y with oil production at 8.97mn b/d. Manufacturing meanwhile was up 12.4% y/y, boosted by a 32.6% rise in coke and refined petroleum products production. Food products were up 4.8%.

Egypt’s CPI inflation slowed to 25.5% y/y in November, down from 26.5% the previous month. This broke a three-month run where government adjustments to subsidies had prompted a modest uptick in annual price growth, stalling the disinflationary trend that had been in play previously. While the November slowdown will be welcomed, we expect the CBE to remain on hold at its last 2024 MPC meeting on December 26 with real rates still only marginally positive, and a recent sell-off in the EGP likely giving pause. Instead, we expect cuts to come in the first quarter. Prime Minister Mostafa Madbouly said in October that there would be no further fuel price hikes for the next six months, which combined with base effects related to the currency which will pass through in the first quarter, should exert a sharp slowdown in inflation in the next several months.

China’s trade balance rose to USD 97.44bn in November, beating both expectations and last month’s balance of USD 95.72bn. Underlying the move in the balance was a further fall in import growth, which declined 3.9% y/y in November from a 2.3% fall in October. Export growth was also weaker on the month, moderating to 6.7% y/y from 12.7% in October. The robust growth in October appears to have been related to weather conditions however, so the drop in November is unlikely to be a material concern. In fact, Chinese exports may receive a boost in the remainder of 2024, as exporters try to get ahead of possible Trump administration tariffs.

Today’s Economic Data and Events

• 17:30 US CPI (Nov): Forecast 2.7% y/y
• 18:45 CA BoC rate decision: Forecast 3.25%

Fixed Income

• US Treasury yields rose further on Tuesday, ahead of 10yr and 30yr auctions taking place later in the week. The 2yr yield gained 2bps to 4.143% and the 10yr yield rose 3bps to 4.2263%.
• Yields on European bonds were generally higher, with the exception of the 10yr Bund, which was broadly flat at 2.119%. The 10yr Gilt yield gained 5bps to reach 4,3221%.

FX

• The dollar saw further gains on Tuesday, strengthening against a basket of peer currencies for the third consecutive session of trading, rising 0.24%. EURUSD fell 0.26% to 1.0527 and JPYUSD rose 0.5% to 151.95. GBPUSD was however the outlier, gaining 0.16% to reach 1.2771.
• Commodity currencies also weakened against the dollar. AUSUSD fell 0.98% to 0.6377, NZDUSD dropped 1.11% to 0.5799 and CADUSD rose 0.07% to 1.4181.

Equities

• US equity markets fell for a second consecutive day on Tuesday, with markets waiting for the final CPI print before the Fed meets next week. The Dow Jones fell 0.35%, the S&P 500 declined 0.3% and the NASDAQ dropped by 0.25%.
• European equity markets also fell on the day, as earlier optimism about the prospects of further Chinese economic stimulus faded. The Eurostoxx 50 fell 0.68%, the FTSA 100 dropped 0.86%, the CAC 40 declined by 1.14%, and the DAX fell by a more marginal 0.08%.
• Local markets were mixed with the DFM lower by 1.1% overnight while the ADX closed about flat. In Saudi Arabia the Tadawul index added 0.8%.

Commodities

• Oil saw marginal gains on Tuesday, with markets holding steady ahead of Wednesday’s CPI release and the publication of OPEC’s monthly report. Brent futures rose 0.07% to USD 72.19/b while WTI was up 0.32% at USD 68.59/b.