US retail sales unchanged in December

US headline retail sales were unchanged in December, moderating from 0.6% m/m growth in November, and markedly below expectations for a 0.4% m/m gain. Retail sales excluding autos were also flat on the month. The weakness in December retail sales was broad-based across sectors, with eight out of thirteen categories reporting declines. Adverse weather in January will make it harder to determine if the stalling in retail sales in December was a one-off or the start of a softening in consumer spending.

Egypt CPI inflation slowed to 11.9% y/y in January, down from 12.3% in December. This marked the slowest pace of annual price growth since September last year, after which the previous steep disinflationary trend was temporarily impacted by government subsidy adjustments and changes to rental rules which saw a brief and modest reacceleration. While there was an acceleration in food & beverage inflation in January – 1.5% y/y up from 0.7% in December – and housing & utilities inflation remains high at 29.2%, we still see the outlook as for a continued modest slowdown in the headline measure in 2026. This will be aided by previous subsidy adjustments passing through the base, a stronger currency than a year earlier, and an ongoing normalisation of expectations. The Central Bank of Egypt is set to make its first monetary policy decision of the year on Thursday and given the positive outlook and widening real interest rates – 8.1% currently with the overnight deposit rate at 20.0% – we anticipate a 150bps cut to the bank’s benchmark interest rates.

Chinese consumer price inflation rose just 0.2% y/y in January, lower than consensus expectations, and down from 0.8% y/y in December. The move was driven by a 0.7% fall in food prices. Producer prices remained in deflation for the 40^th consecutive month, falling 1.4% y/y in January, although this did amount to the smallest decline since mid-2024.

Today’s Economic Data and Events

• 17:30 US nonfarm payrolls (Jan): Forecast 68k
• 17:30 US unemployment rate (Jan): Forecast 4.4%

Fixed Income

• US Treasuries gained for a second consecutive day, after disappointing retail sales added to the case for Fed rate cuts. Yields on the 2yr fell 3bps to 3.452% while the 10yr yield dropped by 6bps to 4.1427%.
• There were broad-based falls in major European bond yields, with the 10yr Gilt falling 2bps to 4.505% and the 10yr Bund declining by 3bps to 2.807%.
• Emirates NBD issued EU 500m 5-year green bond, priced at MS+77.

FX

• EURUSD fell 0.2% to 1.1895, GBPUSD declined by 0.4% to 1.3643 and USDJPY fell 1% to 154.39.
• In emerging markets, USDINR fell 0.2% to 90.56, while USDZAR rose 0.3% to 15.9511.

Equities

• The S&P 500 and the NASDAQ both fell during Tuesday’s session, declining 0.3% and 0.6%, respectively, as markets reacted to weaker retail sales. The Dow Jones saw a 0.1% gain.
• Moves in European markets were muted on the day. The Euro Stoxx 50 fell 0.2%, the FTSE 100 declined by 0.3%, the CAC 40 gained 0.1% and the DAX fell 0.1%.
• In regional markets the DFM was flat, the ADX rose 0.1%, and the Tadawul gained 0.2%.

Commodities

• Oil prices fell back somewhat on Tuesday, with Brent futures 0.4% lower at 68.8/b while WTI fell 0.6% to USD 63.96/b. The API reported a sizeable jump in crude inventories last week, increasing by 13.4 million barrels, the biggest jump since the end of 2023.
• Gold fell 0.6% to USD 5025.4/oz while silver declined by 3.1% to USD 80.81/oz.