UK GDP growth picks up in November

The UK registered a pick-up in monthly GDP growth in November as it accelerated to 0.3%, beating expectations of 0.2% and up from the 0.3% m/m contraction seen in October. Activity was boosted by Black Friday sales during the period. Industrial production rose 0.3% m/m in November, in line with expectations, while services expanded 0.4% but construction fell 0.2%. The 3m/3m measure was at -0.2% however, and there remains a chance that Q4 growth will be negative meaning a technical recession for the UK, especially as there was renewed strike action in December. Chancellor of the Exchequer Jeremy Hunt acknowledged the risk, stating that: ‘While growth in November is welcome news, it will be slower as we bring inflation back to its 2% target.’

Turkey’s current account deficit stood at -USD 2.7bn in November, wider than the consensus prediction of -USD 1.7bn and compared to a surplus of USD 10mn in October. Foreign travel spending was up 2.4% y/y to USD 2.9bn with visitor numbers up 7.7% compared with November 2022.

India’s CPI inflation came in at 5.7% y/y in December, up from 5.6% the previous month and just shy of the predicted 5.8%. The primary driver was higher food prices, especially onions and tomatoes, but this is set to pass through the base in the coming months which should enable the RBI to start easing monetary policy later in the year. Meanwhile, industrial production rose 2.4% y/y in November, down from the 11.6% gain recorded in October and weaker than the consensus estimate of 3.5%. Mining production was up 6.8% y/y and manufacturing 1.2% while consumer durables fell 5.4%.

In the US, PPI inflation data was a little softer than anticipated, with PPI final demand dropping 0.1% m/m, compared with the predicted 0.1% rise. Stripping out food and energy, the measure was flat m/m, compared with the predicted 0.2% gain.

In China, the PBOC kept its key interest rate, the medium-term lending facility, on hold at 2.5% this morning, confounding consensus predictions of a 10bps cut, although it did boost liquidity through offering CNY 995bn through the facility.

Today’s Economic Data and Events

No major data releases today. US markets are closed.

Fixed Income

• The weaker-than-anticipated PPI data out of the US on Friday saw US treasuries gain, with yields on the 2yr dropping 10bps on Friday to close at 4.14%. The sixth consecutive daily drop took the yield down to levels last seen in May as bets on a March cut from the Fed were raised. The 10yr dropped 3bps on Friday to 3.94%.
• There were similar gains for European bond markets as the 10yr bund and the 10yr gilt both dropped 5bps on Friday to 2.18% and 3.79% respectively.

FX

• By the close of Friday the dollar index was almost unchanged from the previous Friday’s closed (102.404 from 102.412) despite some moves through the course of the week.
• GBP closed up 0.3% w/w against the USD, ending Friday at 1.2753, while the Euro added 0.1% to end at 1.0951. The Japanese yen ended the week at 144.88, down 0.2% w/w.

Equities

• Equity markets were somewhat mixed last week. In East Asia, Japan’s Nikkei closed up 6.5% w/w, boosted by a weakening yen, but the Hang Seng ended 1.4% lower and the Shanghai Composite dropped 1.6% w/w as there was further weak data out of China including deflation in December.
• European equities ended Friday on a positive note with gains across the major indices, offsetting losses recorded at the start of the week. The composite STOXX 600 ended Friday up 0.1% with the CAC gaining 0.6% and the DAX 0.7%. By contrast, the FTSE 100 ended the week 0.8% lower.

• In the US, a higher-than-expected CPI inflation print was not high enough to turn sentiment towards equities negative once more, and the three major indices all ended the week higher, with the Dow Jones adding 0.3% w/w, the S&P 500 1.8%, and the NASDAQ 3.1%.
• Locally, the ­DFM gained 0.4% w/w and the ADX added 1.4%. Saudi Arabia’s Tadawul ended the week 0.2% lower while Egypt’s EGX 30 gained 0.4%.

Commodities

• Oil prices continued to be buffeted by headlines regarding unrest in the Red Sea and wider region over the past week, but at the close on Friday it was the ongoing stream of weaker data and the implications thereof for demand that won out, and both benchmarks ended the week lower.

• Brent futures ended the week at USD 78.3/b, down 0.6% w/w, while WTI lost 1.5% to end at USD 72.7/b.