Inflation in Saudi Arabia modestly higher in March

Headline inflation in Saudi Arabia was broadly stable in March, rising only modestly on an annual basis to 1.8%, from 1.7% in February. Prices were 0.3% higher than the previous month. Inflation in Saudi Arabia has been low and stable over the past several years, and had been modestly disinflationary in recent months, with the February print the lowest reading in a year. While there was a modest uptick in the headline measure last month, there was no evidence of a rise in price pressures emanating from the US-Iran conflict that is reintroducing inflation concerns elsewhere.

PIF has approved a new strategy for 2026-30, structuring its investments into a vision, strategic and financial portfolio. The visions investment will focus on strategic sectors for the Kingdom’s economy such as travel and tourism, urban development, manufacturing, utilities and NEOM. PIF will continue to invest in “national champions” that can expand globally and form global partnerships.

The UAE has entered into a comprehensive economic partnership agreement (CEPA) with Azerbaijan with the aim of expanding trade and investment. The UAE is already a trading partner with Azerbaijan, accounting for 40% of its total trade with MENA economies and the UAE holds investments in the country of more than USD 1bn.

China’s economy expanded by 5% y/y in Q1, faster than market expectations and the strongest print since Q2 last year. Other indicators focusing on March also showed some positivity: industrial production was up by 5.7% y/y in March while fixed asset investment rose by 1.7%. The retail side of the economy remains soft with total retail sales rising by 1.7% in March, down from nearly 3% in the first two months of the year.

Today’s Economic Data and Events

10:00 UK industrial production y/y Feb: forecast -1%

16:30 US initial jobless claims Apr 11: forecast 213k

17:15 US industrial production m/m Mar: forecast 0.1%

Fixed Income

US Treasury yields drifted higher with no major catalyst. The 2yr UST yield settled at 3.7614%, up slightly less than 2bps while the 10yr showed more movement, rising by 4bps to 4.2834%.

US President Donald Trump upped his pressure on the Federal Reserve once again, saying hie would fire Chair Jerome Powell if he doesn’t resign when his term as Fed chair ends.

Türkiye sold USD 1.59bn in a 2027 bond overnight at a yield of 4.46%. It has also mandated banks for a longer-term benchmark deal.

Local credit markets continued to ride on the optimism that a diplomatic resolution to the conflict was imminent. A GCC-wide index rose 0.7% overnight with gains across all major sub categories. At a geographic level, bonds from the UAE were up by 0.6%, Saudi Arabia by 0.6% and Qatar up by 0.7%.

CDS pricing was mixed with Dubai, Qatar, Kuwait, Oman and Bahrain tighter while Abu Dhabi and Saudi Arabia were wider.

FX

The sell-off in the US dollar extended overnight though it looks to be losing some momentum. EURUSD was higher but only marginally at 1.1799 at the close – though it has broken above 1.18 in early trade today, a level last seen prior to the conflict. GBPUSD slipped by less than 0.1% to 1.3561 while USDJPY unwound some of the prior day’s move and rose by 0.1% to 159 level.

In emerging markets, the Indian rupee was unchanged at 93.38 while the Turkish lira was a little softer at 44.7397. The Egyptian pound strengthened by 0.9% to 52.0194.

Equities

Global equity markets closed mixed as the focus shifts from the diplomatic optimism to the economic assessment of the conflict. The Dow Jones dropped 0.2% overnight while the S&P 500 and NASDAQ both managed gains. The Euro Stoxx index dropped 0.7% while the FTSE was lower by 0.5%.

In the UAE the DFMGI soared by 2.6% overnight with strong gains from the materials sector, industrials, real estate and financials. In Abu Dhabi the ADX general index gained 0.5%.

In Saudi Arabia the Tadawul rose by 0.9% with all sectors reporting positive moves. Technology and industrial firms led the rally.

Commodities

Oil prices were holding steady overnight as markets await a clearer outcome of the diplomatic process while keeping a focus on the level of ships moving through the Strait of Hormuz. Brent futures were up just 0.2% at USD 94.93/b while WTI was near unchanged at USD 91.29/b.

Weekly EIA data showed a drop in US crude inventories by about 910k bbl while gasoline and distillate stockpiles also dropped. Oil production was flat at 13.59m b/d.