UAE and US agree on USD 200bn of economic deals

The US and the UAE have agreed to USD 200bn worth of commercial deals during the visit of US President Donald Trump to the country. Etihad Airways, Abu Dhabi’s national carrier, has agreed to buy USD 14.5bn worth of Boeing aircraft, ADNOC has made a deal with Exxxon Mobil, Occidental and EOG Resources to expand oil and gas output while EGA will build a new aluminium smelter project in the US.

There were parallel agreements on the expansion of digital infrastructure in the UAE including investments into new data centres and cloud services operations. The UAE will also invest into critical minerals projects in the US And cooperate with a US firm in development of small modular reactors. The US is reportedly still working on a deal that would allow more than a million of advanced chips from Nvidia to be exported to the UAE.

Producer prices in the US cooled more than expected in April, dropping by 0.5% m/m compared with expectations of 0.2% rise. On an annual basis, PPI inflation rose by 2.4% y/y, down from an upwardly revised 3.4% a month earlier. Along with the cooler than expected CPI print out earlier in the week, the PPI data will likely pass through to a more encouraging PCE inflation print.

Retail sales in the US rose by 0.1% m/m in April, cooler than the 1.7% recorded a month earlier when consumers tried to front-run the effect of tariffs but still better than expected. Core retail sales did drop by 0.2% m/m, however, coming short of market expectations of a 0.3% rise.

Initial jobless claims in the US were relatively steady at 229k in the week ending May 10, more of less unchanged from a week earlier. Continuing claims ticked up to 1.881m in the prior week but were below market expectations.

India recorded a 9% y/y rise in exports in April, up from just a 0.7% gain a month earlier, while imports surged by 19% y/y, up from 11% in March. That helped to widen the country’s trade deficit to USD -26.42bn, up from -21bn a month earlier and the widest level since November last year. India and the US are currently negotiating a trade deal, a process that was underway prior to the announcement of tariffs from the US earlier in April.

DP World has signed a USD 800m MoU to develop the port of Tartus in Syria, according to press reports.

Today’s Economic Data and Events

18:00 US University of Michigan Sentiment May: forecast 53.5

18:00 US University of Michigan inflation expectations 1yr May: forecast 6.5%

Fixed Income

The softer than expected PPI data helped to lift US Treasuries overnight with yields on the 2yr UST lower by 9bps to 3.9608% while the 10yr yield dropped 10bps to 4.4315%.

FAB priced a USD 750m 5yr FRN at SOFR +97.

Regional credit indexes were broadly positive overnight with gains across the UAE, Saudi Arabia and Qatar. Sovereign bond prices were marginally lower along with high-yield bonds.

FX

The US dollar sold off overnight as softer data led to a pull back in Treasury yields. EURUSD added 0.1% at 1.1187 while GBPUSD gained 0.3% to 1.3305. The Japanese yen strengthened for a third day in a row with USDJPY pulling lower by 0.7% at 145.67 and has continued to move lower today despite Japan’s economy recording a contraction in Q1.

Commodity currencies were mixed with USDCAD pulling lower in favour of the Loonie. The pair closed at 1.3959, down 0.2%. AUDUSD, however, was weaker by 0.3% at 0.6406 while NZDUSD fell 0.4% to 0.5877.

Equities

Benchmark equity markets were broadly positive overnight with the Dow Jones up 0.6% while the S&P added 0.4%. The NASDAQ, however, slipped lower by 0.2%. In Europe, the Euro Stoxx added 0.2% while the FTSE jumped higher by 0.6%.

Local markets were stronger with the DFM rallying 0.7% while the ADX added 0.1%. In Saudi Arabia, the Tadawul closed the week with a 0.4% decline.

Commodities

Oil prices closed lower overnight in response to market anticipation that the US and Iran could reach a deal that sees sanctions on the country’s oil exports lifted. Brent futures fell 2.4% to USD 64.53/b while WTI was off by 2.4% at USD 61.62/b.

The IEA estimates that global oil demand will grow by 740k b/d this year, a marginal uptick from its prior estimate. However, demand growth will slow over the year after nearly a 1m b/d gain in Q1.