US retail sales surprise on the upside

US retail sales surprised on the upside in June, remaining unchanged from their May value. Consensus expectations had been for a 0.3% m/m decline. Excluding auto sales, retail purchases (not adjusted for inflation) rose by 0.4% m/m, their biggest advance in three months. Of the 13 categories tracked, only three – including petrol sales - saw declines.

The German ZEW investor expectations survey declined for the first time in 12 months in July, falling to a value of 41.8 from 47.5 in June. The deterioration may in part be due to recent higher volatility in Eurozone financial markets because of French elections. In contrast, the ZEW current conditions index defied consensus expectations of a sharp fall and rose to a value of -68.9 from -73.8 in June.

Consumer prices in Saudi Arabia rose 1.5% y/y in June, marginally lower than the 1.55% seen in May. The primary driver of inflationary pressure in Saudi continues to be housing and utilities, which rose 8.4% y/y. Other categories contributing positively to inflation in the Kingdom include food and beverages, as well as restaurants and hotels.

The IMF has made sharp downward revisions to its expectations for Saudi Arabia’s GDP growth in its July update of the World Economic Outlook. The revision was entirely driven by the Kingdom’s decision to cut oil production. The Fund now expects Saudi Arabia to grow by 1.7% in 2024, down from a forecast of 2.6% in April. Growth in 2025 is also expected to be lower, coming in at 4.7% from an initial forecast of 6%.

Today’s Economic Data and Events

• 10:00 UK CPI (Jun): forecast 1.9% y/y
• 13:00 EC CPI final (Jun): forecast 2.5% y/y
• 17:15 US Industrial production (Jun): forecast 0.3% m/m

Fixed Income

• US Treasury yields fell over the course of Tuesday, as markets continue to anticipate future Fed rate cuts. Yields on the 10yr UST dropped 7bps to 4.1576%, while the 2yr yield declined by 4bps to reach 4.4172%.
• Bond yields were also lower across major European markets, with both the 10yr Gilt and Bund yields falling 5bps to 4.0477% and 2.47%, respectively.

FX

• Moves in the US dollar against major peer currencies were mixed and fairly modest on Tuesday. EURUSD gained less than 0.1% to close the day at 1.0899, while GBPUSD rose 0.05% to 1.2974. USDJPY gained 0.18% to close at 158.35.
• Commodity currencies moves were similarly mixed. AUSUSD fell 0.38% to 0.6734, NZDUSD declined by 0.41% to 0.605, while USDCAD dropped 0.07% to 1.3673.

Equities

• US equity markets rose again on Tuesday, buoyed by a better-then-expected retail sales print. The S&P 500 hit a new record high, gaining 0.6%, while the Dow Jones rose 1.85% and the NASDAQ increased by 0.2%.
• European equity markets saw further widespread declines on the back of disappointing earnings data. Both the Euro Stoxx 50 and the CAC 40 dropped 0.7%, while the DAX declined by 0.4%. The FTSE 100 fell 0.2%.
• Locally, the DFM fell 0.12% and the ADX gained 0.26%.

Commodities

• Oil prices closed sharply lower on Tuesday, with disappointing Chinese data continuing to weigh on markets. Brent futures were down 1.3% to USD 83.73/b and WTI declined 1.4% to USD 80.76/b.
• The API reported that US stockpiles of crude fell by 4.4m barrels last week.