ECB expected to begin cutting rates in September 2024

Economists surveyed by Bloomberg now expect the ECB to begin cutting interest rates in September 2024. This is a material delay relative the September Bloomberg survey results, which saw economists reporting that they expected the first cuts to ECB policy rates in March 2024. The revisions are consistent with recent comments from ECB officials, including Peter Kazimir, who suggested that the central bank could keep rates stable for another year before considering a cut.

The US Empire manufacturing survey, a measure of factory activity in New York state, declined in October. The measure fell from a value of 1.9 in September to -4.9 in October, with a value below zero indicative of a contraction in activity. Although the measure of current conditions deteriorated, the 6-month ahead expectations for new orders and shipments remained in expansionary territory.

The IMF issued an end-of-mission press statement, following a staff visit to the UAE. The statement highlighted recent strong growth on the back of resilient domestic activity in areas such as tourism, construction and real estate. IMF staff noted the role of business-friendly reforms in the UAE’s ability to attract foreign capital and labor. The Fund expect real GDP to grow by 3.5% in 2023, while inflation is forecast to average 3%.

Markets will be looking to several important Chinese data points in the week ahead. Third quarter GDP, together with September industrial production and retail sales are due to be announced on Wednesday, providing additional clues as to whether recent weaker activity data has bottomed out.

Today’s Economic Data and Events

• 10:00 UK Average weekly earnings, Aug. Forecast: 8.3% 3m/YoY

• 13:00 GE ZEW Survey, Oct. Forecast: -9.5

• 16:30 US Retail sales, Sept. Forecast: 0.3% m/m

• 17:15 US Industrial production, Sept. Forecast: 0.0% m/m

Fixed Income

• US Treasury yields rose on Monday, with the 2yr up 4bps to reach 5.098% and the 10yr climbing just over 9bps to 4.702%.

• There were also gains in yields across most European bond markets. In the UK, the 2yr Gilt yield rose 7bps to 4.88% and the 10yr increased 9bps to 4.477%. The 10yr German Bund yield rose 5bp to reach 2.78%

FX

• The dollar fell against a basket of major currencies on Monday. EURUSD rose 0.48% to 1.056 and GBPUSD gained 0.61% to reach 1.2217.

• Commodity currencies also gained, with AUDUSD and NZDUSD both rising just over 0.7% to reach 0.6342 and 0.5927, respectively. USDCAD declined 0.36% to 1.3611.

Equities

• East Asian equity markets started the trading week with losses as they followed the sharp US drop on Friday. The Hang Seng fell 0.9% on the day while the Nikkei ended down 2.0%.

• There was a sense of greater calm later in the day when European and US markets opened, with some modest gains recorded after Friday’s heavy selling. In Europe, the composite STOXX 600 closed 0.2% while in the US there were even greater gains as the S&P 500 added 1.1% and the NASDAQ 1.2%.

• Locally, the ADX closed flat while the DFM closed 0.6% lower.

Commodities

• Oil prices lost ground once again on Monday after the sharp upwards spike seen Friday as regional geopolitical tensions heightened. Both benchmarks closed lower with Brent futures dropping 1.4% to USD 89.7/b, while WTI ended the day down 1.2% to USD 86.7/b.