Fed speakers call for more cuts

Federal Reserve governor Christopher Waller said he favoured cutting rates in 25bps increments to “see what happens” and to avoid making a mistake in easing policy prematurely. Waller supported a 25bps cut at the September FOMC and it is looking like another cut at the end of October is a certainty. Stephen Miran, who is filling in on an interim basis as a Fed governor, said he favoured bigger moves such as a 50bps cut at the October FOMC and that the Fed was “set up for three 25bps cuts” by the end of the year. Market pricing is now for 54bps of easing by the end of 2025.

International Holding Company, the UAE’s largest listed company, will merge three of its constituent companies into a single investment firm valued at USD 33bn. The new merged firm, 2PointZero, will focus on energy and consumer investments around the world.

The UAE’s General Civil Aviation Authority said that the country’s airports are due to handle 155m passengers this year, representing growth of 5% from a year earlier. Air travel and tourism in particular have been major contributors to the growth of the Dubai and Abu Dhabi economies in the last several years.

Saudi Arabia’s minister of industry and mineral resources, Bandar Alkhorayef, said the Kingdom would have seven steel manufacturing projects valued at USD 16bn on offer to improve the availability of building materials in Saudi Arabia. Steel demand will be strong in Saudi Arabia as substantial project spending draws in large amounts of capital inputs.

Egypt is planning three or four IPOs of government-owned firms per year according to a statement from finance minister Ahmed Kouchouk. Targeted industries include financial services, airports, logistics and renewable energy.

Home sales in Türkiye rose by 6.9% y/y in September to 150k, their highest level all year. Secondary sales dominate the market, accounting for about 87% of total sales with “other” financing representing the largest form of sale.

Today’s Economic Data and Events

13:00 EC CPI Sept (f): forecast 2.2%

16:30 US housing starts Sep: forecast 1.32m

Fixed Income

A flight to havens helped to support US Treasuries overnight. Yields on the 2yr UST fell 7bps to 3.4243% while yields on the 10yr fell 5bps 3.9745%.

Regional credit was well supported across all assets and geographies with high-yield and sovereigns the standout performers.

Mubadala priced an AED 1bn 5yr at a yield of 4.2%. Total interest was at more than AED 4.7bn.

FX

The US dollar sold off for a third day overnight with EURUSD up 0.3% at 1.1687 while JPY strengthened by 0.4% with USDJPY down to 150.43. GBPUSD managed a gain of 0.2% to 1.3434 while USDCHF extended its move lower to 0.793, down 0.5% on the day.

In emerging markets, the Turkish lira was steady at around 41.85 while INR strengthened a second day in a row, with USDINR down 0.3% to 87.8262. Egyptian pound was moderately strong at 47.5807.

Equities

In the US concern over several regional banks helped to pull equities broadly lower. The Dow Jones closed lower by 0.7% while the S&P 500 gave up 0.6% and the NASDAQ fell 0.5%. European markets fared better with gains of 0.8% in the Euro Stoxx index and 0.1% in the FTSE.

In local markets the DFM dropped 0.2% overnight while the ADX gained 0.4%. The Tadawul was higher by 0.1%.

Commodities

Oil prices dropped overnight with Brent futures down 1.4% at USD 61.06/b and WTI moving further away from USD 60/b to USD 57.46/b, down 1.4%. Both contracts are edging lower in early trading today.

The EIA reported a build in commercial stocks of 3.5m bbl last week, offset by a sizeable draw in distillate inventories. Overall commercial stocks of crude and products were 2.4m bbl higher. US oil production was steady at 13.6m b/d while refinery utilisation dropped sharply to less than 86%, its lowest level since February this year.

Gold prices extended to new record highs, closing above USD 4,320/troy oz overnight, up 2.8%. Silver also pushed higher to USD 54.24/troy oz. Industrial metals generally were stronger though iron ore slipped marginally.