Dubai data points to robust growth

Two sets of figures from Dubai are illustrative of the robust growth in the economy over the past year, which expanded by 3.1% y/y over the first three quarters of 2024 and had strong momentum through the final three months according to the PMI survey data. Firstly, the Dubai International Financial Centre (DIFC) reported that it now houses 6,920 different companies, up 25.3% on the previous year, while operating profit was up 55%. These figures are testament to the continued importance of the financial services sector in Dubai which was up by 4.5% y/y over January to September last year and accounted for 10.3% of the total economy.

Not unrelatedly, Al-Maktoum International has reported that it saw 17,891 private jet movements over the course of 2024, up around 7% on 2023, with December seeing a y/y gain of over 50%. This is likely reflective of a number of things, including the rising number of private firms, but also a mounting population generally, including an increasing number of high-net-worth individuals, and also Dubai’s continued evolution as a globally popular tourism destination, with a new record in visitor numbers hit last year on growth of 9.2%.

President Trump has warned that the US may impose new tariffs on imports of cars, semiconductors and pharmaceuticals of as much as 25% from the start of April, following on from the tariffs on metals that are scheduled to begin in March. Meanwhile, Secretary of State Marco Rubio has told European allies of the US that sanctions on Russia will remain in place until a deal over Ukraine is reached.

Canada’s CPI inflation picked up modestly to 1.9% y/y in January, in line with expectations and up from 1.8% in December. On a monthly basis prices were 0.1% higher, compared to a 0.4% drop the previous month. Energy prices drove much of the inflation over the month, with a sales tax break easing pressure elsewhere.

The Reserve Bank of New Zealand cut its official cash rate by 50bps to 3.75% this morning, the third straight meeting where a half-point move was delivered as economic growth has looked weak. The RBNZ also pointed towards further easing this year, stating that ‘If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.’

The ILO unemployment rate in the UK for the three months to December stood at 4.4%, unchanged on the previous month and lower than the predicted 4.5%. Average weekly earnings for the same period meanwhile were up 6.0% y/y, and 5.9% when stripping out bonuses, up from 5.5% and 5.6% respectively in November. The robust labour market data, which suggests that it was not overly affected by the employer national insurance changes, will likely give the BoE cause for caution in its rate cutting.

Germany’s ZEW survey saw an improvement in both the expectations and the current situation components in January as they came in at 26.0 and -88.5 respectively, compared to 10.3 and -90.4 in January. The current situation improvement was one of the biggest in recent years, with the upcoming snap elections potentially set to lead to more market friendly policies from the new government.

Today’s Economic Data and Events

11:00 UK CPI inflation, % y/y, January. Forecast: 2.8%

23:00 US FOMC meeting minutes, January 29.

Fixed Income

• US treasuries sold off on Tuesday as they reopened from the Presidents’ Day holiday at the start of the week. Yields on the 2yr ended the day 5bps higher at 4.3056% while the 10yr rose by 7bps to 4.5503%.
• In the UK, gilt yields rose as strong labour market data pared bets on rate cutting from the BoE. The 2yr closed at 4.243%, up 4bps, while the 10yr ended the day at 4.558%, up 3bps.

FX

• It was a day of broad dollar strength yesterday as the DXY index broke its run of five straight days of losses to close up by 0.5%.
• The notable loser was the NZD which closed down 0.6% to 0.5703 ahead of the RBNZ rate decision. AUD was down by a lesser 0.1%.

• GBP pared earlier losses after robust labour market data, closing down just 0.1% at 1.2613. EUR was down by 0.4% at 1.0446.

Equities

• While moves in US equities were not especially large as they reopened yesterday, they were positive, and the 0.2% gain for the S&P 500 was enough to see it close at a record high. The NASDAQ added 0.1% while the Dow Jones closed just above its Friday level.
• Locally the DFM closed down 0.2% but the ADX added 0.7% while the Tadawul ended the day 0.6% higher.

Commodities

• Oil prices remained supported yesterday, likely bolstered by reports of a possible further delay by OPEC+ in bringing volumes back to the market, and by the outlook for sanctions on Russia. Brent futures closed up 0.8% at USD 75.8/b, while WTI prices added 1.6% as trading reopened post the holiday, closing at USD 71.9/b.