Dubai pledges infrastructure investment in Pakistan

The UAE has pledged economic support for Pakistan through agreeing to roll over its USD 2bn loan at the Pakistani central bank. This will help provide stability and help the nearby country’s ongoing recovery from its economic crisis. Dubai has also pledged sizeable investments in Pakistan, with moves by DP World to develop a freight corridor through investing in rail, ports, and freight storage capabilities. This will also benefit Dubai, through opening up new markets in Asia to trade.

Japan’s national inflation rate came in at 2.6% y/y in December, above the predicted 2.5% but down from the 2.8% registered in November. Core inflation was at 3.7%, in line with expectations. The slowing inflation means that the BoJ will likely wait beyond the upcoming January meeting to implement its first rate hike since 2007.

Weekly initial jobless claims in the US fell to 187,000 in the week to January 13, down from 203,000 the previous week and undercutting the predicted 205,000. Meanwhile, housing starts fell to 1.46mn in December, down from 1.53mn in November.

Visitor numbers to Egypt hit a record 14.9mn in 2023 according to Minister of Tourism and Antiquities Ahmed Issa, up by more than a quarter from 2022’s 11.7mn and beating the previous 2010 record of 14.7mn by 1.4%. However, this fell just short of the targeted 15mn visitors in 2023, with Q4 numbers falling short of projected levels as visitors were deterred by the conflict across the border in Gaza.

Today’s Economic Data and Events

11:00 UK retail sales, December, % m/m. Forecast: -0.5%

19:00 US University of Michigan sentiment index, January. Forecast: 70.1

19:00 US existing home sales, December. Forecast: 3.83mn

Fixed Income

• Yields on longer-dated USTs ticked up again yesterday as there was further pushback from Fed officials including Raphael Bostic, and the initial jobless claims came in under expectations. The 10yr yield climbed 4bps to 4.1420%, its highest since mid-December. The 2yr closed all but flat however, up less than 1bps to 4.3524%.

FX

• The dollar index continued to grind higher yesterday, adding a further 0.1% against its basket of peers for the second day running, but any gains against other currencies were fairly minimal. The JPY closed flat while EUR lost 0.1% to the greenback.
• Notable gainers against USD yesterday included GBP which added 0.2% to close at 1.2706 and the AUD which added 0.3% to 0.6573.

Equities

• Equity markets had some respite from recent selling yesterday, starting off in Asia where the Shanghai Composite closed up 0.4% and the Hang Seng 0.8%. IN Japan, the Nikkei closed flat.
• In Europe, a good day for luxury stocks helped boost sentiment more widely and the STOXX 600 ended the day 0.6% higher with the CAC gaining 1.1%. In the UK, the FTSE 100 added 0.2%.
• In the US, a rally in tech stocks helped boost markets, with the NASDAQ adding 1.4%. The Dow Jones gained 0.5% and the S&P 500 closed 0.9% higher.
• Locally, the ADX closed down 0.1% while the DFM ended the day 0.9% lower.

Commodities

• Oil prices picked up to three-week highs yesterday, boosted by Red Sea tensions, a drop in US stockpiles, and US weather disruption. Brent futures closed 1.6% higher at USD 79.1/b, while WTI added 2.1% to USD 74.1/b.
• EIA data released yesterday showed that US crude stockpiles had fallen to the lowest level since October last week, dropping 2.5mn bbl. On the other hand, gasoline inventories rose 3mn bbl to levels last seen in February 2022.
• The IEA estimates global oil demand growth of 1.24m b/d in 2024, an increase of 180k b/d from its previous estimate. Emerging Asia will represent the bulk of the demand growth this year, more than 1m b/d in total, while developed markets will see consumption drop by about 150k b/d. Non-OPEC+ supply will rise by 1.5m b/d in 2024 led by higher output from the US, Brazil, Guyana and Canada.