Qatar economy cools in Q1

Qatar’s real GDP growth rate slowed to 3.7% y/y in Q1, down from 6.1% in Q4 2024 as hydrocarbons growth slowed to 1.0%, from 6.2% the previous quarter. There was also a more modest slowdown in non-hydrocarbon GDP which maintained a robust growth rate of 5.3%, compared with 6.2% previously. Notable growth drivers include wholesale & retail trade which expanded 14.6% y/y and accounted for 8.4% of GDP, and manufacturing which made up 7.4% of the total and grew 5.6% y/y, compared with a 0.2% decline in Q4 2024. We forecast headline GDP growth of 2.6% this year, compared with 2.4% in 2024, and anticipate an acceleration to 4.8% in 2026 given the expected start of operations at the North Field East expansion project in the middle of next year. In other data released yesterday, Qatar’s CPI inflation print for May was -0.1%, from positive 0.5% in April.

Saudi Arabia’s National Centre for Privatisation and PPP has announced two major PPP projects in Makkah and Dammam to build mixed use projects covering healthcare and commercial operations. The project in Makkah will be built under a Build-Own-Operate-Transfer model for a 30 year concession while in Dammam the project will be based on a Design-Build-Finance-Operate-Maintain-Transfer model for 30 years.

In Türkiye, the manufacturing PMI for June eased to 46.7 from 47.2 a month earlier. New orders fell to 46, marginally lower than 46.3 in May. The June print is the softest PMI for this year means the manufacturing sector has been self-reporting contraction for every month since March 2024.

The US Senate voted in favour of the Trump Tax bill with a close 51-50 vote. It will now go to the House of Representatives where there still may be some push back at how much fiscal loosening is planned according to the bill. US President Donald Trump has a target of July 4 for the bill to become law.

The ISM manufacturing index in the US improved in June to a still contractionary 49, up from 48.5 a month earlier. Production was the primary reason for the improvement in the headline index as new orders and employment declined. Import levels also increased along with inventories which may be a sign that firms have run down their pre-tariff purchases. Prices paid rose to nearly 70 in June. US data also showed 7.77m job openings in May, up from 7.4 a month earlier. Essentially every sector reported healthy job demand in May while the voluntary quits rate was moderately higher at 2.1% compared with 2% in April.

Inflation in the Eurozone rose to 2% y/y in June, marginally higher than 1.9% in May. Core inflation printed at 2.3%, unchanged from a month earlier. Markets are pricing in a skip at the next ECB meeting for later in July and tentatively pricing in one additional 25bps cut by the end of the year.

Today’s Economic Data and Events

15:30 US Challenger job cuts June

16:15 US ADP employment change June: forecast 95k

Fixed Income

Fed Chair Jerome Powell said that the Fed would have already cut rates were it not for the tariffs introduced by the Trump administration and that the Fed was still going to “wait and learn more” about what effect tariffs may ultimately have on inflation. He did not explicitly rule out a July rate cut, preferring to “depend on how the data evolve.”

Treasuries were more responsive to the strong job openings numbers and yields on the 2yr UST added 5bps to 3.7725% while the 10yr yield was moderately higher. Markets are pricing in about 5bps of cuts at the July FOMC and about 64bps in total by the end of the year.

GCC credit was positive overnight with strong gains in investment grade and sovereign markets. UAE, Saudi and Qatar bonds all had a strong performance.

FX

The US dollar extended its sell-off overnight across nearly all peer currencies as markets take stock of the impending debt burden the US would endure as a result of the cuts to tax rates. EURUSD added almost 0.2% to 1.1806 while GBPUSD gained 0.1% to 13746. USDJPY pulled lower by 0.4% for a second day in a row to 143.42 while USDCHF extended its moves in favour of the franc, down another 0.3% at 0.7911.

In commodity currencies USDCAD was the odd one out, with CAD weakening by 0.3% while both AUD and NZD were moderately stronger.

Indian rupee pulled stronger by about 0.3% at 85.53 while USDTRY edged up marginally to 39.8398.

Equities

It was a mixed performance for US equity markets overnight with a 0.9% gain in the Dow Jones offset by losses of 0.1% in the S&P 500 and 0.8% in the NASDAQ. European markets were also mixed with the EuroStoxx lower by 0.4% and the FTSE gaining 0.3%.

Local equities were weaker with both the DFM and ADX lower by more than 0.2% while the Tadawul recorded a 0.4% loss.

Commodities

Brent markets slipped overnight, down 0.7% to USD 67.11/b while WTI managed a gain of 0.5%. API data reported a build of 680k bbl in US crude inventories last week along with a gain in gasoline stockpiles, though distillate inventories fell.