OPEC plots another big increase for July

US President Donald Trump announced at a rally that the US would raise its tariffs on imported steel and aluminium to 50% from the currently levied 25%. The new tariff rate will reportedly take effect from June 4th. The announcement on metals-specific tariff followed a decision at the end of last week from a federal appeals court that would allow the tariffs announced on April 2nd to be in place until at least June 9th, reversing a decision from a trade court earlier in the week.

The eight members of OPEC+ that have been making additional voluntary cuts agreed to accelerate their production increases in July to 411k b/d, the third month in a row of a near tripling of the original target. Output from the group, which includes the UAE, Saudi Arabia, Iraq, Kuwait, Russia and others, is unlikely to materially push higher for July as output from many members is already above target level. Instead, the new targets for July affirm calibrate targets to existing production levels. The voluntary cutters (or V8) will set August production levels in early July.

Personal spending in the US slowed in April to just 0.1% m/m in real terms, down from a 0.7% rise in March likely as consumers tried to front-run the effect of tariffs taking effect. At the same time, imports fell almost 20% m/m in April, leading to a substantial narrowing of the US trade deficit to USD 87.6bn from USD 162.3bn a month earlier. Personal income in nominal terms rose by 0.8% m/m. The PCE deflator, the Fed’s target measure of inflation, rose by just 2.1% y/y in April, nearly on the Fed’s 2% target level. Core PCE slowed to 2.5% y/y, from 2.7% a month earlier.

Turkiye’s economy expanded by 1% q/q in the first quarter of 2025, slower than the 1.7% recorded in the last quarter of 2024. On an annual basis, the economy grew by 2%. Household consumption declined in Q1 on a sequential basis while government spending was higher. Investment turned negative, however, with a 1.4% q/q drop compared with a near 4% q/q rise in Q4 2024. At a sector level, manufacturing declined by 2.4% y/y while services, real estate and construction all expanded.

India’s economy grew by 7.4% y/y in the Jan-Mar quarter, up from 6.4% in the final quarter of calendar 2024. Private consumption and investment led the growth with expansion of 6% and 9.4% respectively. Imports declined sharply, lower by almost 13% in the quarter while government spending was lower by almost 2%. On a sector level, construction, financial services and trade, transport, hospitality and communications were the stand out performers in Jan-Mar.

Official PMI data from China came in roughly as expected for May with the manufacturing PMI at 49.5, up from 49 a month earlier, while the non-manufacturing PMI ticked marginally lower to 50.3 in May from 50.4 a month earlier.

The GCC and Malaysia have begun negotiations for a free trade deal while the UAE’s comprehensive economic partnership agreement with Serbia came into effect on May 31, the tenth bilateral trade agreement the UAE has reached. Non-oil trade between the UAE and Serbia is estimated at USD 121m in 2024.

Today’s Economic Data and Events

09:00 IN HSBC India PMI May (f)

11:00 S&P Global/ICI Turkey Manufacturing PMI May

18:00 US ISM Manufacturing May: forecast 49.5

Fixed Income

The front end of the US Treasury curve was seemingly lifted by the positive PCE report showing inflation getting close to Fed target levels. The 2yr UST yield dropped to 3.8975% at the end of the week, down about 4bps on the day. However, the longer end looked more fixated on US-China trade disputes with a dip of just 2bps in the 10yr yield to 4.4004%.

Local credit markets had a strong end to the week with gains across all sectors while all geographies apart from Kuwait saw gains on Friday. Emerging market bonds in general were stronger on Friday.

FX

The US dollar was relatively steady against peers on Friday with EURUSD marginally lower by 0.2% to 1.1347 while the Japanese yen closed modestly stronger against the dollar with USDJPY down 0.1% at 144.02. GBPUSD dipped slightly to 1.3459, down 0.2% on the day.

Amid emerging market currencies, USDTRY pushed higher by 0.2% to 39.198 while USDINR was close to unchanged at 85.5813. Egyptian pound closed near flat at 49.7238.

Equities

Benchmark stockmarkets had a mixed close to the end of the week with the Dow Jones higher by 0.1% while the S&P 500 was flat and the NASDAQ closed lower by 0.3%. European markets also had a mixed session with the FTSE up by 0.6% while the Euro Stoxx edged marginally lower.

In the UAE, the DFM closed Friday lower by 0.2% while the ADX 15 lost nearly 1%. The Tadawul started its week with a 1.5% decline.

Commodities

Oil markets lost ground last week but have started this week on a strong footing with Brent futures up 2.2% to USD 64.16/b for the front month while WTI futures have gained 2.6% to USD 62.34/b. The gains come despite the large increase in production that OPEC+ announced for July and seems to be driven more by geopolitical anxieties than oil market fundamentals.