Sharp drop in Eurozone inflation in November may not be sustained.

Eurozone inflation fell by slightly more than forecast in November, with a final print of -0.6% m/m compared with a flash estimate of -0.5% m/m.  The annual rate fell to 2.4% y/y from 2.9% in October, while core CPI declined to 3.6% y/y in November from 4.2% the prior month. While the data is encouraging, there were some one-off factors behind the sharp decline in services inflation last month which may not be sustained. Consequently, the ECB will likely need to see more data to be convinced that inflation is on track to meet to meet the 2% target before considering any easing in monetary policy.

Saudi Arabia has launched a new unified visa platform to streamline the application process for all types of visas including tourist and Hajj visas. The Kingdom has made development of the tourism sector a key part of its overall economic diversification strategy, and an easier visa application process will support the achievement of this goal. KSA has raised the tourism target to 150mn visits per year by 2030 (including domestic tourism). The GCC has also agreed to work on launching a unified Gulf tourist visa, which should support growth of the sector across the region.  

Today’s Economic Data and Events

11:00 UK CPI (Nov) forecast 0.1% m/m and 4.3% y/y

19:00 US existing home sales (Nov) forecast 3.78mn (-0.4% m/m)

19:00 US Conference Board Consumer Confidence (Dec) forecast 104.5

Fixed Income

• Bond markets continued to shrug off pushback from Fed officials that pricing of rate cuts in 2024 is too optimistic. The 2y yield declined 1bp to 4.44% while the 10y treasury yield was unchanged at 3.93% on Tuesday. China’s holdings of US treasuries fell for the seventh month in a row in October and are now at the lowest level since 2009.

FX

• The USD index declined -0.4% on Tuesday as the EUR gained 0.3%, CHF rose 0.3% and GBP also strengthened 0.3% against the greenback. JPY weakened 1.5% after the BoJ offered no new guidance on when it might start to raise the policy rate.
• AUD and CAD rallied for the second day against the US dollar but CAD weakened slightly.

Equities

• US equity markets are reaching record highs, with the Nasdaq 100 setting a new record yesterday, as bond markets shrug off statements by Fed officials that rate cut pricing for 2024 is too aggressive. The S&P closed up 0.6% while the Nasdaq Composite gained 0.7% on Tuesday. The Dow Jones Industrial Average rose 0.7% to a record high.
• Equity markets in Europe saw smaller gains with the Euro Stoxx50 up 0.3% and the UK’s FTSE100 also up 0.3%. Asian equity markets opened higher this morning with the Nikkei up 1.8% and the Hang Seng index up 1.2% as of this writing.
• GCC equity markets closed mostly in the green yesterday, with Abu Dhabi and Dubai benchmark indices up 0.2% respectively, while the Tadawul rose 0.3%. Qatar’s QE Index gained 2.2% on the day, the biggest move since 5 November.

Commodities

• Both Brent and WTI closed higher again on Tuesday, up 1.6% and 1.3% respectively, even as the API data showed US crude stockpiles rising 939k barrels last week. At USD79.23/b, Brent is trading at the highest level this month, but the price is largely unchanged this morning.