EU approves launch of strategic partnership negotiations with GCC countries

The European Union has approved the launch of bilateral strategic partnership agreement negotiations with GCC nations. The discussions are likely to cover a variety of topics, including energy and security, are intended to deepen existing relationships between GCC countries and the EU.

Two major UAE firms have announced plans to invest in Saudi Arabia. Air Arabia, as part of a consortium, has been awarded a new contract to run a national low-cost airline, operating from King Fahd International Airport in Dammam. Separately, Al-Futtaim group has agreed to purchase a 49.95% stake from the founding partners of Cenomi Retail.

The preliminary print of the July University of Michigan survey showed an improvement in sentiment, rising to a value of 61.8 from 60.7 the month prior. The outturn, which was a touch above consensus expectations, was driven by improvements in both the current and expected conditions sub-components. There was also an improvement in household’s expectations for inflation, with 1-year ahead expectations declining to 4.4% (from 5% in June) and 5 to 10-year ahead expectations falling to 3.6% (from 4% previously).

The US stance on tariffs on the EU appears to have hardened as the 1 August deadline begins to loom, with reports suggesting that the Trump administration prefers a universal tariff, with limited exemptions, in excess of 10%. EU officials are expected to begin drafting a response, should negotiators fail to reach a deal. There is increasing speculation that several member nations would be in favour of using the EU’s Anti-Coercion Instrument (ACI), which gives the bloc power to impose retaliatory measures that go beyond tariffs, including taxes on US tech companies and limiting US investment in the bloc.

Today’s Economic Data and Events

18:00 US Conference Board leading index (Jun): forecast -0.3% m/m

Fixed Income

US Treasury yields fell marginally on Friday, with yields on both the 2yr and 10yr declining by roughly 4bps on the day, to reach 3.8691% and 4.4155%, respectively. On a week-on-week basis changes in yields were also muted, with the 2yr yield 2bps lower while the 10yr was up by less than 1bps.

There were broad-based gains in European government bond yields, with the 10yr Bund yield rising 2bps to 2.693%.

FX

The dollar declined against a basket of peer currencies on Friday, with the spot index falling 0.3% after Fed Governor – Christopher Waller – hinted that he would be a favour of a rate cut next week. EURUSD gained 0.3% to reach 1.1626, while USDJPY rose 0.15% to 148.81. GBPUSD was unchanged on the day.

In emerging markets, USDTRY gained 0.16% to 40.3784 while USDINR rose 0.1% at 86.1588. There was a larger move in USDZAR, which declined 0.6% to 17.7154.

Equity Markets

Moves in US equity markets were mixed on Friday, with the Dow Jones declining 0.3% and the S&P 500 flat. The NASDAQ saw a small rise, gaining 0.05%. Moves were however more marked looking across the week, with the both the S&P 500 and the NASDAQ seeing weekly gains of 0.6% and 1.5%, respectively.

European equity markets were similarly mixed on the day. The Eurostoxx 50 fell 0.3%, the FTSE 100 rose 0.2% and the DAX fell 0.3%.

Commodities

Oil futures declined on Friday, with Brent crude falling 0.4% to USD 69.28/b and WTI falling 0.3% to USD 67.34/b.

Gold gained 0.3% closing at USD 3349.94 per ounce.

• GCC- EU negotiations:
• The European Union has approved the launch of bilateral strategic partnership agreement negotiations with GCC nations
• UAE investment in Saudi Arabia:
• Air Arabia has been awarded a new contract to run a national low-cost airline, operating from King Fahd International Airport in Dammam.
• Al-Futtaim group has agreed to purchase a 49.95% stake from the founding partners of Cenomi Retail.
• US sentiment improves:
• The July University of Michigan survey showed an improvement in sentiment, driven by both the current and expected conditions sub-components.
• Inflation expectations also moderated, with 1-year ahead expectations declining to 4.4%, from 5% in June.
• EU-US trade negotiations:
• Reports suggest that the US prefers a universal tariff, with limited exemptions, in excess of 10%.
• EU officials are expected to begin drafting a response, should negotiators fail to reach a deal.
• Speculation that the EU could use the Anti-Coercion Instrument (ACI), which gives the bloc power to impose retaliatory measures that go beyond tariffs.
• Economic Data and Events:
• US Conference Board leading index: -0.3%m/m.
• Fixed Income:
• Small falls in US Treasury yields on Friday.
• Both 2yr and 10yr declining by roughly 4bps, to reach 3.8691% and 4.4155%, respectively.
• FX Markets:
• USDJPY rose 0.15% to 148.81; EURUSD gained 0.3% to reach 1.1626; GBPUSD was unchanged.
• USDTRY gained 0.16% to 40.3784; USDINR rose 0.1% at 86.1588.
• Equity Markets:
• Dow Jones declined 0.3%, while the S&P 500 remained flat. The NASDAQ saw a small rise, gaining 0.05%.
• Eurostoxx 50 fell 0.3%, the FTSE 100 rose 0.2% and the DAX fell 0.3%.
• Commodities:
• Brent crude fell 0.4% to USD 69.28/b. WTI declined 0.3% to USD 67.34/b.
• Gold gained 0.3% closing at USD 3349.94 per ounce.