Central Bank of Egypt keeps rates on hold

The Central Bank of Egypt kept its interest rates on hold at its meeting yesterday, leaving the benchmark overnight deposit rate at 27.25%. This was the fifth hold in a row at this record high. The decision was anticipated given that the disinflationary trend has paused for now as subsidy adjustments by the government have pushed up prices for certain components of the basket; headline CPI inflation ticked up to 26.5% y/y in October, from 26.4% the previous month. The bank expects inflation to remain around these levels through the end of the year before base effects mean a fairly sharp slowdown in annual price growth should materialize later in the first quarter of 2025. There remains one more MPC meeting this year, on December 26, but we expect no movement in rates this year with the first cuts more likely in Q1.

The weekly US initial jobless claims figure fell to 213,000 in the week to November 16, down from 219,000 the week before. This was somewhat lower than the predicted 220,000 and was the lowest reading since mid-April, with the upcoming holiday season likely explaining the relatively low reading. On the other hand, continuing claims were at a three-year high at of 1.9mn indicate that the labour market is slowing down over all.

CPI inflation in Lebanon slowed to 15.7% y/y in October, down from 32.9% in September. This marked the slowest pace of price growth since February 2020, with the intervening period seeing a bout of very high inflation. This started with the financial crisis which began in March 2020 and was subsequently exacerbated by the Covid-19 pandemic, the Beirut port blast, and the Ukraine conflicts and compounded by political stalemate domestically. Inflation peaked at 268.8% y/y in April 2023.

Today’s Economic Data and Events

12:15 France manufacturing PMI, November preliminary. Forecast: 44.5

12:30 Germany manufacturing PMI, November preliminary. Forecast: 43.0

13:00 Eurozone manufacturing PMI, November preliminary. Forecast: 46.0

19:00 US University of Michigan sentiment index, November final. Forecast: 73.9

Fixed Income

• USTs sold off again yesterday, with sharper yield rises at the short end. The 2yr added 3bps to 4.3487% while the 10yr yield ended the day at 4.4218%, up 1bps on the day.
• The Turkish central bank kept its benchmark one-week repo rate on hold at 50.0% yesterday, as had been widely anticipated.

FX

• The dollar index added 0.3% against its basket of peers yesterday as an escalation in the Russia-Ukraine war led to a flight to haven currencies. This was underlined by the JPY being a notable gainer against the greenback, climbing 0.6% to 154.54.
• Other currencies largely lost ground against the dollar, with GBP down 0.5% at 1.2589, while EUR ended the day 0.7% lower at 1.0474. The rise in oil prices was supportive of CAD which closed flat, while AUD added 0.1%.

Equities

• US equity indices were up for the most part yesterday although some disappointing earnings results in the tech sector meant that the NASDAQ closed higher just marginally at a gain of 0.03%. There was a stronger performance from the S&P 500 which added 0.5% and the Dow Jones which closed 1.1% higher.
• In Europe, the FTSE 100 was the standout as it closed up 0.8%, with the CAC adding 0.2% and the DAX 0.7%.
• Locally, the DFM fell 0.7% and the ADX closed 1.0% lower. Saudi Arabia’s Tadawul fell 0.2% on its last trading day of the week.

Commodities

• Oil prices had a sizeable boost yesterday as an escalation in the Russia-Ukraine war added a risk premium back into the market.
• Brent futures closed up 2.0% at USD 74.2/b, while WTI added 1.8% to USD 70.1/b. Both benchmarks are up further in early trading today.