President Trump addresses Davos

President Trump addressed the Davos forum by videolink yesterday, with a wide-ranging speech addressing a number of notable macroeconomic concerns. Most relevant to the region, he urged Saudi Arabia and other OPEC producers to bring down the cost of oil, claiming that it would help end the war in Ukraine and also lower inflation, enabling greater interest rate cuts. Trump followed up on the interest rate theme later in the day saying that he would like US rates to come down a ‘lot’ and setting himself up for a collision with Chair Jerome Powell. Trump also reiterated threats around tariffs in order to bring manufacturing back to the US during his Davos speech. Yesterday President Trump also set up a working group on digital assets but has so far stopped short of creating a national reserve. He has also told Fox News that he would ‘prefer’ not to impose tariffs on China.

The IMF published its end-of-mission report yesterday after completing its staff visit to the UAE. The statement carried a constructive view on the UAE and forecasts growth of around 4% this year, citing robust non-oil activity in ‘tourism, construction, public expenditure, and continued growth in financial services’, while it also projects hydrocarbon GDP growth of over 2% despite ongoing OPEC+ production curbs. Inflation is expected to remain around the 2% mark despite ongoing upwards pressure from housing costs, while the budget is forecast to remain in surplus at around 4% of GDP, down from an estimated 5% last year, while the current account surplus remains at a robust 7.5% of GDP.

Turkey’s central bank cut its one-week repo rate by 250bps at its first rate-setting meeting of the year yesterday, taking the benchmark rate down to 45.00%. This marked the second cut from the TCMB following the initial 250bps cut implemented at the close of 2024, and with inflation continuing to slow, falling to 44.4% y/y in December, further easing is expected through the rest of the year. The wording of the bank’s statement removed a reference to monthly inflation which had been in the past several communiques, with m/m inflation having slowed to 1.0% in December, down from 2.2% the previous month.

US initial jobless claims rose to 223,000 in the week to January 18, up from 217,000 the previous week and higher than the predicted 220,000. Meanwhile continuing claims in the week to January 11 hit 1.9mn, the highest level since November 2021.

National core inflation in Japan hit 3.0% y/y in December, the highest level in 16 months and supportive of the widely expected rate hike from the BoJ this morning. Headline CPI inflation was 3.6%, up from 3.4% previously.

Today’s Economic Data and Events

09:00 India manufacturing PMI, January

12:15 France manufacturing PMI, January. Forecast: 42.5

12:30 Germany manufacturing PMI, January. Forecast: 42.7

13:00 Eurozone manufacturing PMI, January. Forecast: 45.4

13:30 UK manufacturing PMI, January. Forecast: 47.0

18:45 US manufacturing PMI, January. Forecast: 49.8

Fixed Income

• There was little change in USTs yesterday at the short end yesterday, with the 2yr yield closing lower by less than 1bps at 4.2890%. There was more movement on the longer end however with the steepening trend still in play. Yields on the 10yr were 3bps higher at 4.6436% while the 30yr was up 4bps at 4.8671%.
• The Bank of Japan was due to hold its rate decision this morning, with a 25bps hike to 0.50% for the target rate widely anticipated.

FX

• The dollar index closed 0.1% lower against its peers yesterday, with the greenback showing a mixed performance across its notable peer currencies, though with little concrete direction.
• GBP closed up 0.3% at 1.2353, while EUR added less than 0.1% to 1.0415. JPY gained 0.3% against the dollar to close at 156.05 ahead of the BoJ decision today.

Equities

• Global equity markets had a largely positive day yesterday, with gains across most of the major indices. In the US, the NASDAQ, the S&P 500, and the Dow Jones added 0.2%, 0.5%, and 0.9% respectively. The UK’s FTSE 100 added 0.2% while France’s CAC and Germany’s DAX both gained 0.7%.
• Locally, the ADX added 0.2% while the DFM closed 0.3% higher. Saudi Arabia’s Tadawul closed 0.1% lower.

Commodities

• Brent futures closed down for the sixth straight session yesterday, with President Trump’s comments contributing to the downward pressure. They fell 0.9% to USD 78.3/b while WTI fell 1.1% to USD 74.6/b.