Dubai's economy grew 3.2% in Q1 2024

Dubai’s economy grew 3.2% y/y in Q1 2024 according to preliminary estimates. The fastest growing sector was utilities, which grew over 7% y/y, but economic growth was really driven by expansion of Dubai’s tourism & storage and financial services sectors which both grew 5.6% y/y in the first quarter of the year. The wholesale & retail trade sector, which accounts for almost a quarter of Dubai’s economy, expanded 3% in Q1. Real estate services grew 3.7% y/y. The official statement indicated that full year 2023 GDP growth was 3.3%, slightly lower than our 3.5% estimate. However, there appear to be some revisions to older data, and the full dataset has not yet been released.

The Turkish central bank kept its benchmark one-week repo rate on hold at 50.0% at its meeting yesterday, the third consecutive hold from the TCMB’s rate-setting committee. The decision was widely anticipated given that with headline CPI inflation still at 71.6% in June, real rates are still in deeply negative territory even as price growth has started to come off the recent peak. Explaining the decision, the bank’s communique noted ‘the high level of and the stickiness in services inflation’ and other factors including geopolitical risks as keeping ‘inflationary pressures alive.’ The bank ‘reiterated that it remains highly attentive to inflation risks’ even while noting the lagged effects of the massive cumulative hiking enacted over the past 12 months.

US existing home sales fell by more than expected in June, declining -5.4% m/m to 3.89m transactions (annualized) after a -0.7% m/m drop in May. This was the lowest reading since December. The median home price rose 4.1% y/y to USD 426k.

India’s FY2025 budget projects a deficit of -4.9% of GDP, down from -5.6% in FY2024, even as spending is expected to rise. Current spending will rise by 0.2% of GDP while capex will grow 17.1% y/y in the next fiscal year. There was tax relief for middle income earners, offset by higher capital gains and STT taxes on investors.

Key Economic Data and events

12:00 Eurozone flash composite PMI (Jul) forecast 50.9

12:30 UK flash composite PMI (Jul) forecast 52.6

17:45 Bank of Canada rate decision, forecast -25bp to 4.5%

17:45 US flash composite PMI (Jul) forecast 53.9

18:00 New home sales (Jul) forecast 640k (3.4% m/m)

Fixed Income

• There was strong demand for 2y US treasuries auctioned overnight, as investors looked to lock in rates ahead of expected Fed easing in September. This helped to push the 2y yield down -3bp to 4.49%, and this has declined further in Asian trade this morning. The 10y yield was largely unchanged at 4.25% at Tuesday’s close.
• European benchmark 10y yields also fell yesterday with Germany and the Netherlands seeing the biggest declines of -5.7bp (to 2.43%) and -5.3bp (to 2.71%) respectively. 10y gilt yields declined -3.6bp to 4.12%.

FX

• The USD index rose 0.1% on Tuesday as most of the major currencies weakened against the dollar. The exception was JPY which appreciated for the second consecutive session, up 0.5% to 156.05. JPY has broken below 156/USD in Asia this morning and is trading at 155.33/USD as of this writing.

Equities

• US equities closed lower yesterday with the Nasdaq100 down -0.4% and the S&P500 down -0.2%. Alphabet and Tesla reported Q2 earnings after the bell, which have seemingly disappointed investors and S&P500 futures have declined -0.3% this morning. European equities were mixed with the Dax up 0.8% and the CAC40 down -0.3%.
• The DFMGI rose 0.9% on Tuesday while ADXGI declined -0.5% and Tadawul ASI fell -0.6%.

Commodities

• Crude oil closed lower for the third consecutive session on Tuesday with Brent down -1.7% to USD 81.01/b and WTI down -3.5% to USD 76.96/b. However, API reports late yesterday showed US inventories fell by 3.86mn barrels last week, pushing both crude benchmarks up 0.4% in early Asian trade this morning. The market will be looking to official EIA data for confirmation of this draw later today. Oil prices may have also been boosted by news that Canadian wildfires may threaten the country’s oil production, if not brought under control.