FDI into the UAE exceeded USD 30bn in 2023

Foreign direct investment (FDI) into the UAE grew 35% y/y in 2023 to USD 30.7bn (AED 112.6bn), according to the latest annual FDI report by UNCTAD. This was against a backdrop of an overall decline in global FDI last year by about 2%, as high interest rates, slowing growth and geopolitical tensions weighed on global investment flows. The UAE’s investments abroad declined to USD 22.3bn last year according to the report, meaning the country saw a net inflow of foreign direct investment of over USD 8bn in 2023. Saudi Arabia’s inward FDI fell to USD 12.3bn from USD 28.1bn in 2022, while the kingdom’s investment abroad declined to USD 16.1bn from USD 27bn in 2022 according to the report.

The Bank of Japan's board discussed the prospect of an interest rate hike at the June meeting, as upside risks to inflation become more evident. Weakness in the yen in recent months may lead to higher imported inflation. The summary of the meeting suggests that July may a live meeting for a rate hike. 

UK retail sales grew 2.9% m/m in May, well above market expectations and up from -1.8% m/m in April. On an annual basis, retail sales were 1.3% y/y higher. The May increase was the strongest m/m growth since January, after heavy rains deterred shoppers in April. Most categories of retail spending saw an increase last month, led by online sales, clothing and footwear, and household goods. Stronger real income growth is likely supporting consumer demand, along with higher consumer confidence.

Eurozone growth likely slowed in June, according to preliminary PMI data released on Friday. The composite PMI fell to 50.8 for the bloc, from 52.2 in May and below the median forecast. The main drag was manufacturing, where the PMI fell to 45.6 from 47.3 in May. The services PMI slipped 52.6 this month but remains in expansion territory. In the UK, manufacturing fared better with the flash PMI rising slightly to 51.4 from 51.2 in May, but the services PMI fell to 51.2 from 52.9 previously.

US economic data was mixed at the end of last week with the flash PMI surveys coming in slightly better than forecast for both manufacturing (51.7) and services (55.1) in June but the housing market still seeing fewer transactions. Existing home sales declined -0.7% m/m in May, the third consecutive monthly decline, as high prices and mortgage rates weigh on affordability. Supply of homes on the market did increase last month but remains low relative to before the pandemic. The shortage of homes for sale has helped to keep prices high however, with the median sales price up 5.8% y/y in May.

Today’s Economic Data and Events

12:00 Germany IFO business climate (Jun) forecast 89.6

18:30 US Dallas Fed manufacturing activity (Jun) forecast -15.0

Fixed Income

• US treasury yields declined over the course of last week with the 2y yield down -4bp since Monday to close at 4.73% on Friday. The 10y yield fell -2.5bp to end the week at 4.26%. European bond markets had a mixed week with Sweden and France seeing 10y yields rise w/w while most other benchmark European yields declined.

FX

• The US dollar spot index gained 0.2% w/w as EUR, GBP and CHF lost ground against the dollar. The yen ended the week at 159.8/ USD, down -1.5% w/w. Finance Minister Kanda said early this morning that the authorities are ready to intervene in currency markets 24 hours a day if needed, to prevent "excessive currency fluctuations".
• Among the commodity currencies, AUD and CAD strengthened while NZD weakened -0.4% w/w.
• ZAR closed below 18/USD for the first time since July 2023, after Cyril Ramaphosa was sworn in as President of South Africa last week, presiding over a Government of National Unity which is seen to be supportive of market friendly reforms.

Equities

• Despite closing lower on Friday, US equities gained w/w, led by the DJIA at 1.3% w/w. The Nasdaq100 and the S&P500 gained 0.6% w/w. It was a similar story in Europe where the EuroStoxx 50 ended the week 1.4% higher and the FTSE100 rose 1.1% w/w.
• Regionally, the DFMGI and ADXGI gained 0.8% w/w and 0.9% w/w respectively in a holiday-shortened week.

Commodities

• Brent oil rose 3.2% w/w and WTI gained 2.9% w/w, despite closing lower in Friday’s session. EIA reports last week of an unexpected decline in inventories as well as optimism about the prospect of lower rates likely helped buoy prices. However, economic and geopolitical uncertainty remains high.