US PMI points to price rises

US private sector activity continued to expand in June, albeit at a marginally slower pace when compared to May, with the composite measure declining to 52.8 from 53.0. Export orders acted as a drag on growth, likely reflecting continued trade tensions. Sharp price increases were seen on the month, commonly attributed by respondents to the survey to the impact of tariffs. The manufacturing component remained unchanged, above the neutral-50 mark, at 52.0, while the services component declined to a reading of 53.1 from 53.7 in May.

The provisional Eurozone PMI print continued to point to very limited growth amongst private sector firms in June, with the composite measure remaining unchanged at a value of 50.2. Underlying the headline was a marginal increase in the services subcomponent, which rose to the neutral-50 mark from 49.7 in May, while the manufacturing index remained steady at 49.4. At a country-level, the German composite PMI measure rose back into expansionary territory, albeit marginally, increasing to 50.4 in June. The composite PMI reading for France, in contrast, fell further, declining to a value of 48.5 from 49.3 in May.

The flash estimate of the UK composite PMI measure rose to a value of 50.7 in June, higher than both expectations and the 50.3 recorded in May. Despite improvements in both the manufacturing and services components, the headline measure remained below levels seen earlier in the year, with activity constrained by both the uncertainty created by US tariff announcements and domestic tax changes.

President Trump announced a ceasefire in the Israel-Iran conflict, with the truce due to begin at midnight - Washington time - on Monday. The deal came after Iran launched missiles at a US airbase in Qatar. Oil futures fell sharply overnight on the news.

Oman has announced plans to impose a 5% personal income tax from 2028 onwards. The tax will be applied to those earning more than 42,000 Rials (equivalent to USD 109k), meaning that the tax will only affect the top 1% of earners.

Today’s Economic Data and Events

12:00 GE IFO Business climate survey June: forecast 88.2

16:30 US current account balance Q1: forecast -$445.5bn

18:00 US Conference Board consumer confidence June: forecast 99.8

Fixed Income

US Treasuries saw further small gains on Monday, with dovish comments from a further two Fed officials following comments from Fed Governor, Christopher Waller, at the end of last week. The yield on the 2yr treasury fell 1bps to reach 3.8633%, while the 10yr yield fell 3bps to 4.3475%.

Yields on major European bond were broadly lower on the day. The 10yr Bund fell 1bps to 2.506%, while the 10yr Gilt yield declined by a more substantial 4.5bps to 4.4912%.

The Central Bank of the UAE conducted its regular M-bill auction on Monday, raising a total of AED 29.4bn. The bank sold AED 4.1bn of 28-day bills at a yield of 4.54%; AED 2.1bn of 84-day bills at 4.59%; AED 3.2bn of 168-day bills at a yield of 4.6% and AED 20bn of 336-day bills at 4.53%.

APICORP has mandated banks for a USD benchmark 3yr issuance.

FX

A de-escalation of the Israel-Iran conflict boosted risk appetite and sent the US dollar spot index lower against a basket of peer currencies, declining 0.3% on Monday. Both EURUSD and GBPUSD rose roughly 0.5% to 1.1578 and 1.3524, respectively. USDCHF fell 0.6% to reach 0.8127.

Commodity currencies gained against the US dollar, with both AUDUSD and NZDUSD gaining a little over 0.1%. USDCAD remained flat at 1.3734.

Equities

US equity markets rose on Monday. The Dow Jones gained 0.9%, while both the S&P 500 and NASDAQ rose just short of 1%.

European stocks were broadly weaker on the day. The Euro Stoxx 50 index fell 0.2%, the FTSE lost 0.2%, the DAX dropped 0.35% and the CAC 40 fell 0.7%.

In local markets the DFM rose 1.1% while the ADX was 0.5% higher. The Tadawul rose 1.29%.

Commodities

Oil prices fell back sharply on Monday, with President Trump announcing a truce in the Israel-Iran conflict. Brent fell 7.2% to end the day at USD 71.48/b and WTI declined 8.6% to USD 68.51/b. There have been further falls in oil market futures in early morning trade.