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Saudi Arabia’s sovereign rating was upgraded by Moody’s to ‘Aa3’ from ‘A1’ and the outlook on the rating was revised to stable from positive. According to the rating agency the upgrade was in response to success in economic diversification and that further momentum will be maintained. Moody’s also noted positively the “recalibration and reprioritisation of diversification projects” as a positive driver for Saudi Arabia’s fiscal path. Moody’s expects non-oil growth of around 4-5% and fiscal deficits of between 2-3% of GDP in the coming years.
Economic momentum continues to diverge in major markets according to the latest PMI readings. The S&P Global flash PMI for November for the US showed the composite level rising to 55.3, up from 54.1 a month earlier. Activity was led by the services sector where the PMI improved to 57 in November, ahead of a month earlier and market expectations. Manufacturing remains below the neutral 50 level at 48.8 but it did improve month/month.
In contrast the HCOB Eurozone composite PMI for November dropped to 48.1, down from the neutral 50 level recorded a month earlier. Both services and manufacturing deteriorated last month and among the major countries reporting their flash estimates, activity was weaker in both France and Germany: manufacturing in particular remains soft. Conditions in the UK also weakened with the composite PMI at 49.9 thanks to declines in both manufacturing and services. The softer picture in Europe compared with the US will widen expectations for policy rates from central banks with the Fed pitched at a much higher path for rates than the European Central Bank.
President-elect Donald Trump has selected Scott Bessent, a hedge fund manager, as his nominee for Treasury Secretary. The treasury secretary will be key in implementing the incoming Trump administration’s plan on tariffs, tax cuts and financial services deregulation. Bessent has in the press given his support for the idea of a shadow chair for the Federal Reserve.
COP 29 concluded in Baku in Azerbaijan with an agreement on climate finance where wealthier countries have pledged USD 300bn per year by 2035. There was also an agreement to allow bilateral trading of carbon credits which can be used by countries in their emissions offset and reduction plans.
Today’s Economic Data and Events
Fixed Income
US Treasuries closed the week on a mixed footing with the 2yr UST yield up 2bps at 4.373% while the 10yr UST yield dropped by about the same amount to 4.4002%. The 2s10s curve flattened to just 2bps at the end of the week, down from 13bps a week earlier.
Markets are now assigning the December FOMC about a 50:50 chance of another 25bps cut from the Fed. For the whole of 2025, slightly more than two more 25bps are priced in by the market.
S&P upgraded their rating on Ras Al Khaimah to ‘A’ and changed the outlook to stable from positive. The upgraded reflects, according to S&P, “the solid pipeline of tourism-related development” along with growth in the non-oil sectors of mining, free zones, real estate and logistics.
FX
The US dollar pulled higher at the end of the week with a gain of 0.5% in the DXY index. EURUSD fell by 0.5% to 1.0418 taking it to a third weekly loss in a row. Since the US election the single currency is down by almost 4.7% with seemingly few downside barriers in the way. GBPUSD also fell on Friday, down nearly 0.5% at 1.2530, taking the pair down for eight weeks in a row. The next potential level of resistance would be the April year-to-date low of 1.23. USDJPY added 0.2% on Friday for the pair to close at 154.78, and a rise of 0.3% on the week. The pair may extend its upward move to around the 157 level.
Commodity currencies also closed Friday weaker against the US dollar with AUDUSD down by 0.15% at 0.6501 and NZDUSD off by 0.5% at 0.5833. USDCAD was a little more resistant with the pair closing nearly unchanged at 1.3978 and the Loonie actually strengthening on the week by 0.8%.
Equities
US equity markets had a strong close to the week with the Dow Jones up nearly 1% on Friday while the S&P 500 added 0.4% and the NASDAQ gained 0.2%. European markets also shared in the rally with a 0.7% gain in the EuroStoxx index while the FTSE gained 1.4%.
Local markets in the UAE closed weaker on Friday with the ADX leading the way lower with a near 1% drop while the DFM fell by a bit more than 1%.
ADNOC is reportedly considering to sell an additional 3-5% of ADNOC Gas. The national oil company maintains a stake of 95% after an initial public offering in 2023.
Commodities
Oil prices pushed higher on Friday with front month Brent at USD 75.17/b, up 1.3%, and WTI adding 1.6% to USD 71.24/b. Anxiety over geopolitical developments between Russia and Ukraine are fueling a political risk premium to oil prices in the short run.
Gold prices had five straight days of gains last week with a close on Friday of USD 2,716/troy oz, up 1.7%. prices rose by almost 6% last week for the first weekly gain in the last four. Precious metals were stronger across the board with silver, platinum and palladium all gaining.
