Dubai CPI rises to 3.4% y/y in August

Inflation in Dubai rose 0.6% m/m in August according to the latest data from the Dubai Statistics Centre. The August print was a pick-up from the modest monthly deflation recorded in July. On an annual basis, CPI inflation rose by 3.38%, up marginally from 3.32% a month earlier. With a weight of just over 40% of the inflation basket, the housing and utilities component remains the primary driver of inflation in Dubai, rising 6.9% y/y, up from 6.8% a month earlier. Food and beverage price growth also contributed to the uptick, rising 2.8% y/y. Oil prices acted as a drag on the annual inflation picture, with transport costs falling 1.7%y/y.

The German IFO business climate index dipped further than had been expected in September, declining to a reading of 85.4 from 86.6 in August. While there were falls in both the current and expectations components, the decline in the former was more material – dropping 2 points. On a sectoral basis, the manufacturing sub-index remained at its lowest level since 2020. Separately, the Bundesbank have suggested that Germany may already be in a recession.

The US Conference Board consumer confidence index fell sharply in September, declining to a value of 98.7 from 105.6 in August. The reading is at odds with recent developments, including lower mortgage rates and higher equity prices, as well as a more upbeat assessment from the University of Michigan sentiment survey. This mismatch may be due to increased concern around the upcoming US election.

The PBOC cut the rate of the one-year medium-term lending facility by 30bps, reducing the rate to 2%. The latest move adds to the string of stimulus measures announced by the central bank yesterday, in a bid to support the Chinese economy in achieve the 5% GDP growth target for 2024.

Today’s Economic Data and Events

• 13:00 OECD interim economic outlook
• 15:00 US mortgage applications (w/e 20 Sept). Forecast: 104
• 18:00 US new home sales (Aug). Forecast: -5.3% m/m

Fixed Income

• US treasuries rallied on Tuesday, on the back of poor consumer confidence data out of the US. The 2yr yield fell by 5bps to 3.5379%, and the 10yr yield declined by 2bps to reach 3.728%.
• With the exception of the UK, bond yields were weaker across major European markets. The 10yr Bund yield fell 1bps to 2.145%. The UK Gilt yield rose 2bps to 3.9397%.

FX

• The dollar spot index fell 0.4%, with weaker consumer confidence boosting expectations for further cuts by the Fed. EURUSD gained 0.6% to 1.118, while GBPUSD rose 0.5% to 1.3413. USDJPY fell 0.3% to 143.23.
• Commodity currencies were stronger against the dollar, with the Australian dollar rising to its strongest level in over a year as the RBA elected to keep rates unchanged. AUDUSD rose 0.8% to 0.6892, NZUSD gained 1.2% to 0.634, and USDCAD fell 0.8% to 1.3431.

Equities

• US equity markets rose on expectations of further rate cuts, driven by a slump in US consumer confidence. Both the S&P 500 and the Dow Jones rose to new highs. The Dow Jones gained 0.2%, S&P 500 rose 0.3%, and the NASDAQ increased by 0.6%.
• Major European equity markets also saw gains on the day, lifted by news of stimulus measures from China buoying luxury and automotive stocks. The Eurostoxx 50 rose 1.1%, the CAC 40 gained 1.3% and the DAX increased 0.8%. The FTSE 100 rose 0.3%.
• Locally, the DFM rose 0.6% and the ADX gained 0.2%.

Commodities

• Oil futures rebounded on Tuesday, as geo-political tensions ratcheted higher and the PBOC unveiled a variety of stimulus measures. The API reported that there was a drawdown of 4.34m barrels in US crude inventories last week. Both Brent and WTI rose 1.7% to reach USD 75.17/b and USD 71.56/b, respectively.