US consumer confidence falls

The US conference board’s measure of consumer confidence fell in June, declining to a value of 100.4 from a downwardly revised 101.3 in May. The outturn was broadly in line with consensus expectations. While the present situation sub-index rose 0.7 points, reflecting recent equity price rises and slowing inflation, there was a relatively sharp fall (2 points) in the expectations component. Consumers’ expectations about the economy appear to be weighed down by concerns about job prospects and the size of potential wage increases. The latest reading suggests that only 12.5% of surveyed consumers expect business conditions to improve over the course of the next 6 months.

Speaking in London yesterday, Federal Reserve Governor Michelle Bowman highlighted several upside risks to the US inflation outlook. She reiterated her view that rates will need to stay high for longer and indicated that she sees no rate cuts this year.

Fitch affirmed their ‘AA’ rating on Abu Dhabi with a stable outlook. The rating agency cited the emirate’s low government debt and high net foreign assets. Fitch assumes Abu Dhabi will run substantial fiscal surpluses of 5.4% of GDP in 2024 before narrowing to 3.6% in 2025 and assumes a fiscal break-even oil prices of less than USD 70/b.

Today’s Economic Data and Events

10:00 GE GfK consumer confidence (Jul). Forecast: -19.5

10:45 FR consumer confidence (Jun). Forecast: 89

15:00 US new home sales (May). Forecast: 0.2% m/m

Fixed Income

US treasury yields rose marginally on Tuesday, with both the 2yr and 10yr yield gaining 2bps to reach 4.7424% and 4.2476%, respectively.

European bond yields were broadly lower on Tuesday. The 10yr Bund yield fell 1 bps to 2.408%, while the 10yr Gilt yield was fairly flat on the day at 4.0778%.

The UAE has mandated banks for a benchmark USD 10yr bond issue, priced at T+60.

FX

The US dollar spot index gained 0.13% on Tuesday, after Fed Governor Michelle Bowman cautioned markets about upside risks to US inflation. EURUSD fell 0.18% to reach 1.0714 and USDJPY gained 0.05% to 159.7.

Commodity currencies were also generally weaker against the dollar on Tuesday. AUDUSD fell 0.15% to 0.6647, NZDUSD declined 0.07% to 0.6121. USDCAD was flat at 1.3658.

Equities

US equity market moves were once-again mixed on Tuesday. The Dow Jones fell 0.76% but a rally in technology stocks (including a rebound in Nvidia) resulted in the S&P 500 gaining 0.4% and the NASDAQ jumping 1.26%.

European equity indices moved broadly lower on Tuesday, with revised guidance from Airbus and a drug trial failure from Merck weighing on sentiment. The Eurostoxx 50 fell 0.3%, the CAC 40 dropped 0.58%, the DAX declined 0.81% and the FTSE fell 0.41%.

Regionally, the DFMGI was largely flat and ADXGI gained 0.1%.

Commodities

Oil futures fell on Tuesday, with a stronger dollar overshadowing concern about attacks on ships in the Red Sea. The API also reported a small build in US inventories last week, with the industry report suggesting crude stockpiles grew by 900k barrels. Brent fell 1.16 % to USD 85.01/b, while WTI declined 0.98% to USD 80.83/b.