Dubai CPI accelerated to 3.6% y/y in January

Dubai’s CPI declined -0.3% m/m in January as lower transport, recreation and hospitality services prices offset a 0.9% m/m rise in food costs and a 0.5% m/m increase in housing and utilities costs. On an annual basis however, CPI inflation accelerated to 3.6% y/y in January from 3.3% in December. While annual food inflation has slowed from November and December, housing costs rose 6.2% y/y last month. Insurance and financial services costs also rose sharply to 13.3% y/y but have a very small weight in the consumer basket. We expect housing costs to remain a key driver of overall inflation this year, even as most other components of the basket see price growth slow. We forecast average CPI at 3.0% in 2024, down from 3.3% in 2023.

Japan’s CPI came in higher than forecast at 2.2% y/y in January, although lower than the 2.6% recorded in December 2023. Excluding fresh food, core inflation slowed to 2.0% y/y from 2.3% in December. The main driver of higher inflation last month was foreign travel packages, and overall services inflation remained above 2% y/y. Inflation coming in higher than forecast is supportive of the BoJ’s expected normalization of monetary policy this year.

New home sales in the US rose by smaller than forecast 1.5% m/m in January, while the December data was revised lower. Mortgage rates have eased in recent weeks, and supply grew by 456k in January, the most in over a year, suggesting that sales could recover in the coming months. Separately, the Dallas Fed Manufacturing Activity Index improved sharply in February to -11.3 from -27.4 in January. Texas firms’ outlook for the coming six months also improved from January.

Today’s Economic Data and Events

17:30 US Durable Goods Orders (Jan prelim) forecast -5.0% m/m

19:00 US Conference Board Consumer Confidence (Feb) forecast 115.0

Fixed Income

US treasury yields rose on Monday ahead of the second estimate of Q4 GDP and January’s PCE data later this week. PCE is expected to have accelerated in January. The 2y treasury yield rose 3bp to 4.72% at Monday’s close, the highest level since November 2023. The 10y yield also rose 3bp to 4.28% while the 30y yield rose 2bp to 4.39%.

Saudi Arabia’s Public Investment Fund (PIF) intends to offer a USD denominated 7y sukuk, according to Reuters. PIF issued USD 5bn worth of bonds in January.

Dubai Islamic Bank has mandated banks for a USD 5yr benchmark sustainable sukuk. Initial guidance was for pricing around T+125, but this narrowed to T+95 in final pricing. An existing DIB sukuk (sustainable 28) is currently yielding close to 5%.

FX

The US dollar index weakened -0.1% on Monday as EUR gained 0.3% and GBP rose 0.1% against the greenback. CHF also strengthened 0.2% yesterday. JPY closed slightly weaker yesterday but is firmer this morning after stronger than expected inflation data for January.

The commodity currencies weakened against the dollar yesterday with NZD down -0.4% while AUD lost 0.2% and CAD weakened 0.1%.

Equities

Most global benchmark indices closed in the red yesterday after last week’s rally and ahead of key economic data later this week. The S&P500 was down -0.4% while the Nasdaq100 closed only fractionally lower.

In Europe the CAC40 fell -0.5% while Germany’s Dax eked out a gain of less than a tenth of a percent. The UK’s FTSE declined -0.3% on Monday.

Gulf equity markets also closed lower yesterday with Tadawul ASI down -0.6% and ADXGI down -0.2%. The DFMGI declined -0.1%. Egypt’s stock market rallied on news of the ADQ FDI deal over the weekend and closed up almost 4% on Monday.

Commodities

Both Brent and WTI gained in the first session of the week, rising 1.1% and 1.4% respectively. Bloomberg reported pockets of strength in the physical market as supporting prices, pointing to signs of buying activity from refineries in the US and China.