UAE President begins state visit to Korea and China

UAE President Sheikh Mohamed bin Zayed starts an official two-day visit to Korea today, which will be followed by a state visit to China. The trip is aimed at boosting trade ties as well as technology transfers to boost the manufacturing and clean energy sectors in the UAE. Korea and the GCC signed a free trade agreement at the end of last year, and an FTA with China has been under negotiation for several years. Korean firms have built the UAE’s four nuclear reactors at the Barakah Power Plant, and another four reactors are currently in planning stages.

With both US and UK markets closed for holidays, there was little in the way of data releases yesterday. ECB governing council member Francois Villeroy de Galhau said that the ECB should not rule out cuts in both the June and July meetings, pushing back against other policy makers who indicated that the ECB would not necessarily cut at successive meetings, even if they started easing monetary policy next month. Wage growth in the eurozone did not ease as much as expected in Q1, according to the latest data, and some policy makers may be reluctant to get too far ahead of the Fed.

Germany’s IFO business climate index came in slightly lower than forecast for May but was unchanged from April at 89.3. However the expectations component of the survey rose for the fourth consecutive month to 90.4 from 89.7 in April and a low of 83.4 in January.

Today’s Economic Data and Events

18:00 US Conference Board Consumer Confidence (May) forecast 96.0 prev 97.0

18:30 US Dallas Fed Manufacturing Activity (May) forecast -12.5 prev -14.5

Fixed Income

• S&P affirmed Bahrain’s B+ long term foreign currency debt rating and maintained a stable outlook. The ratings agency expects the government to continue its fiscal consolidation efforts to reduce the budget deficit, and expects additional support from other GCC states to continue to be provided.
• 10y benchmark bond yields declined in Europe on Monday. The 10y German yield declined -3.7bp to 2.55% while the 10y French bond yield fell -4.4bp to 3.01%.

FX

• Most major currencies appreciated against the dollar yesterday, although with two major markets closed, liquidity was likely thin. EUR gained 0.2% to 1.0863, as did GBP to 1.2756. NZD rose 0.4% to 0.6145 while AUD was 0.3% firmer at 0.6648.

Equities

• The DFM closed 0.45 higher on Monday, while ADXGI was largely unchanged. The Tadawul ASI declined -0.2% at the start of the week.
• European stock indices closed higher on Monday after dovish comments from ECB governing council member Galhau. EuroStoxx50 gained 0.5%, albeit in light trading.

Commodities

• Oil prices edged higher on Monday as the US Memorial Day weekend kicked off the summer driving season there. Geopolitical tensions in the Middle East have increased after an Egyptian soldier was killed at the Rafah border. Brent oil rose 1.2% yesterday to USD 83.10/b while WTI rose 1.1% to USD 77.72/b. Both are trading higher again this morning.