US consumer confidence rose to a four-month high in May

US consumer confidence, as measured by the Conference Board, rose to 102.0 in May, up from 97.5 in April and well above forecasts. This was the first increase in the Consumer Confidence Index in four months, with both the present situation and expectations components rising from April’s reading. The survey reflects improved sentiment on business conditions and the stock market but consumers, particularly lower income households, are still concerned about inflation and personal finances.

The Dallas Fed Manufacturing Activity index declined to -19.4 in May from -14.5 in April, below expectations. New orders declined sharply while prices paid rose. Firms’ outlook deteriorated from April and uncertainty about the outlook remains elevated.

Egypt’s ministry of tourism has reported that tourism revenue hit USD 4.3bn over January-April, up 4.9% on the USD 4.1bn reached in the corresponding period last year. Visitor numbers to Egypt have continued to grow despite the conflict across the border in Gaza, hitting a record 14.9mn in 2023 and up by roughly a further 4% y/y in the first quarter of 2024. The country is aiming for 16mn visitors this year which would help narrow the current account deficit.

Today’s Economic Data and Events

16:00 Germany CPI (May, P) forecast 2.7% y/y, prev. 2.4% y/y

18:00 US Richmond Fed Manuf. Index (May) forecast -6, prev. -7

Fixed Income

• Saudi Arabia has raised USD5bn in a benchmark sukuk in three tranches. A 3yr tranche of USD 1.25bn was priced at +60, a 6yr USD 1.5bn tranche was priced at +75 and a USD 2.25bn 10yr was priced at +85 over US benchmarks. All three tranches were priced tighter than the initial guidance. Saudi Arabia issued USD 12bn of bonds in January this year in 6, 10 and 30 year tenors.
• Minneapolis Fed President Neel Kashkari said that the probability of further rate hikes from the Fed was “quite low” but that they had not been take off the table entirely. He highlighted that wage growth was probably still too high to be consistent with a 2% inflation target and that there was plenty of time for the Fed to assess the impact of monetary policy on demand before making any decision to ease.
• US treasury yields rose on Tuesday, with the 2y gaining 3bp from Friday’s close to 4.98% and the 10y up 7bp to 4.55% (markets were closed on Monday). Benchmark 10y yields also rose across EMEA yesterday, with Italy’s 10y yield up 7bp to 3.89%, France up 5bp to 3.07% and Portugal up 5bp to 3.2%. Bund yields rose 4.5bp to 2.59% while Gilts gained 2bp to 4.28%.

FX

• JPY continues its move higher and is trading above 157/USD this morning in Asia. Most other major currencies had appreciated gained against the dollar on Tuesday but are trading weaker in Asia this morning.

Equities

• The major US indices were mixed yesterday with Nasdaq up 0.3%, the S&P500 unchanged and the DJIA down -0.6%. Most indices in Europe also closed in the red on Tuesday, with the FTSE100 losing -0.8% and the EuroStoxx50 down -0.6%.
• Regionally, the DFMGI and the ADXGI closed down -1.0% on Tuesday while the Tadawul ASI lost -1.5%.
• Saudi Arabia is expected to announce a sale of USD 10-20bn of Aramco stock as soon as this week, according to reports from the Wall Street Journal. This would be a follow-on offering after the 2019 IPO.

Commodities

• Oil prices gained for the third consecutive session on Tuesday, with Brent rising 1.4% to USD 84.22/b and WTI up 2.8% to USD 79.83/b. Geopolitical tensions in the Middle East continued to rise with a bulk carrier ship attacked in the Red Sea and as Israel continues its invasion of Rafah.