KSA PMI unchanged at 57.5 in December

The Riyadh Bank PMI for Saudi Arabia continues to point to robust activity in the non-oil private sector, with the reading for December remaining unchanged from November at a value of 57.5. New orders rose sharply, up from 66.3 in November to reach 68.3 in December, the measure's highest reading since June 2023.

Oman’s 2024 budget has been passed, with expectations for a deficit equivalent to 1.5% of GDP, driven by projected spending worth OMR 11.65bn and revenue of OMR 11.1bn. These official projections assume of an average oil price of USD 60/b. Using an average expected oil price of USD 82.5/b, the Emirate NBD forecast for Oman estimates a larger budget revenue, resulting in a small surplus of just under 1% of GDP in 2024.

A report from Global SWF suggests that the Public Investment Fund of Saudi Arabia was the most active spender amongst sovereign wealth funds in 2023, accounting for roughly a quarter of all spending. While no detailed breakdown of the PIF’s USD 31.5bn spend is published, the fund did make notable investments in sports clubs and tournaments, as well as the purchase of US gaming company Scopley.

The final print of the December UK S&P Global/CIPS manufacturing PMI was revised down to 46.2, from an initial estimate of 46.4. The December print was materially lower than the 47.2 recorded in November. Manufacturers appear to be pessimistic about the year ahead, with the future output index falling to a 12-month low and the employment balance declining to 46.1 in December from 47.1 the month prior.

A measure of UK food price inflation produced by the British Retail Consortium (BRC) saw a material fall in December, slowed to 6.7% from 7.7% in November. A slower pace of inflation in food will be welcomed by the Bank of England, with higher food costs having played a significant role in driving UK inflation over 2023.

Today’s Economic Data and Events

• 11:00 TU CPI (Dec): forecast 64.9% y/y
• 19:00 US ISM manufacturing index (Dec): forecast 47.2
• 19:00 US JOLTS job openings (Nov): forecast 8863k
• 23:00 US FOMC meeting minutes (13 Dec)

Fixed Income

• US Treasury yields rose on Tuesday ahead of several key US data releases due later in the week, including FOMC meeting minutes due on Wednesday. The yield on the 2yr rose 7bps to 4.3201, and the yield on the 10yr gained 5bps to 3.9294.
• There were also broad-based increases in European bond yields on Tuesday. The 2yr Gilt yield rose 9bps to 4.0402 and the 10y Gilt yield jumped 11bps to 3.6362. The 10yr Bund yield gained 4bps to reach 2.066.

FX

• The US dollar was stronger against a basket of major peers on Friday, with the dollar spot index rising 0.89% as markets pared back Fed rate cut expectations for 2024. EURUSD and GBPUSD both fell 0.9% to 1.0942 and 1.2617, respectively. USDJPY gained 0.8% to 141.99.
• The dollar was also stronger against major commodity currencies on Friday. AUDUSD fell 0.8% to 0.6761, NZDUSD fell 1.15% to 0.6252, and USDCAD rose 0.6% to 1.3321.

Equities

• With the exception of the Dow Jones, which saw a modest 0.07% rise, US equities ended lower on the first day of trading in 2024. The weakness was driven by declines in tech stocks, leaving the S&P 500 0.57% lower and the Nasdaq 1.63% weaker.
• There were also losses on several major European equity indices on Tuesday. The Eurostoxx 50 declined 0.2%, and the CAC 40 fell 0.16%. The Dax, in contrast, posted a 0.11% increase.
• Locally, the DFMGI rose 0.77% and the ADXGI gained 0.21%.

Commodities

• Brent and WTI futures both declined on Tuesday, despite rising geo-political tensions in the red sea. Brent declined 1.49% to USD 75.89/b and WTI fell 1.8% to USD 70.38/b.