Eurozone inflation eases while Fed speakers take a hawkish tone

Inflation in the Eurozone slowed to 2.1% y/y in October, marginally slower than the 2.2% recorded a month earlier. Core inflation was steady at 2.4% while services prices inflation accelerated to 3.4% from 3.2%. The inflation print followed a decision from the ECB earlier in the week to keep rates unchanged. The ECB’s current projections are for inflation to fall below its 2% target level in 2026 while markets are pricing in minimal chance of any further cuts from the ECB in 2026.

Several Fed speakers pressed with a more hawkish tone at the end of last week, following the October FOMC decision for a cut. Lorie Logan from the Dallas Fed and Beth Hammack, president of the Cleveland Fed, both said they would have supported keeping rates unchanged, though neither are currently voting members on the FOMC. Markets have pared back expectations for the December FOMC with about 17bps of easing currently priced in.

In the UAE fuel prices were cut for November. High octane petrol prices will be 5% lower m/m at AED 2.63/litre while mid-grade petrol prices are about 5.6% lower at AED 2.51/litre. Diesel prices were also lowered to AED 2.67/litre, down 1.5%. Benchmark oil prices dropped in October with Brent futures ending the month at UDS 65.07/b, down from closer to UD 70/b at the end of September.

Inflation in Istanbul rose by 3.3% m/m in October, an acceleration from the 3.2% recorded a month earlier. Annual inflation rose to 40.84% from 40.75%. Clothing and food prices were the major contributors to the local inflation print while national inflation data is due out today.

Today’s Economic Data and Events

09:00 IN HSBC India mfg PMI Oct

11:00 TU S&P Global/ICI Turkey mfg PMI

11:00 TU CPI y/y Oct: forecast 33.2%

19:00 US ISM mfg Oct: forecast: 49.5

Fixed Income

US Treasuries pulled higher at the end of the week though markets are still operating a new higher yield level following the hawkish commentary from Fed chair Jerome Powell after the October FOMC. Yields on the 2yr UST fell 3bps to 3.5736% while the 10yr yield dipped about 2bps to 4.0775%.

GCC credit was broadly weaker at the end of last week. Bloomberg’s ME composite index dropped along with a GCC USD sukuk index.

S&P affirmed their ‘AA’ rating on Qatar with a stable outlook. Fitch raised their rating on Ittihad to ‘BB-‘ with a stable outlook.

Sharjah Islamic Bank has mandated banks for a USD 500m green 5yr sukuk.

FX

The dollar was stronger nearly across the board at the end of last week, abetted by a cooling inflation picture in the Eurozone and hawkish messaging from Fed officials. EURUSD dropped 0.2% on Friday to settle at 1.1537 while GBPUSD was near unchanged at 1.3152. USDJPY was the notable outlier with a drop of 0.1% to 153.99 in favour of the yen.

In emerging markets, the broad dollar strength was affirmed. USDINR rose by a bit less than 0.1% at 88.7712 while Turkish lira depreciated by 0.2% to 42.062. The Egyptian pound was steady at 47.2343.

Equities

Global equity benchmarks had a mixed close to the week. US equities were higher with the S&P 500 up 0.3% and the NASDAQ gaining 0.6% while the FTSE 100 was lower by 0.4% and the Euro Stoxx index dropped 0.7%. Asian markets had a widely mixed session with the Nikkei gaining 2.1% and the Hang Seng off by 1.4%.

In the UAE, the DFM was lower by 0.8% at the end of the week while the ADX 15 dropped 1.5%.

Commodities

Oil prices had a moderately positive close on Friday with Brent futures up 0.1% at USD 65.07/b and WTI up by 0.7% at USD 60.98/b. Both contracts were lower for the week and on the month.

OPEC+ agreed to another small production increase for December of 137k b/d, the third month in a row at that scale. Output from the UAE is set to rise by 12k b/d while Saudi Arabia’s production should increase by 41k b/d. For the first time since the group started increasing output this year, OPEC+ outlined its targets for several months going forward. For Q1 2026, the eight countries in OPEC+ who have been phasing barrels back into the market will keep output steady owing to what they describe as “seasonality” in the market. Projections from the IEA and other oil market forecasters anticipate a sizeable market surplus developing in Q1 next year.

Gold prices pulled back on Friday from gains earlier in the week, dropping 0.5% to USD 4,003/troy oz along with a similar sized decline in silver prices. Industrial metals were more mixed with aluminum higher while copper and iron ore both settled lower.