Turkey's economy cools in Q2

Turkey’s economy expanded by 2.5% y/y in Q2, slower than the more than 5% recorded in Q1 and the slowest pace since the economy was impact by the Covid-19 pandemic in Q2 2020. On a quarterly basis, the pace of expansion dropped to 0.1% q/q, down from 1.4% in the first three months of the year. Household spending slowed to just 0.5% q/q, down from 0.7% in the prior three-month period while fixed capital spending declined by 4.1% q/q. On a sector basis, manufacturing dropped substantially to a decline of almost 3% y/y from growth of 3.6% in Q1 while construction spending also slowed sharply. Inflation remains elevated in Turkey and the central bank has hiked rates to control it, weighing on the outlook for consumption in coming quarters.

Final estimates for Eurozone manufacturing PMIs came in better than the preliminary estimates. Manufacturing PMIs for France and Italy were both considerably upgraded for August though at 49.4 and 43.9 they both remain in contraction territory. Germany’s manufacturing PMI was also revised up slightly to a still poor 42.4. In the UK, the picture remains brighter with the final estimate for the manufacturing PMI at 52.5.

Today’s Economic Data and Events

• 11:00 TU CPI y/y Aug: forecast 51.86%
• 13:30 SA GDP y/y 2Q: forecast 0.3%
• 18:00 US ISM manufacturing Aug: forecast 47.5

Fixed Income

• US Treasury markets were closed at the start of the week thanks to a public holiday in the US. Yields are edging slightly higher in early trade today with the 2yr UST yield up a bit less than 2bps at 3.931% and the 10yr at 3.915%.
• ADNOC Murban, a subsidiary of ADNOC, has mandated banks for a multiple tranche benchmark issuance. The company plans to issue 5-, 10- and 30yr bonds.
• ADCB has mandated banks for a USD 500m 10.5yr issuance.

FX

• Currency markets didn’t show a clear trend at the start of the week. EURUSD managed to gain 0.2% against the dollar to settle at 1.1072, outpacing a gain of 0.1% in GBPUSD which closed at 1.3146. USDJPY, by contrast, moved against the yen with the pair rising 0.5% to 146.92.
• In commodity currencies, AUDUSD was the standout with a gain of 0.4% to 0.6791 while NZDUSD closed lower by 0.3% at 0.6233. USDCAD was unchanged.

Equities

• US equity markets were closed overnight. In Europe, the FTSE dropped by 0.15% while the EuroStoxx 50 index was higher by 0.3%.
• Regional markets were more positive. The DFM and ADX both gained a strong 0.7% to start the week. In Saudi Arabia, the Tadawul dropped by 0.2%.

Commodities

• Brent markets extended their slump from the end of last week overnight with a drop of 1.6% in front month futures which closed at USD 77.52/b. Brent is extending further losses in early trading today.
• Libya’s National Oil Corp has declared force majeure on the output of one of the country’s largest oil fields as a political dispute over revenue continues to interrupt production.