Turkish inflation slows in May

Inflation in Türkiye eased in May to 35.4% y/y on the headline index, down from 37.9% a month earlier and the slowest pace since Q4 2021. On a sequential basis, inflation also slowed to 1.5% m/m from 3% a month earlier. Core inflation printed at 35.4% y/y, below market expectations and also slower than a month earlier. Food and communications prices fell outright m/m in May while there was a broad cooling across nearly all components of the inflation basket. Housing inflation dipped to 67% y/y from 74% in April. Producer prices were marginally faster year/year in May at 23.1%, up from 22.5% a month earlier.

Job openings in the US increased to 7.39m in April, up from 72.m job openings a month earlier and beating market expectations. There was particularly strong labour demand in professional services and education and healthcare while demand for manufacturing jobs declined. Government job openings fell though the drop was concentrated at the state level. Non-farm payrolls data for May are due out at the end of the week with 130k jobs expected to have been added.

Headline inflation in the Eurozone decelerated to 1.9% y/y in May, down from 2.2% a month earlier. Core inflation slowed sharply to 2.3% y/y from 2.7% in April. Energy costs were a major part of the dip in headline inflation while services inflation fell from 4% in April to 3.2% in May. The ECB is likely to cut rates by 25bps when it meets on June 5, taking policy rates to 2%. Elsewhere, inflation in Switzerland turned negative in May with prices falling 0.1% y/y.

Qatar’s PMI improved to 50.8 in May according to S&P Global, up from 50.7 a month earlier. Employment rose meaningfully to 60.4 from 57.2 a month earlier while new orders also improved.

Today’s Economic Data and Events

16:15 US ADP employment May: forecast 112k

18:00 US ISM services May: forecast 52

22:00 US Fed Beige Book

Fixed Income

US Treasuries showed a round trip move overnight, ultimately ending the day softer. Yields on the 2yr UST were marginally higher at 3.9511% while the 10yr yield closed higher at 4.4537%.

Emerging market credit was stronger overnight along with GCC bonds. Sovereigns and IG bonds were the standout performers for the region while an index of Omani bonds popped up 0.2%.

Qatar Islamic Bank priced a USD 750m 5yr sukuk at T+80.

FX

The US dollar recovered some of the prior day’s losses overnight with EURUSD lower by 0.6% at 1.1372 while GBPUSD fell 0.2% to 1.3517. USDJPY moved higher by 0.9% to 143.97.

Emerging market currencies were mixed overnight with USDINR moving against the rupee, up 0.2% at 85.5925 while USDTRY dipped by 0.1% to 39.1477.

Equities

US equity markets closed higher with the Dow Jones up 0.5% while the S&P 500 added 0.6% and the NASDAQ rallied by a strong 0.8%. European markets were also positive with a 0.4% rise in the Euro Stoxx while the FTSE 100 added 0.2%.

In the UAE, local markets had a strong session with the DFM up 0.7% and the ADX 15 adding the same amount. By contrast the Tadawul in Saudi Arabia dipped by 0.2%.

Commodities

Oil prices maintained their upward momentum overnight with a 1.6% gain in Brent futures to USD 65.63/b while WTI added 1.4% to USD 63.41/b. The API reported a draw in US crude inventories of 3.3m b/d though that was more than offset by builds in gasoline and distillate stockpiles.