Saudi Arabia approves 2026 debt plan

Saudi Arabia’s Ministry of Finance has approved its 2026 borrowing plan, with projected financing needs of USD 58bn which it expects will cover its projected deficit of around USD 44bn, plus principal repayment of around USD 14bn. International bond sales are expected to account for around 25% to 30% of this, or around USD 14bn to USD 18bn, which if borne out would mark a slowdown in the rapid expansion of international issuance seen over the past several years. While the country remains committed to its Vision 2030 diversification programme, officials have signalled a more cautious approach as lower oil prices have constrained budgets.

The S&P Global PMI survey for Saudi Arabia dipped to 57.4 in December, down from 58.5 the previous month. This remains indicative of a non-oil private sector that is expanding rapidly, however. The index averaged 57.7 over 2025, up from 56.5 in 2025, contributing to our estimate of real non-oil GDP growth of 4.9% last year.

The eight OPEC+ member countries that had voluntarily introduced additional supply cuts – namely UAE, Saudi Arabia, Kuwait, Oman, Kazakhstan, Algeria, Iraq, and Russia, or the v-8 – held a virtual meeting on Sunday, where they opted to maintain their current oil production levels in February and March, reaffirming a decision made previously in November. The group’s statement reiterated that the remaining 1.7mn b/d ‘may be returned in part or in full subject to evolving market conditions and in a gradual manner’. There was no mention of the developments in Venezuela over the weekend, where US troops seized President Nicolas Maduro and US President Donald Trump stated that US oil majors would be investing in the country’s oil sector.

Turkey’s manufacturing PMI survey rose to 48.9 in December, up from 48.0 previously. Over 2025 the index averaged 47.3, compared with 48.1 in 2024. The December reading marked the slowest pace of contraction since April 2024, with the index in sub-50 contractionary territory consistently since March last year. The PMI has improved for the past two months now, indicating some positive momentum in the manufacturing sector heading into 2026, when consensus forecasts put GDP growth at 3.5%. A slower pace of inflation is one factor that will support the manufacturing sector this year, and CPI data released later today is expected to show ongoing disinflation.

Today’s Economic Data and Events

11:00 Turkey CPI inflation, % y/y. Forecast: 31.0%

19:00 US ISM manufacturing, December. Forecast: 48.4

Fixed Income

There was little movement in US treasuries as the year began. Yields on the 2yr were almost unchanged at 3.4733%, while the 10yr closed up 2bps at 4.1907%.

There are no major central banks setting rates this week so the focus will likely be on employment data coming out of the US, culminating in the nonfarm payroll report for December which is due on Friday. Market expectations are for three 25bps cuts from the Fed this year, in line with our own expectations.

FX

The US dollar started the year positively on Friday, with the dollar index adding 0.1% on the day. This followed a 9.4% depreciation against its basket of peer currencies in 2025, however, the worst performance for the greenback since 2017. We expect further softening of the USD this year, though not to the same degree.

The dollar’s gains on Friday came largely against the Euro which closed down 0.2% to 1.1719. GBP closed flat at 1.3456, while JPY weakened by less than 0.1% to 156.84.

Equities

Global equity markets started the year on the front foot, after the strongest performance in years in 2026. In the US, the NASDAQ closed down marginally but the S&P 500 added 0.2% while the Dow Jones closed 0.7% higher.

European indices also started positively, with the CAC adding 0.6% while both the DAX and the FTSE 100 added 0.2%. The FTSE pared gains made earlier in the day, when it had breached the 10,000 level for the first time.

Locally, the DFM got off to a strong start as it gained 1.1% on the first trading day of the year on Friday, while the ADX closed broadly flat.

Commodities

Oil prices closed down on Friday amidst thin trading at the start of the year. Brent futures closed down 0.2% to USD 60.8/b, while WTI closed at USD 57.3/b, also down 0.2%. Crude prices fell nearly 19% last year as supply ramped up amidst weak demand growth, and the likelihood is for further softening this year.

Despite the US seizure of Venezuelan president Nicolas Maduro over the weekend, oil markets have looked through the geopolitical noise and both benchmarks are trending lower in early trading today. A return of supply from Venezuela could exacerbate market surpluses in the future but this prospect remains some years away, notwithstanding the legal uncertainties around any prospective US investment in the sector.