Weak ISM survey points towards Fed easing

The US ISM manufacturing survey slipped to 47.9 in December, down from 48.2 the previous month and falling short of the predicted 48.4. This marked the 10th straight month of contractionary readings for the index and was the lowest since October 2024. New orders declined at a marginally slower pace, coming in at 47.7, compared with 47.4 previously. Prices paid rose at the same pace as in December, while employment was negative once again at 44.9. Taken together, the weaker headline reading, the ongoing decline in employment and the stabilisation of price pressures point towards further easing from the Fed this year.

Inflation in Türkiye continued to slow in December 2025 with the annual pace of price growth falling to 30.9% y/y, down from 31.1% in November and much slower than the 44% y/y rise recorded in December 2024. On a monthly basis, inflation held steady at 0.9% m/m in December, a similar pace to November, with higher food, communication and healthcare prices among the major contributors to the December print. Producer price inflation accelerated marginally to 27.7% y/y in December, up from 27.2% a month earlier.

The S&P Global PMI survey for the UAE slipped to 54.2 in December, from 54.8 the previous month. It remains indicative of robust non-oil growth, however, with the index averaging 54.0 over the year, comfortably above the neutral 50.0 line. Dubai’s December reading was 54.3, down marginally from 54.5 previously. Egypt’s PMI survey is due for release later this morning and we will publish a more detailed regional note on the results then.

Today’s Economic Data and Events

11:45 France CPI inflation, % y/y, December. Forecast: 0.9%

17:00 Germany CPI inflation, % y/y, December. Forecast: 2.1%

Fixed Income

• US treasuries picked up yesterday after a weak ISM reading for December pointed towards further easing from the Federal Reserve. Yields on the 2yr were down 2bps to close at 3.4508%, while the 10yr yield fell by 3bps to 4.1612%.
• The Central Bank of the UAE carried out its first auction of m-bills for 2026 on 5 January, raising AED 19.5bn. The CBUAE sold AED 4bn of 28-day m-bills at a yield of 3.87%; AED 3bn of 56-day m-bills at a yield of 3.92%; AED 3bn of 140-day m-bills at a yield of 3.94% and AED 9.5bn of 308-day m-bills at 3.94%. The total amounts of bids was AED 26.4bn, leaving a bid-coverage ratio of 1.3x for the total issuance.
• Emirates NBD is preparing to offer blue and green bonds and held investor calls on Monday. Property developer Aldar Properties also held an investor call on Monday, mandating banks for new hybrid USD notes.
• Saudi Arabia is offering USD 11.5bn in a four-part dollar bond sale with maturities from three to 30 years. The shortest part of the deal, USD 2.5bn for three years, is set to pay 0.65ppt over treasuries. USD 2.75bn for five years is priced at 0.75ppt over treasuries, USD 2.75bn for 10yrs is fixed at 0.85ppt over treasuries, while the longest component, a 30yr bond maturing in 2056, will pay 1.1ppt over treasuries. Strong demand saw pricing come in lower than in initial discussions.

FX

• The US dollar index fell yesterday after rate cut expectations were bolstered by the ISM manufacturing survey result. It dipped 0.2% on the day.
• Gains against the greenback were broad based, but GBP had a particularly strong day as it gained 0.6% to close at 1.3542. EUR closed almost flat at 1.1722, prompting GBP to close at its highest level against the single currency since October. JPY strengthened by 0.3% against the dollar to close at 156.38.

Equities

• Equity indices continued their strong start to the year, with robust gains across major markets. In the US< the S&P 500, the NASDAQ, and the Dow Jones added 0.6%, 0.7%, and 1.2% respectively.
• European equity markets also had a strong start to the first full week, with the FTSE 100 adding 0.5% and the DAX closing 1.3% higher.
• Locally, the DFM added 0.3% while the ADX closed down by 0.5%. In Saudi Arabia, the Tadawul ended the day 0.4% lower.

Commodities

• Oil prices were boosted by geopolitical risk premium yesterday after the US seizure of Venezuelan president Nicolas Maduro over the weekend. Both primary benchmarks ended the day 1.7% higher, with Brent futures closing at USD 61.8/b and WTI at USD 58.3/b.
• Precious metals have also benefited from the additional global uncertainty, with spot gold closing up 2.7% yesterday while silver added 5.2%