Saudi Arabia goes to the markets

Bloomberg reported that Saudi Arabia had initiated its first bond sale of the year, a three-tranche dollar issuance, as the Kingdom looks to cover its budget shortfall. The National Debt Management Centre has projected 2025’s borrowing at SAR 139bn to cover a predicted SAR 101bn shortfall. The issuance follows a USD 7bn Islamic loan announced by the Public Investment Fund yesterday, its first Murabaha credit facility.

Visitors to Dubai hit 16.8mn over January to November last year, y/y growth of 9.2%. Western Europe was the largest source market for tourists, accounting for 20% of the total, followed by South Asia on 17% and the rest of the GCC on 15%. REVPAR was up 3% y/y to AED 405.

CPI inflation in Germany accelerated to 2.9% y/y in December according to the preliminary data, up from 2.4% in November and higher than the predicted 2.6%. On the monthly measure, price growth was 0.7% m/m, compared with a 0.7% deflation print in November and missing the consensus estimate of 0.5%. Energy and food were the primary drivers of the acceleration in price growth as energy exerted less of a drag than in recent months, but services inflation also picked up modestly. The data followed an upside surprise in Spain’s inflation print earlier, and the likelihood is that the Eurozone aggregate will also come in higher than the predicted 2.4% when released later today. Faster than anticipated inflation at the close of the year will potentially hold the ECB back from more aggressive easing.

US factory orders declined 0.4% m/m in November, a modestly larger contraction than the predicted fall of 0.3%, although the October growth print was revised up to a 0.5% expansion, from 0.3% on the initial print. Stripping out the volatile transport orders, growth was 0.2% m/m, in line with October’s growth print.

Today’s Economic Data and Events

11:45 France CPI inflation, % y/y, December. Forecast: 1.5%

14:00 Eurozone CPI inflation, % y/y, December. Forecast: 2.4%

Fixed Income

• The bear-steepener trade continued yesterday as yields on 2yr USTs were almost unchanged at 4.2745% while the 10yr yield climbed 3bps to 4.6300% and the 30yr closed up 4bps at 4.8482%, the highest in more than 12 months.

FX

• The dollar index closed down for the second straight session yesterday as it pared recent gains against its basket of peer currencies. It ended the day 0.6% lower after paring some earlier losses after President-elect Donald Trump pushed back against reports that his tariff plans would be less stringent than previously signposted.
• Strength against Asian currencies continued though as the Asian FX index fell to a two-decade low. JPY closed 0.2% lower against the dollar at 157.62.
• Both EUR and GBP closed up 0.8%, at 1.0390 and 1.2520 respectively. CAD also gained 0.8% to close at 0.6977 as PM Justin Trudeau resigned as Liberal Party leader.

Equities

• Asian markets started the week on the back foot with the Nikkei closing down 1.5% as it reopened post the holidays, while the Hang Seng dropped 0.4%.

• There was more positivity later in the session, kicking off in Europe where the FTSE 100 and the CAC both added 1.2% and the DAX closed 1.9% higher.
• In the US, the Dow Jones closed down 0.1% but the S&P 500 (0.6%) and the NASDAQ (1.2%) both closed higher.
• Locally, the ADX added 1.1% and the DFM 1.3%, while Saudi Arabia’s Tadawul closed up 0.3% on the day.

Commodities

• The rally in global oil prices came to a close yesterday, despite a weaker dollar having supported prices earlier in the session. By the close, Brent futures were down 0.3% at USD 76.3/b, while WTI fell 0.5% to USD 73.6/b.