Retail sales power ahead in March in the US

US retail sales rose more than expected in March, giving more evidence that the US economy is in good condition. Headline retail sales rose by 0.7%, in nominal terms, while control group sales that strip out food, building materials and cars and gasoline increased by 1.1% m/m. Paired with consistent labour market strength, the retail sales numbers are likely to help support a decent Q1 GDP print for the US economy.

China’s economy expanded by 5.3% y/y in Q1, ahead of market estimates of a gain of 4.8%. Retail sales data for March was published alongside the GDP numbers and were disappointing, growing by 3.1% y/y in March compared with market estimates of an increase of 4.8%. Industrial production was also much slower than expected at 4.5% y/y for March compared with an estimate of 6%.

Inflation in Saudi Arabia eased to 1.65% y/y in March from 1.8% a month earlier according to the kingdom’s statistics authority. On a monthly basis prices fell by 0.1% compared with a 0.2% gain a month earlier. On the annual measure, housing and utility costs were the main gainer with the component up nearly 9% y/y while rental costs alone with more than 10% higher y/y. Food prices rose by slightly less than 1% while restaurant and hotel costs rose by 2.4%. Inflation in Saudi Arabia has been relatively contained in the last eight months, consistently printing below 2% on an annual basis. Elsewhere among the GCC economies, inflation dropped in Qatar to less than 1% y/y in March from 2.7% a month earlier while inflation in Oman increased to 0.2% y/y in March from flat a month earlier.

The World Bank has updated their regional economic outlook and expects the Middle East and North Africa region to expand by 2.7% in 2024 from 1.9% in 2023. For the UAE the World Bank forecasts growth of 3.9% from 3.1% in 2023 while in Saudi Arabia they expect to see growth of 2.5% from a contraction of 0.9% last year. The World Bank expects a slowdown in Egypt’s economy, however, to 2.8% in 2024 from 3.8% last year.

India’s trade balance improved in March to a deficit of USD 15.6bn from USD 18.7bn in February and sharply lower than a record wide deficit of more than USD 30bn hit in October last year. Exports dropped by 0.7% last month but were more than offset by a 6% drop in imports.

Today’s Economic Data and Events

• 10:00 UK unemployment rate Feb: forecast 4%
• 13:00 GE ZEW survey Apr: forecast 35.5
• 17:15 US industrial production m/m Mar: forecast 0.4%

Fixed Income

• US Treasury yields rose on the back of the strong retail sales print for March with yields on the 2yr UST up by 2bps to 4.9205% while the 10yr yield jumped by almost 8bps. Data from the economy shows few signs of needing the Fed to start easing policy imminently and markets will continue to push back their expectation for when rates will start to move lower.
• Bond markets generally closed weaker overnight with bund yields up 8bps at 2.437% and gilt yields adding more than 10bps to 4.239%.
• Emerging market and high-yield bond indexes also closed weaker overnight.

FX

• The US dollar started the week higher with a gain of 0.2% against EURUSD which settled at 1.0624 while GBPUSD was a touch lower at 1.2446. USDJPY has hit a historic high level at more than 154 for the first time since 1990. Japan’s finance minister said he was watching the currency market closely, according to press reports.
• Commodity currencies were resolutely weaker overnight. USDCAD nudged up by a bit less than 0.1% to 1.3788 while AUDUSD dropped 0.4% to 0.6442 and NZDUSD fell by 0.7% to 0.5904.

Equities

• US equity markets closed weaker to start the week with the Dow Jones down 0.65% while the NASDAQ sank 1.8% and the S&P closed lower by 1.2%. European markets fared better with a 0.6% gain on the EuroStoxx market while the FTSE 100 was down by 0.4%.
• Asian markets have started the day lower today with a drop of 1.7% on the Nikkei and the Hang Seng down by 1.2%.
• Regional markets had a mixed performance. The DFM settled near flat while the ADX managed a gain of about 0.3%. In Saudi Arabia, the Tadawul added 0.3%.

Commodities

• Oil prices absorbed the escalation in regional geopolitical anxieties overnight with both Brent and WTI futures dipping as it is clear that no interruption to production or shipping is apparent. Brent futures fell 0.4% to USD 90.10/b while WTI dropped by 0.3% to USD 85.41/b. Both are trading higher this morning, more than recovering the prior day’s losses.
• Gold prices pushed higher overnight, up 1.7% to USD 2,388/troy oz as markets continue to push back their expectation on when the Fed will cut while the global geopolitical environment remains tense. Industrial metals also pushed higher on news that Russian metal will no longer be deliverable into the LME.