Dubai inflation picks up in April

Headline CPI inflation in Dubai accelerated to 3.9% y/y in April, up from 3.3% in March. This marked the highest annualised inflation print since October last year. On a monthly basis, prices were 0.8% higher than the previous month, the fastest pace since September. The primary driver of the acceleration was an uptick in petrol prices over the past several months, tracking global oil prices which have edged higher. The transport component (9.3% of the basket) was up 3.3% y/y in April, reversing five consecutive months of deflation. On the monthly measure, it was up 3.5% m/m. As prices at the pump rose again in May, the transport component will likely continue to fuel price growth in Dubai. The other key driver of higher annual inflation in April was housing (40.7% of the basket), which was up 6.5% y/y, even as prices were down 0.1% m/m. Food and beverages, the second largest component (11.6%) was up 2.3% y/y and 0.3% m/m.

US industrial production was flat m/m in April, while March’s expansion was revised down to growth of just 0.1%, from 0.4% previously. The stagnating output was driven by the manufacturing sector, which declined 0.3% m/m, and while this was largely driven by the autos sector, even stripping this out factory output expanded only 0.1%. Manufacturing in the US has come under pressure from higher input prices, elevated interest rates, and weak demand, and the S&P Global manufacturing PMI has neutral at 50.0 in April while the ISM manufacturing survey turned contractionary once more after March saw the first positive reading since October 2022. In other data out of the US, initial jobless claims in the week to May 11 expanded 222,000, down from the previous week’s 232,000 and broadly in line with the predicted 220,000.

April data out of China this morning was somewhat mixed, with an outperformance on the production side, while consumption data disappointed. Industrial production was up 6.7% y/y, up from 4.5% in March and stronger than the predicted 5.5%. This puts China’s industrial production over the year-to-date up 6.3% y/y. On the other hand, retail sales were up just 2.3% y/y in April, compared with 3.1% growth in March and missing the predicted 3.7% growth. Over the year-to-date, sales are up 4.1%. Manufacturing and exports have powered the Chinese economy so far this year as consumption has been weighed down by the troubled property market, and residential property sales in April were down 31.1% y/y, although there has been some expansion ytd (5.0% y/y).

Today’s Economic Data and Events

13:00 Eurozone CPI, % y/y, April final. Forecast: 2.4%

Fixed Income

• USTs declined yesterday as pushback from Fed officials on the cutting narrative that had bolstered gains the previous day saw yields rise once more. Loretta Mester, Thomas Bark, and Raphael Bostic were all speaking yesterday, advocating the need for patience.
• Yields on the 2yr UST rose 7bps to 4.7953%, while the 10yr rose by 4bps to 4.3750%. In Europe, the 10yr gilt yield rose 1bps to 4.079%, while the 10yr bund yield ended the day 4bps higher at 2.459%.

FX

• The dollar picked up yesterday after three consecutive days of losses at the start of the week, with the DXY index adding 0.1% and up by a further 0.1% against its peers today as Fed officials have pushed back against a prospect of an early cut.
• The gains were broad-based against its peers, but JPY was a significant faller, dropping 0.3% to 155.39 as GDP data disappointed, and down a further 0.3% this morning as the BoJ left bond buying unchanged.
• GBP fell 0.1% against the greenback to close at 1.2670, while EUR closed 0.2% lower at 1.0867.

Equities

• Asian equity markets followed the strong Wall Street gains of the previous day, with the Hang Seng closing up 1.6% and the Nikkei adding 1.4%.
• Elsewhere, stocks took a breather from the momentum of the previous day. In the US, the Dow Jones had briefly crossed the 40,000 mark but ended the day just below it as it closed down 0.1%. The S&P 500 dropped 0.2% and the NASDAQ 0.3%. In Europe, the composite STOXX 600 ended the day 0.6% lower.
• Locally, the DFM ended the day down 0.2% while the ADX closed up 0.2%.

Commodities

• Oil prices saw a second day of gains yesterday, bolstered this week by lower US stockpiles and that softer-than-anticipated inflation print on Wednesday. Brent futures added 0.6% to close at USD 83.3/b, while WTI added 0.8% to USD 79.2/b.