China boosts support for property sector

China announced measures aimed at shoring up the troubled property sector on Friday, including removing the floor on mortgage rates and lowering the required downpayment for a mortgaged property to 15% on first properties (down from 20% previously) and 25% on second homes (from 30%). Further, local authorities will be enabled to purchase unsold commercial housing inventory and sell it on as subsidised affordable housing. House prices have been falling y/y since the start of 2022, and April saw first- and second-hand housing prices down by 3.5% and 6.8% y/y respectively, while property investment ytd was down 9.8% y/y.

The Oman Investment Authority and the Kuwait Investment Authority have signed a memorandum of understanding which could see the Kuwaiti entity invest in the OIA’s funds which focus on sectors including utilities, energy, and transport and logistics.

Major data releases scheduled this week include the UK’s April inflation figures due on Wednesday, where the annual rate is predicted to come in at just 2.1%, down from 3.2% in March, on the back of favourable energy base effects. Canada inflation figures are due on Tuesday. Central banks setting policy this week include the RBNZ, expected to keep the official cash rate on hold at 5.5% on Wednesday, and Hungary, expected to cut by 50bps to 7.25%. Within the wider region, Turkey’s CBRT is expected to keep the one-week repo on hold at 50.0% and Egypt’s CBE is likely to keep the overnight deposit rate at 27.25%, both on Thursday.

Today’s Economic Data and Events

No major data releases scheduled today.

Fixed Income

• USTs gained over the week as risk-on mood was bolstered by a slower inflation print, although gains were tempered at week-end as Fed officials pushed back on expectations of sooner rate cuts. Yields on the 2yr dropped 4bps to 4.8245%, while the 10yr dropped 8bps w/w to 4.4198%.
• In the UK, 10yr gilt yields dropped 4bps to 4.127%.There was less movement in Europe, where German 10yr bunds ended the week almost unchanged at 2.515%.

FX

• The US dollar lost ground against its peers last week, and the DXY index closed Friday down 0.8% w/w.
• GBP was a notable gainer as the UK had some favourable data releases, with sterling closing Friday at 1.2701, up 1.4% w/w. EUR closed up 0.9% at 1.0869. JPY saw some movement over the week but ended up just 0.1% against the greenback at 155.65.

Equities

• Measures to support the housing sector saw the Shanghai Composite close up 1.0% on Friday, although the index still logged a w/w decline of 1.1%, compared to the Hang Seng’s 4.8% gain over the week. In Japan, the Nikkei added 1.4% w/w.
• European markets pared recent gains at the close of the week, and most major indices ended Friday down w/w with the notable exception of the composite STOXX 600 which closed up 0.4% w/w despite dropping 0.1% on Friday. The FTSE 100 ended the week 0.2% lower and the DAX closed down 0.4% w/w.
• By contrast, US equity indices had strong gains over the week, bolstered in particular by the slower inflation print on Wednesday. The Dow Jones managed to close the week above the 40,000 level, with a w/w gain of 1.2%, lagging the S&P 500 (1.5% w/w) and the NASDAQ (2.1%).
• Locally, the DFM closed down 2.5% w/w on Friday while the ADX declined by 0.5%. On Thursday, Saudi Arabia’s Tadawul ended the trading week down by 0.7%, while Egypt’s EGX 30 closed up 0.5% w/w.

Commodities

• Oil prices saw strong gains last week on the back of general risk-on mood and a drop in US inventories. Brent futures added 1.4% w/w to end Friday just shy of USD 84.0/b. while WTI added 2.3% to USD 80.1/b.