Inflation moderates further in Saudi Arabia

Inflation in Saudi Arabia slowed to 1.62% y/y in October from 1.7% a month earlier. According to data from the GASS in Saudi Arabia, housing costs were the main driver of inflation last month with rents up 9.3% including a 14% y/y increase in apartment rental costs. The housing and utilities component of the CPI showed annual inflation of 7.8% y/y in October, down from 8.1% y/y in September. Food prices were marginally higher y/y, up 0.8%. Services inflation has moderated, and clothing & footwear prices have declined over the past year. In the 10 months to October inflation in Saudi Arabia has averaged 2.5%, in line with our forecast of 2.5% for the year as a whole.

Inflation in the UK fell to 4.6% y/y in October, down from more than 6% a month earlier. The drop was steeper than markets had been expecting and included a drop in core CPI to 5.7% y/y from more than 6% in September. On a monthly basis, CPI inflation was flat in October. Headline price growth in the UK is now at its lowest level since 2021. Food prices remain elevated, up more than 10% y/y in October while there was a sharp slowdown in the price of housing and household services. Goods inflation dropped from more than 6% in September to less than 3% in October while services ticked only marginally lower. The easing in inflation pressures will probably mean the Bank of England will keep rates on hold for now before looking at easing policy.

US retail sales dropped 0.1% m/m in October while sales ex-automobiles actually increased by 0.1% m/m. Control group sales, of core purchases, rose by 0.2% m/m suggesting that consumers started Q4 on a relatively sound footing.

US president Joe Biden and his Chinese counterpart Xi Jinping reached agreement on restoring communications between the two countries’ militaries, stemming supplies of fentanyl and holding discussions on artificial intelligence. The two leaders are meeting on the sidelines of the APEC summit being held in San Francisco.

Today’s Economic Data and Events

• 17:30 US initial jobless claims Nov 11: forecast 220k
• 18:15 US industrial production Oct: forecast -0.4%

Fixed Income

• US Treasuries gave back some of the prior day’s gains overnight with yields on the 2yr UST up almost 8bps at 4.9118% and the 10yr yield up more than 8bps at 4.5314%.
• Bond markets generally closed weaker overnight with bund yields up 4bps at 2.641% while the Bloomberg EM USD-index was marginally lower.
• Fitch affirmed their ‘A+’ rating on PIF with a stable outlook.

FX

• The US dollar recovered some poise overnight largely at the expense of the Euro. The single currency closed lower by almost 0.3% at 1.0848 while USDJPY resumed its upward move, settling up 0.7% at 151.36. GBPUSD also dipped, closing lower by 0.7% at 1.2416.
• Commodity currencies were better off though moves were more contained. USDCAD slipped marginally to 1.3683 while AUDUSD was near unchanged and NZDUSD rose 0.3% to 0.6023.

Equities

• Global equity markets recorded another day of gains overnight with the Dow Jones up 0.5% and the S&P 500 adding 0.2%. The tech-oriented NASDAQ added less than 0.1%, however. European markets also closed stronger, with the FTSE up 0.6% and the EuroStoxx adding 0.6%.
• In regional markets the DFM dropped 0.3% overnight as the standout underperformer. The Tadawul added 1.5% while the ADX gained 0.5%.

Commodities

• Oil markets closed lower overnight with Brent futures down 1.6% at USD 81.18/b and WTI falling more than 2% to USD 76.66/b.
• The EIA resumed publishing its weekly data which showed a 3.6m bbl in commercial crude stocks last week offset by draws in gasoline and distillates. Oil production, under new methodology, was flat at 13.2m b/d.