DEWA announces IPO

• Dubai Electricity and Water Authority (DEWA) has announced its intention to list 6.5% of its shares on the Dubai Financial Market, with subscriptions opening on 24 March. Shares are expected to start trading in April. DEWA is the first of Dubai’s government related entities to be listed, with district cooling firm Empower expected to follow in Q3 2022 according to DEWA CEO Saeed Al Tayer.
• Consumer inflation in Saudi Arabia rose 0.3% m/m and 1.6% y/yin February, the fastest rate of annual inflation since June 2021 but still well below many developed markets’ inflation. Both food and transport costs increased in the kingdom last month, up 0.4% m/m and 0.5% m/m respectively. Housing costs also rose 0.2% m/m in February but were down -0.2% y/y. We expect inflation in Saudi Arabia to accelerate over the course of 2022 although it is likely to remain lower than in the large, developed economies.
• Saudi Arabia indicated it was continuing talks with China over receiving yuan as payment for Chinese oil imports from the kingdom.  The idea had been mooted over the past several years but are reportedly being stepped up.
• UK prime minister Boris Johnson will visit the UAE and Saudi Arabia today as he seeks to add to calls from the US for the two countries to boost oil production at a faster rate. He is also likely to seek to boost investment in the UK from the two countries’ sovereign wealth funds.
• Unemployment in the UK declined to 3.9% in the 3m to January, down from 4.1% previously and back to the pre-pandemic level. However, this was largely due to people leaving the labour force than an increase in employment over the period.  Separate data from ONS showed that 275k jobs were added in February, much more than had been expected, and job vacancies reached a new high last month. Average wages rose 3.8% y/y in the 3m to January (excluding bonuses) but inflation adjusted wages declined. Household finances will continue to be pressured by higher taxes and utility bills as well as faster inflation.  The Bank of England is expected to raise rates by 25bp this Thursday.
• German investor confidence fell sharply in March as a result of the war in Ukraine.  The ZEW survey expectations index fell to -39.3 from 54.3 in February, the worst reading since the start of the pandemic in 2020. Inflation expectations have also surged on higher energy prices. The current situation index also fell but was more in line with forecasts at -21.4.
• US PPI was broadly in line with expectations, rising 0.8% m/m and 10.0% y/y.  Excluding food and energy, PPI rose just 0.2% m/m, much less than the median forecast of 0.6% m/m and suggests that some inflationary pressure may be easing.  Separately, the Empire Manufacturing index, an indicator of business conditions in the state of New York, fell to -11.8 in March from 3.1 in February and well below expectations.  Orders and shipments declined, prices increased and supply chain performance deteriorated.

Today’s key economic data releases and events

8:30 JN industrial production (Jan) no forecast

16:30 US advanced retail sales (Feb) forecast 0.4% m/m

22:00 US FOMC rate decision, forecast 25bp rate hike to 0.5% (upper bound)

Fixed Income

• Benchmark government bond markets closed mixed overnight ahead of the end of the FOMC meeting later today. Yields on the 2yr UST ticked lower, down 1bps to 1.8491% while the 10yr yield added 1bps to 2.1437%. Markets are giving a clear pass for a 25bps hike at today’s meeting with focus to fall on the Fed’s economic projections.
• In Europe bonds were generally higher. Yields on the 2yr Schatz fell 7bps to -0.435% while the 10yr bund yield closed down by almost 4bps at 0.327%. Gilts also moved higher overnight.
• Optimism around talks underway between Russian and Ukrainian officials helped to support emerging market bonds overnight. South African yields closed down by 5bps to 10.147% while Indian bonds closed little changed. 

FX

• The dollar showed a modest boost overnight on the broad DXY index, up 0.1% to near in on the 100 level. EURUSD stands to benefit from any de-escalation of the war in Ukraine and gained overnight by 0.15% to 1.0956 and is extending its move higher in early trade today. USDJPY continues to push higher, closing at 118.30, up a bit less than 0.1% overnight. Sterling was another solid performer with gains of 0.3% to settle at 1.3042.

• Commodity currencies are in flux thanks to the persistent volatility in commodity markets. USDCAD closed down 0.5% at 1.2765 making up some of the loonie’s losses from earlier in the week. AUDUSD rose 0.1% to 0.7196 while NZDUSD added almost 0.4% at 0.6771.

Equities

• Some East Asian equity markets came under concerted pressure in yesterday’s session, buffeted by concerns over the new lockdowns in China and the potential for geopolitical fallout from the Ukraine conflict. Technology stocks, which are also exposed to tightening by the Federal Reserve,  have been particularly affected. The Hang Seng dropped -5.7%, taking it down to levels last seen in early 2016, while the Shanghai Composite dropped -5.0%. By contrast, Japan’s Nikkei eked out a 0.2% gain. There has been something of a rebound in early trading this morning, as the Hang Seng is currently up 2.4%.
• Elsewhere, stocks were buoyed by the fall in oil prices yesterday back to under USD 100/b. Major European equity indices closed down just modestly (the DAX, CAC and FTSE 100 dropped -0.1%, -0.2% and -0.3% respectively) while US markets closed higher. The Dow Jones gained 1.8%, the S&P 500 2.1% and the NASDAQ 2.9%.
• Within the region, stocks were driven lower as oil prices fell, as the ADX and the Tadawul both dropped -0.7% and the DFM -1.4%.

Commodities

• Oil prices remain highly volatile, buffeted and buttressed by developments in the war in Ukraine and fears that China’s demand will collapse thanks to large outbreaks of Covid-19 in the country. Brent futures settled at USD 99.91/b, down 6.5% overnight, while WTI closed at USD 96.44/b, down almost 6.4%.
• The API reported a build in US crude stocks of almost 4m bbl last week, helping to add to the downward pressure. Inventories at the Cushing, OK price point rose by more than 2m bbl.

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