Dubai government approves 2023 budget

Dubai’s government approved a 2023 budget of AED67.5bn, a 13% increase on the 2022 budget.  With revenue expected to rise by 20% next year, the government forecasts a surplus of AED 1.5bn (0.3% of GDP) in 2023 from a (budgeted) deficit of -AED 2.5bn in 2022. This is the first planned surplus since 2019, as Dubai’s economy is expected to benefit from a continued rebound in tourism and travel next year. On the spending side, over 40% of the budget is allocated to infrastructure development and maintenance, with 34% set aside for social development and services and 20% for security and justice.

Egypt’s headline CPI inflation rate rose to 18.7% y/y in November, up from 16.2% y/y the previous month. The November print was the first following the late-October depreciation in the EGP, as a new IMF deal was concluded, and so was expected to head higher. The higher rate of inflation was also consistent with survey responses seen in the November PMI, released earlier this week. Prices were up 2.3% m/m, a slowdown from 2.6% in October. Food and beverage prices, the largest component of the basket, were up 29.9% y/y but while core inflation has not yet been released that was likely also higher than the 19.0% recorded in October.

US initial jobless claims held broadly steady (and in line with expectations) in the week ending December 3, coming in at 230K from 226K the week prior. Continuing claims rose again, ticking up slightly in the week ending November 26 to 1671K from 1609K the week before. Although this is the highest reading since February 2022 and indicates that workers are taking slightly longer to find new employment after being laid-off, the reading remains below the pre-pandemic average.   

Consistent with expectations, Chinese CPI came in at 1.6% y/y down from October’s reading of 2.1% y/y. Notably food inflation fell from 7% y/y in November to 3.7% in October. Core inflation remained unchanged at 0.6% y/y in November, highlighting the underlying weakness in Chinese price growth. Producer prices remained in deflation for a second month, coming in at -1.3% y/y in November, after having fallen to the same extend in October. The PPI print was slightly higher than consensus expectations of a 1.5% fall in inflation on the month. Weak inflation to date is a reflection the country’s strict Covid-19 restrictions. Although restrictions are now being relaxed any widespread Covid outbreaks in the country may itself cause further economic strain.

Today’s Economic Data and Events

• 17:30 US PPI Final demand Nov: forecast 0.2% m/m
• 19:00 University of Michigan Consumer Sentiment Dec: forecast 56.9

Fixed Income

• Yields on USTs rose yesterday following two days of declines. The 10y added 6bps to 3.48195 while the 2y gained 5bps to 4.3077%, leaving the inversion at wide levels albeit marginally narrower.
• UK gilt yields also saw gains with the 10y climbing 5bps to 3.089% and the 2y 7bps to 3.338%.
• ECB head Christine Lagarde was speaking yesterday but gave little in the way of signals around what might transpire at next week’s rate-setting committee meeting, focusing rather on systemic risks and the crypto market.

FX

• As the haven play seen at the start of the week dissipated, the dollar index declined against its peers for the second day running. It closed down 0.3% to 104.774, erasing the gains seen on Monday and Tuesday.
• Most of the greenback's peers made gains against it with EUR adding 0.5% to 1.0556 and GBP a more muted 0.3% to 1.2234. JPY was stabler as it ended the day at 136.67, down less than 0.1%.

Equities

• The Hang Seng recouped its Wednesday losses yesterday as it gained 3.4%. Elsewhere in East Asia there were losses as the Nikkei fell 0.4% and the KOSPI 0.5%, while Indian markets closed higher with the Sensex and Nifty added 0.3% each.
• There was little concrete movement in either direction in Europe as the CAC and the FTSE 100 both lost 0.2% but the DAX closed flat.
• A modest rise in initial jobless claims in the week to December 3 prompted a bout of risk-on sentiment in US equity markets yesterday, snapping an extended run of selling. The Dow Jones, the S&P 500 and the NASDAQ added 0.6%, 0.8% and 1.1% respectively.
• Locally, the ADX fell 0.6% and the DFM 0.7%, while the Tadawul closed up 0.6%.

Commodities

• Force majeure has been declared on a major crude pipeline in North America yesterday, introducing more uncertainty in the markets after the volatility of the past several weeks. The news prompted an intraday reversal in oil benchmarks as they snapped losses earlier in the session to end the day higher. More directly affected WTI added 0.8% to close at USD 72.0/b while Brent futures closed up 0.6% at USD 76.6/b.

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