Dubai hotels enjoy a strong start to 2023

Dubai’s hotel occupancy rose to 80.5% in January, up almost 10pp from January 2022 and also higher than December’s 76.1% occupancy. Revenue per available room was slightly lower in January m/m but was 5.7% higher y/y. Hotel occupancy for Abu Dhabi was similar to last year at 71.7% in January according to data from STR.

UK retail sales came in stronger than expected in January, rising 0.5% m/m against a forecast for a -0.3% m/m decline. However, December’s retail sales figure was revised down to -1.2% m/m and the level of retail spending remains more than 5% below where it was in January 2022. January figures were likely boosted by the new year sales but household consumption is likely to remain constrained as higher interest rates weigh on demand.

China's PBOC kept benchmark rates unchanged at 3.65% for 1 year and 4.3% for 5 year loans. The PBOC is expected to ease monetary policy to support China's post-covid recovery this year. The central bank did inject liquidity (CNY224bn) into the financial system through open market operations this morning. 

Egypt’s finance ministry is expected to launch a USD sukuk this week according to local press, with an estimated USD 1.5bn issuance.

US markets are closed today for Presidents’ Day. The focus this week will be on flash PMIs for February and the second estimate of Q4 2022 GDP in the US, as well as personal income and spending data for January. The latter are likely to provide further evidence of a strong start to the year for US consumers, following recent better than expect jobs and retail sales data.  The minutes of the Fed’s last FOMC meeting will also be released on Wednesday.

No key Economic Events and Data today

Fixed Income

• US Treasuries managed to pull higher at the end of the week as benchmark government bonds caught a bid. However, the brief gains were nowhere near enough to compensate for the pull higher in yields on the back of hotter than expected inflation earlier in the week and persistent hawkish commentary from Fed officials.
• Yields on the 2yr UST closed Friday down 2bps at 4.6169% though had risen by about 10bps for the week as a whole. On the 10yr UST, yields dropped 5bps on Friday to 3.8148% while on the week they gained 8bps. Bunds also moved higher on Friday, with yields down about 4bps to 2.435% while gilts moved in the opposite direction with yields up 1bps on Friday to 3.508%.
• Emerging markets bonds closed Friday weaker as there was a general risk-off tone to trading. The Bloomberg emerging market USD index dropped 0.2% on Friday while most local currency bonds also settled lower.  

FX

• The US dollar extended gains last week, solidifying year-to-date gains. The broad DXY index has now risen three weeks running thanks to steady weakness in JPY as well as some commodity currencies. EURUSD managed to gain last week, up by 0.2% to 1.0695. The main loser against the dollar last week with JPY with USDJPY adding more than 2% to 134.15. The appointment of a new Bank of Japan governor doesn’t seem to have inspired much of a rally in anticipation of a tightening of monetary policy. GBPUSD fell 0.2% last week to settle at 1.2037.
• Commodity currencies also had a rough go of it with USDCAD up nearly 1% to 1.3473 while AUDUSD fell 0.6% to 0.6879 and NZDUSD dropped 0.9% to 0.6247.

Equities

• Losses in the second half of the week weighed on US equities as some hot data points and hawkish messaging from numerous Fed officials raised expectations of higher for longer interest rates and dampened the exuberance seen in the days preceding. Nevertheless, the US equity market has continued to defy expectations given the current conditions, and the losses were comparatively negligible in the circumstances. The Dow Jones (down 0.1% w/w) and the S&P 500 (down 0.3%) both ended the week lower, but the NASDAQ managed to hold on to a w/w gain of 0.6% as it rose on Friday.
• There were losses across the board in European equities on Friday, but the key indices all still ended the week higher, with the FTSE 100 adding 1.6% w/w to a record weekly close as it crossed the 8,000 threshold and managed to cling on. The CAC added 3.1% over the week and the DAX 1.1%.
• There was less positivity in Asia, where the Nikkei, the Shanghai Composite, and the Hang Seng lost 0.6%, 1.1%, and 2.2% w/w respectively. In India, however, the Sensex ended the week 0.5% higher.
• Locally, the DFM ended the week 0.1% lower while the ADX recorded a w/w gain of 1.3%. In Turkey, the Bist saw substantial gains after it reopened post the earthquake closure, adding 11.6% w/w. Egypt’s EGX 30 lost 0.7% w/w.

Commodities

• Oil prices erased some of the prior week’s gains with Brent futures down about 4% to USD 83/b while WTI fell by 4.2% to USD 76.34/b. Near-term anxiety over the strength of demand amid tighter monetary policy is weighing on oil even as major forecasting agencies continue to flag the risks to fundamentals in H2 2023.