DXB passenger numbers decline 70% in 2020

• Dubai International Airport saw passenger numbers decline by -70% y/y in 2020 as a result of the coronavirus pandemic’s impact on global travel. This is in line with recent data from IATA, which showed global air passenger volumes fell by 70% last year.  Flight movements at Dubai International declined by over 50% y/y and the average number of passengers per flight was down -20.3% y/y.  Cargo traffic was less affected than passenger traffic, and declined -23.2% y/y.  However, data points to a recovery in world trade volumes in Q4 2020 and we expect this to continue as the global economy returns to growth this year.  Tourism is also expected to recover in H2 2021 as coronavirus vaccines are rolled out and travel restrictions are eased, although the return to pre-pandemic levels will likely be slow. IATA have noted that bookings for future travel globally were still down -70% y/y in January 2021.  
• Ratings agency S&P estimated a 4% decline in the GCC population last year, as “subdued” growth and nationalization policies led to expatriates leaving the region.  S&P expects the trend to continue through the next two years and noted that while near term impacts are limited, if the trend is sustained over the long term it could slow diversification efforts in the region unless it is offset by economic and social reforms to boost human capital.
• US President Joe Biden has been pushing the case for his USD 1.9tn stimulus package. The president plans to make his first trip outside Washington D.C. to Milwaukee, Wisconsin, today in order to attend a town hall forum which will also be broadcast on CNN. The spending plan is equivalent to some 9% of GDP and has so far failed to garner cross-party support from Republicans.
• The number of new coronavirus cases in countries with effective rollout programmes has been falling markedly. In the UK, which is also undergoing a strict lockdown, new cases fell below 10,000 for the first time since October, while in the US new cases were at 53,000, down from in excess of 200,000 several months ago. Curbing the spread of the virus should enable an easing of restrictions and a normalisation of economic activity, providing a boost to growth later in the year; in the UK, Prime Minister Boris Johnson said yesterday that he would provide a ‘roadmap’ for reopening on February 22.

Today’s Economic Data and Events

• Saudi Arabia CPI inflation, y/y: 10:00
• Eurozone employment, y/y: 14:00
• Israel GDP annualised, Q4: 15:00, forecast -3.7%
• US Empire manufacturing: 17:30, forecast 6

Fixed Income

• The US Treasury market was closed at the start of the week but has opened lower today as risk appetite spreads globally. Yields are higher across nearly the entire curve with 2yr USTs back above 0.11% and the 10yr adding almost 4bps for a yield of 1.24%. Overnight, European and Asian bond markets sold off as well with 10yr bund yields at -0.38% hitting their highest level since June 2020.
• Higher oil prices and rising UST yields have been putting pressure on EM domestic currency bonds. Yields on 10yr Indian government bonds moved back above 6% overnight while Indonesia’s similar tenor IDR issue has pushed up to 6.2% from less than 6.1% at the start of February. EM USD-denominated spreads over USTs are still narrowing but the pace of decline has moderated considerably from the strong downward pull seen from Q2 2020 last year.

FX

• The dollar is on the back foot this morning against nearly all major peers. The broad DXY index is down by 0.26% with EUR and GBP both up against the greenback by 0.13% and 0.31% respectively. Commodity currencies are also trading up strong against the dollar with the NZD leading gains even as New Zealand’s largest city of Auckland has had to endure another set of lockdowns.
• EM currencies were also generally up strongly against the dollar with TRY leading the gains, with USDTRY down by more than 1% and back below the 7 handle. INR saw more muted gains to close at 72.69 while IDR and PHP recorded stronger gains against the dollar of 0.45% and 0.24% respectively.

Equities

• Equity markets remained on the front foot at the start of the week amongst a general risk-on tone. US markets were closed for Presidents’ Day but S&P 500 futures are pointing higher this morning after the 1.2% w/w gain last week.
• In Europe, the FTSE 100 had its best day since the start of January, gaining 2.5%, as optimism around a reopening heightens following comments by Prime Minister Boris Johnson earlier in the day. The CAC gained 1.5%, the DAX 0.4%, and the composite STOXX 600 closed 1.3% higher.
• In Asia, the better-than-expected Q4 GDP growth figures in Japan helped push the Nikkei up 1.9% yesterday, passing the 30,000 level for the first time since 1990. The index is enjoying further gains this morning, up 1.6% at the time of writing.
• Within the region the DFM gained 0.7%, while the Tadawul closed 0.5% higher.

Commodities

• Oil markets continued their meteoric rise with Brent futures rising 1.4% to close at USD 63.30/b and WTI up 2.1% to settle at USD 59.47/b. Both contracts are moving higher in early trade today with WTI holding above the USD 60/b level. A major snap of cold weather in the US has seen heating oil futures gain strongly this morning—up more than 3%--along with Henry Hub natural gas getting bid up by more than 5%.
• Refineries and pipelines are being halted amid the freezing conditions which will likely send domestic fuel prices sharply higher until the weather subsides. Oil output in major producing states has reportedly dropped as much as 1.5-1.7m b/d.
• Gold prices started the week on a softer footing, extending losses for a third day in a row. The yellow metal settled at USD 1,818/troy oz, down 0.3%. Elsewhere metals were more positive with copper holding above USD 8,300/tonne.

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