08 September 2023
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Eurozone and Japan GDP revised lower in Q2

By Khatija Haque

Eurozone GDP was revised lower in the final reading for Q2, expanding just 0.1% q/q, down from a previous estimate of 0.3%. On an annual basis, the economy expanded 0.5% y/y in Q2. Survey data over the summer has been weak, and German industrial production (also released yesterday) fell by a bigger than expected -0.8% m/m in July. Consumption has remained soft in the Eurozone in H1 and net exports were a drag on overall GDP in Q2. Growth in the Eurozone last quarter was largely due to investment and government spending, both of which are likely to weaken going forward.

Japan’s Q2 GDP data was also revised lower in the final reading, coming in at 4.8% annualized, down from a previous estimate of 6.0%. However, growth accelerated sharply from Q1, and was the fastest growth recorded since Q2 2022. The main driver was net exports, with consumption and investment declining in Q2.

China’s exports and imports fell again in August, but to a smaller extent than in July and came in above the median forecasts. Exports fell -8.8% y/y while imports declined -7.3% y/y last month. The trade surplus narrowed to USD 68.4bn from USD 80.6bn in July.

The UAE’s Minister of Trade attended the G20 and highlighted the role of the UAE as a major global trade hub. He noted that UAE’s non-oil trade with G20 countries accounted for more than half of the UAE’s total non-oil trade last year, and was up 21% y/y to reach USD 341bn. Trade with the bloc grew 14.4% y/y in H1 2023, dominated by imports, which accounted for 66% of total non-oil trade with G20 countries in H1. Over 90% of the UAE’s investments abroad are in G20 countries, while these countries account for around 43% of all foreign investment into the UAE.   

Today’s key economic data and events

  • 10:00 Germany CPI (Aug) forecast 0.3% m/m and 6.1% y/y
  • 10:45 France industrial production (Jul) forecast 0.1% m/m

Fixed Income

  • US Treasuries pulled higher overnight with the 2yr UST yield down about 7bps at 4.9469% while the 10yr yield slipped about 4bps to 4.2441%. The gains seemed to have been sparked by a strong rally in the gilts market after firms in the UK indicated they were planning to limit further price rises. Yields on 10yr gilts fell about 8bps to 4.448% while European bonds also rallied.
  • Bond markets generally were tentatively higher. A Bloomberg index of emerging market USD bonds added 0.1%, matching gains in high yield debt. Turkey’s 10yr Eurobonds, however, did slip marginally while local currency bonds also pulled weaker.  


  • The US dollar rallied against nearly all peers overnight. GBPUSD dropped by about 0.3% to 1.2472, its third day in a row of losses, as investors pare back rate expectations from the Bank of England. The euro also dropped about the same amount, settling at 1.0696 as economic data continues to underperform in Germany. USDJPY was the outlier, managing to move lower by 0.2% in favour of the yen to settle at 147.30.
  • Commodity currencies closed mixed with USDCAD up by 0.4% at 1.3685 while AUDUSD edged slightly lower at 0.6376 while NZDUSD held near flat at 0.5875.


  • More poor economic data from China, this time on exports, weighed on East Asian equities on Thursday. The Shanghai Composite and the Hang Seng dropped 1.1% and 1.3% respectively, while in Japan the Nikkei ended the day down 0.8%.
  • In Europe, stocks remained under pressure as the economic outlook worsened. The CAC managed to close flat but the DAX ended down 0.1%. In the UK, the FTSE 100 added 0.2% as bets on further rate hikes eased.
  • In the US, technology stocks took a hit after the Chinese government announced plans to broaden its ban on the use of iPhone in government agencies. The NASDAQ dropped 0.9%. The S&P 500 also fell, losing 0.3% on the day, but the Dow Jones managed to close up 0.3%.
  • Locally, both the DFM and the ADX ended the day 0.5% higher. In Saudi Arabia the Tadawul lost 0.7%.


  • Oil prices pulled back from some of their recent gains with Brent futures pulling away from USD 90/b to close 0.8% lower at USD 89.92. WTI also dropped, settling at USD 86.87/b or down 0.8%. Inventory data from the US showed a 6.3m bbl drop in commercial crude stocks while gasoline inventories also pushed lower. Oil production was unchanged at 12.8m b/d.


Written By

Khatija Haque Head of Research & Chief Economist

Edward Bell Head of Market Economics

Daniel Richards Senior Economist

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