08 December 2022
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German industrial production falls less than expected

By Daniel Richards

The October German industrial production print boosted hopes that a recession in the Eurozone may be milder than previously anticipated. Industrial production fell -0.1% m/m in October, better than consensus expectations of a -0.6% fall on the month. In addition, September IP growth was revised up to 1.1%, from an initial reading of 0.6%. The October print was however buoyed by the contribution of the construction sector, which rose 4.2% m/m, and can be volatile. 

Saudi Arabia has approved a budget of SAR 1.114tn for 2023, with a projected surplus of just 0.4% of GDP down from an official estimate of 2.6% of GDP this year.  Our analysis suggests the budget is based on an oil price forecast of around USD 75/b, well below our house forecast of USD 105/b for next year. Spending is budgeted to decline by 1.5% y/y next year after rising 9% in 2022. The Ministry of Finance expects GDP growth to slow to 3.1% in 2023 from an estimated 8.5% in 2022.

The Bank of Canada raised rates by 50bps yesterday, consistent with expectations. This is the sixth consecutive rate rise by the bank and takes the Canadian overnight interest rate to 4.25%. Language used in the bank’s statement suggested that further large increases had likely come to end, at least for the moment.    

Reports on Bloomberg suggested that Chinese officials are debating setting a 5% growth target for 2023. The initial 2022 growth target of 5.5% was largely abandoned in the face of ongoing Covid19 restrictions and a property sector slump this year, so a 5% target for 2023 would indicate a renewed focus on economic growth after several years of Covid-zero policies, and would be consistent with a recent easing in Covid-19 restrictions and the November announcement of a support package for the embattled property sector. The Chinese trade balance deteriorated by more than expected in November, falling to USD 69.84bn from USD85.15bn in October. There was significantly weaker than expected import and export growth in November, falling 10.6% y/y and 8.7% y/y, respectively, underscoring the need for a rebound in domestic demand to bolster economic growth.

China’s President, Xi Jinping, started a state visit to the kingdom of Saudi Arabia on Wednesday. The two countries are due to sign agreements that seek to harmonize China’s Belt and Road Initiative with Saudi Arabia’s own Vision 2030 development plan.

US mortgage approvals fell by 1.9% w/w in the week ending December 2, this is after a -0.8% w/w fall the week before. Notably approvals fell even as the mortgage interest rates declined, with the rate on a 30-year fixed mortgage falling 8bps to 6.41%.

Today’s Economic Data and Events

  • 17:30 US initial jobless claims Dec 3: forecast 230K
  • 17:30 US continuing jobless claims Nov 2: forecast 1618K

Fixed Income

  • Recession fears were to the fore yesterday as the much-followed 2s10s spread recorded an inversion the size of which had not been seen since the early 1980s. At the close of the day, yields on the 10yr had slipped 11 bps to 3.4169% while the 2y also dropped 11 bps to 4.2561%. Meanwhile the 30yr also fell 11 bps to 3.4317, levels last seen in September.
  • In the UK, gilt yields also headed lower as the 10y dropped 3bps to 3.044% while the 2y fell 4bps to 3.268%.


  • The dollar index erased some of Monday and Tuesday's gains yesterday as the greenback fell 0.5% against its basket of currencies. 
  • Sterling added 0.6% to close at 1.2203 while the Euro added 0.4% to 1.0506.
  • The Indian rupee ended the day up 0.2% against the dollar following the the RBI's hawkish rate hike. The currency ended the day at 82.4800


  • The weak Chinese trade data out yesterday overshadowed positive noise around the easing of the zero-Covid restrictions in the country and the Hang Seng index ended the session down -3.2%.
  • The risk-off tone continued through the rest of the trading day, with European equity markets weighed down by the bearish sentiment seen in the US the previous day as well.  Despite some better-than-expected data (German industrial production and an upgrade to Eurozone Q3 GDP), the key indices ended the day lower as the CAC and the FTSE 100 dropped -0.4% while the DAX ended the day -0.6% lower.
  • In the US, the Dow Jones closed flat but the S&P 500 and the NASDAQ lost -0.2% and -0.6% respectively.
  • Locally, the DFM closed flat while the ADX lost -0.7%. Lower oil prices weighed on Saudi Arabia’s Tadawul also which closed -2.5% lower.


  • Oil markets tumbled further on Wednesday as mounting concerns around a global recession and the likely impact on oil demand in the coming quarters overshadowed any supply fears around the price cap. Oil prices are now back to levels last seen in 2021 as Brent futures dropped 2.8% to USD 77.2/b while WTI slipped 3.0% to USD 72.0/b. 

Click here for charts and tables

Written By

Daniel Richards Senior Economist

Jeanne Walters Senior Economist

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