04 February 2020
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Global PMIs signal improvement in manufacturing

Manufacturing PMIs for the US, UK and the Eurozone were all slightly better than expected in January.

By Aditya Pugalia


Manufacturing PMIs for the US, UK and the Eurozone were all slightly better than expected in January.  Although the Eurozone manufacturing PMI remained in contraction territory at 47.9, it was slightly higher than forecasted and a marginal improvement from December’s reading.  The UK’s manufacturing sector rose to 50.0, the highest reading since May last year.  The US PMI also showed improving conditions in the manufacturing sector, with the index rising to 51.9 from 51.7 in December and beating the consensus forecast.  The ISM manufacturing index told a similar story, rising to a six-month high of 50.9 in January. Regional PMI data was relatively disappointing however, with the headline UAE PMI slipping to 49.3 in January – the first sub-50 reading since August 2009 -  while the Saudi PMI declined to 54.9, the lowest reading in more than a year.  Egypt’s PMI fell to 46.0 from 48.2 in December.

Abu Dhabi and Dubai announced a new natural gas discovery that will be developed jointly and could allow the UAE to become self sufficient in terms of its domestic energy demand.  The Jebel Ali reservoir has 80tn cubic feet of natural gas, making it the fourth largest in the world, according to Bloomberg.  It is unclear how long it will take to develop the field, but increasing natural gas production would boost hydrocarbon GDP, helping to mitigate the impact of oil production cuts.  Separately, Emirates and Etihad Airways will halt all flights to China, except Beijing, effective tomorrow following a decision made by the UAE civil aviation authority.  Emirates reportedly has 90 weekly flights to China, flying 3.7mn passengers last year.  Chinese visitors to Dubai stood at just under 1mn people in 2019, or around 6% of Dubai’s total international visitors.

Turkish CPI accelerated to 12.2% y/y up from 11.8% in December and above the consensus forecast of 11.9%. Core inflation rose to 9.9%, while producer price inflation accelerated to 1.8% m/m (8.8% y/y), all pointing to deteriorating inflation dynamics. Real interest rates are now negative in Turkey at -0.9%, similar to Japan, increasing pressure on the central bank to pause its rate-cutting cycle when it meets later this month.  

Finally, the Reserve Bank of Australia kept rates on hold this morning at 0.75% as widely expected but left the door open for further easing “if needed” to support growth, employment and to achieve the inflation target over time.

MENA PMIs soften at the start of the year

Source: IHS Markit, Emirates NBD Research

Fixed Income

Treasuries closed mixed after the US CDC said that it is preparing as if coronavirus were the next pandemic. USTs gave up early session gains as yields on the 2y UST and 10y UST closed at 1.35% (+4 bps) and 1.52% (+2 bps) respectively.

Regional bonds closed largely unchanged as investors remain largely cautious on emerging market assets. The YTW on Bloomberg Barclays GCC Credit and High Yield index closed at 3.0% and credit spreads remained flat at 153 bps.


Developed market equities closed higher as investor’s started to looked beyond the short term impact of coronavirus. The S&P 500 index and the Euro Stoxx 600 index added +0.7% and +0.3% respectively.

Regional markets closed mixed. The Qatar Exchange (-1.1%) and the ADX index (-0.8%) were notable losers. The weakness was led by market heavyweights with First Abu Dhabi Bank and Etisalat dropping -1.7% and -0.4% respectively.

Taqa, an exception, closed limit up after the company received an offer from Abu Dhabi Power Corp to transfer some assets in exchange of shares. Abu Dhabi Power would own 98.6% of Taqa if the offer is accepted and the deal is completed. Further, the offer implies an equity value of Taqa of AED 4.156bn.


Oil markets moved into a bear market overnight, with both Brent and WTI futures down more than 20% from their 2020 year-to-date highs. Both contracts are managing tepid gains this morning with Brent at USD 54.75/b and WTI at USD 50.50/b. OPEC+ is holding a technical committee meeting today to assess the impact of the coronavirus outbreak on demand and whether to cut production further.

Brent time spreads moved into contango overnight with the 1-2 month spread at USD 0.17/b and 2-3 a little wider. Should the depressed conditions persist it may amplify selling pressure and act as a brake on any positive messages from OPEC+ about production levels.



Written By

Aditya Pugalia Research Analyst

Edward Bell Head of Market Economics

Khatija Haque Head of Research & Chief Economist

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