IMF releases regional economic outlook

• The IMF has revised up its forecast for UAE GDP growth this year to 4.2% from 3.0% previously. The fund noted in its regional economic outlook that oil exporting countries in MENA will benefit from higher oil prices, which should more than offset the impact of tighter financial conditions from higher interest rates. The IMF’s forecast is lower than our house view of 5.7% growth this year, largely on the back of higher oil production.
• For the GCC as a whole, the IMF upgraded the growth outlook from 4.2% to 6.4%. By contrast, the oil importers in the region were mostly moved in the other direction, with 0.6% cut from Egypt’s 2022/23 growth forecast. Countries not enjoying an oil windfall are struggling with high price rises for wheat as the war in Ukraine has disrupted supply.
• The UAE and Turkey have begun discussions regarding a Comprehensive Economic Partnership Agreement. UAE minister for foreign trade, Thani bin Ahmed al-Zeyoudi said that the deal would double bilateral trade between the two countries to AED 100bn over the coming years.

Today’s Economic Data and Events

16:30 US initial jobless claims, week to April 23. Forecast: 180,000

16:30 US GDP annualised q/q, Q1. Forecast: 1.0%

Fixed Income

• Benchmark government bonds gave back some of their recent gains overnight as there was a tentative move back toward risk assets. Yields on the front end of the UST curve popped sharply, with the 2yr UST yield adding 11bps to close at 2.5910% while the 10yr added around the same amount, closing at 2.8318%. Bunds still managed to push higher, slightly, even as Russia has now directly politicized its energy exports by cutting them off to Poland and Bulgaria. Gilts yields edged up by less than 2bps to 1.809% on the 10yr.
• Indian bond markets were moderately weaker overnight with yields on 10yr INR bonds closing up by about 3bps at 7.082%. South African markets were closed for a holiday. Egyptian ‘32s also closed weaker with yields adding 61bps to close at 15.802%.
• An index of local UAE bonds dipped overnight, down by 0.2% while the YTW for the BUAEUL index added almost 4bps to 3.921%.

FX

• Currency markets continued their dramatic sell-offs against the dollar as the backdrop of a deteriorating growth outlook, high interest rates and a conflict involving one of the world’s largest nuclear powers appears to be worsening. EURUSD fell to 1.0557 overnight, a decline of almost 0.8%, as the Eurozone could be directly exposed to Russia politicising its natural gas exports, similar to what it did to Poland and Bulgaria. Sterling was also caught up in the downswing, ending the day lower by 0.2% at 1.2545. USDJPY resumed its upward pull yesterday, rising by 0.9% to 128.43 even as risk appetite looks finely balanced.
• Commodity currencies showed some respite with both AUDUSD and CADUSD moving against the dollar, albeit marginally. NZDUSD was the standout underperformer, falling by 0.3% to 0.6544.

Equities

• There was some respire for global equity markets yesterday after several days of downwards pressure. In the US, the NASDAQ closed flat but the Dow Jones and the S&P 500 both eked out gains of 0.2% - far from sufficient to recoup earlier losses in the week, however. European equity markets also gained, with the DAX adding 0.3% and the FTSE 100 and the CAC both closing 0.5% higher.
• Regionally, the ADX dropped -0.2%, but the DFM (0.6%) and the Tadawul (1.0%) both closed higher.
• There is positive momentum in early trading in East Asia this morning after there have been more signals of support from the PBOC. The Shanghai Composite is currently up 0.7% and the Hang Seng 1.6%.

Commodities

• Oil prices were boosted moderately overnight with Brent up 0.3% to USD 105.32/b and WTI at USD 102.02/b, a gain of 0.3%. Russia’s finance minister estimated that production in the country would fall by 17% as importing countries stop taking deliveries of Russian crude.
• US commercial crude stocks rose modestly last week, up less than 700k bbl while the SPR fell by almost 3m bbl. Both gasoline and distillate inventories fell. Production in the US was unchanged at 11.9m b/d.

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