IMF warns of weak growth ahead

IMF head Kristalina Georgieva has cautioned that the global economy is set to see its worst growth over the next five years since the 1990s as it grapples with the lingering fallout from the Covid-19 pandemic, the Russian invasion of Ukraine, and persistently high inflation. Real GDP growth will average around 3% over the period according to IMF projections, compared to an average 3.8% over the decade to 2019.

US initial jobless claims for the week to April 1 were at 228,000, higher than consensus predictions of 200,000. Meanwhile, the previous week’s claims figure was revised up from 198,000 on the initial print to 246,000 in further signs that the labour market tightness is easing following on from recent JOLTS and ADP data. All eyes now will be on the NFP report due today where the net gain is predicted at 230,000.

Germany industrial production surprised to the upside in February data released yesterday, showing an expansion of 2.0% compared to the predicted 0.1% contraction. The January growth figure was revised up to 3.7%, from 3.5% previously. On an annual basis, growth was at 0.6%. The robust production data over the start of the year makes it unlikely that the German economy contracted in the first quarter, through risks through the rest of the year remain in play.

The IMF has reportedly indicated that Saudi Arabia has given it assurances that it will provide a USD 2bn loan to Pakistan to help the embattled economy avoid default. The Fund had placed a condition of further support from Saudi Arabia and the UAE for Pakistan before it would move forward with its own support package. The PKR sank to a new all-time low against the dollar earlier this week but has strengthened on the latest news.

Today’s Economic Data and Events

• 16:30 US nonfarm payrolls, March. Forecast: 235,000
• 16:30 US unemployment rate, March. Forecast: 3.6%

Fixed Income

• The front end of the UST curve pushed higher overnight as markets responded to more hawkish commentary from James Bullard, head of the St Louis Fed. Yields on the 2yr UST rose by 5bps to 3.8309%, outpacing a flat move from the 10yr which settled at 3.305%. European bond markets also held flat ahead of the Easter holiday weekend. Many markets will be closed today.
• Bahrain priced a USD 7yr sukuk at 6.25% and a 12yr conventional at 7.75%.

FX

• Currency markets closed mixed overnight with EURUSD up by 0.2% at 1.0922 with little material catalyst to support the move. GBPUSD dropped by 0.2% to 1.244 while USDJPY added about 0.4% to 131.78.
• Commodity currencies sold off in a more uniform manner with USDCAD up 0.3% at 1.3493 while AUDUSD fell 0.7% to 0.6672 and NZDUSD dropped by 1.2% to 0.6243.

Equities

• Equity markets were largely positive on Thursday, ahead of the closure for the Easter holiday for many. In the US, the Dow Jones closed flat but the S&P 500 added 0.4% and the interest rate sensitive NASDAQ added 0.8%, with weak jobs data boosting bets on an end to the Fed’s hiking soon.
• In Europe, the FTSE 100 was the key gainer as it added 1.0%. The CAC closed up 0.1% while the DAX added 0.5%.
• Local markets were less buoyant. The Tadawul, the ADX, and the DFM dropped 0.1%, 0.3%, and 0.4% respectively.

Commodities

• Oil prices extended their recent moves higher with Brent up 0.2% overnight to USD 85.12/b while WTI added about 0.1% to USD 80.70/b. Both markets will be closed for public holidays today. Saudi Aramco raised their OSPs to markets in Asia, hiking them for a third month in a row.