06 September 2023
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KSA and Russia extend oil supply curbs through year end.

By Khatija Haque

Saudi Arabia has confirmed it will roll over its additional 1m b/d of production cuts until the end of Q4 while Russia will also curb exports by 300k b/d until the end of the year. We had expected that Saudi Arabia would keep its voluntary cuts in place until the end of the year helping to tighten oil markets substantially over the remainder of 2023. Oil prices rose on the news with Brent breaking above USD 90/b, levels last seen in November 2022. Further upside risk from here will depend on positivity in the broader macro narrative, particularly from China.

The final PMIs for the Eurozone came in lower than the flash readings for August at 47.9 for services and 46.7 for the composite index. The composite PMI is at the lowest level in almost three years and is consistent with a modest contraction in GDP in Q3. New orders for both services and manufacturing declined in August, suggesting that output is likely to remain soft in the coming months. Despite the apparent weak demand, higher services costs drove a rise in the composite output price index last month.

In contrast, the UK PMIs came in slightly higher than their preliminary readings and also improved from July. The UK composite index rose to 48.6 in August from 47.9 in July, with the services PMI rising to 49.5 from 47.0 the previous month.

The Reserve Bank of Australia kept its benchmark rate on hold at 4.1% yesterday, as widely expected by analysts. Outgoing governor Lowe kept a tightening bias even as inflation in Australia has slowed in recent months, saying that “some further tightening of monetary policy may be required” to bring inflation to target in a reasonable time frame.

Today’s key economic data and events

  • 10:00 Germany factory orders (Jul) forecast -4.3% m/m
  • 17:45 US composite PMI (Aug, final) forecast 50.4
  • 18:00 US ISM services PMI (Aug) forecast 52.5
  • 18:00 Bank of Canada rate decision, forecast 5.0%
  • 22:00 Federal Reserve releases Beige Book

Fixed Income

  • US Treasuries dropped overnight as a sharp pull higher in oil prices raises inflation worries once again. Yields on the 2yr UST added 8bps to 4.9597% while the 10yr rose the same amount to 42.598%. Christopher Waller, a Fed governor, said he was in favouring of moving “carefully” and that there was “nothing that is saying we need to do anything imminent,” raising the odds of a skip at the September FOMC meeting. Markets are pricing in less than a 50% chance of one more hike by the end of the year.
  • Bond markets generally traded heavier overnight with high yield and emerging market USD bonds indexes down by about 0.3%. GCC bonds also traded weaker with the Bloomberg GCC USD index down 0.3%.
  • EM Eurobonds closed weaker with Turkey 10yr USD yields up 7bps at 8.212%. In local currency markets, bonds sold off as well with Turkey 10yr yields up 25bps to 21.45% and South African 10yrs up 12bps at 11.914%.
  • ADCB priced a USD 650m 5yr green bond at T+125 overnight.


  • Currency markets traded heavily in risk-off mode overnight with the US dollar pulling higher against all peers. EURUSD fell 0.7% to 1.0722 as disappointing revisions to PMI numbers for August seem to put the nail in the coffin for another rate hike from the ECB. GBPUSD dropped 0.5% to 1.2564 while USDJPY added 0.9% to trade at 147.72.
  • Commodity currencies also closed under pressure. USDCAD added 0.4% to 1.3642 while AUDUSD fell 1.3% to 0.6379 as markets were disappointed the RBA didn’t lay out clear plans to tighten policy further. NZDUSD dropped 0.9% to 0.5884.


  • East Asian equities were under pressure yesterday as Chinese survey data disappointed and questions over Country Garden remained in play, though the firm has avoided default for now. The Shanghai Composite ended the day 0.7% lower while the Hang Seng dropped 2.1%. In Japan, the Nikkei closed up 0.3%.
  • A downwards revision to the Eurozone PMI survey for August weighed on European equities and the composite STOXX 600 ended the day down 0.2%. In the UK, the FTSE 100 initially bucked the trend but it gave up its gains later in the session to also close lower, dropping 0.2% also
  • As US markets reopened after the Labor Day holiday on Monday, sentiment in equity markets was largely negative, and all three major indices closed down. The NASDAQ lost only 0.1%, but the S&P 500 dropped 0.4% and the Dow Jones closed 0.6% lower.
  • Locally, the DFM closed down 0.4% while the ADX dropped 0.9%. In Saudi Arabia the Tadawul dropped 0.2%.  


  • Front month oil prices have pushed higher on the news of extended Saudi and Russian supply cuts with Brent up 1.2% at USD 90.04/b and WTI closing at USD 86.69/b, up 1.3%. Further upside risk from here will depend on positivity in the broader macro narrative, particularly from China.
  • Industrial metals settled mixed overnight with LME 3mth aluminium down about 0.9% at USD 2,193/tonne while copper added 0.4% to USD 84,87/tonne and iron ore continued to gain, up 0.4% at USD 117.54/tonne. Precious metals closed lower across the complex, with gold down 0.9% at USD 1,962/troy oz.


Written By

Khatija Haque Head of Research & Chief Economist

Edward Bell Head of Market Economics

Daniel Richards Senior Economist

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