Mortgage relief for UAE nationals

The Central Bank of the UAE announced new measures to alleviate the impact of higher mortgage rates on lower income UAE citizens. UAE nationals with incomes below AED40k per month would see the tenor of their loans extended to a maximum of 30 years to keep monthly mortgage repayments below 50% of their monthly income. Banks will be able to pass on higher mortgage rates to customers with incomes over AED 40k per month until their monthly repayments reach 60% of their income, at which point they will be capped.    

Japan’s composite PMI came in at 52.1, slightly below the June reading of 52.3. As in other major economies, the services sector is showing more robust growth, offsetting weakness in manufacturing. The services PMI also eased in June however, to 54.0 from 54.2 in May.

The Reserve Bank of Australia kept its cash rate unchanged at 4.1% yesterday but stood ready to tighten further if inflation and economic conditions warranted it. Analysts had been evenly split between those expecting a further 25bp rate hike and those who though the RBA would pause again. Slower inflation data in May and softer growth provided room for the RBA to wait and see how data evolves before deciding whether to hike rates again in the coming months.

Today’s Economic Data and Events

• 11:00 Turkey CPI (June) forecast 38.9% y/y
• 12:00 Eurozone composite PMI (June) forecast 50.3
• 12:30 UK composite PMI (June) forecast 52.8
• 18:00 US factory orders (May) forecast 0.8%
• 18:00 US durable goods orders (May) forecast 1.7%
• 22:00 FOMC June meeting minutes

Fixed Income

• US Treasury markets were closed overnight for a US public holiday. In early trading today, the 10yr UST has pulled a little stronger with yields down about 1bps to 3.843%. European bond markets were mixed overnight with bunds falling slightly and yields up about 2bps at 2.45% while gilts rallied with yields down 2bps to 4.406%.
• Emerging market bonds had a general softer bias overnight. Yields on South African 10yrs rose 4bps to 11.766% though Turkey 10yrs rallied with yields down 6bps at 15.91%.

FX

• The US dollar was moderately higher overnight, mostly thanks to losses in EURUSD which fell 0.3% to 1.0879. USDJPY dropped by almost 0.2% to 144.47 while GBPUSD gained 0.2% to 1.2713. Commodity currencies had a stronger day with AUDUSD recovering losses from earlier in the day after the RBA held rates. AUDUSD added 0.3% to 0.6692 while USDCAD dropped 0.2% to 1.3223 and NZDUSD rallied the most, up 0.6% to 0.6191.

Equities

• With the US markets closed for the July 4 holiday yesterday, trading elsewhere was fairly subdued as well. The trend in Europe was largely negative, and while the composite STOXX 600 eked out a 0.1% gain, the CAC and the DAX dropped 0.2% and 0.3%. The FTSE 100 also closed lower, dropping 0.1%.
• There was more positivity in local markets where the ADX added 0.2% and the DFM 1.4%. However, in the wider region the Borsa Istanbul closed down 0.2% and the EGX 30 dropped 1.1%.  
• ADNOC and OMV are reportedly in talks to merge Borouge and Borealis to create a plastics and chemicals firm worth an estimated USD 30bn.

Commodities

• Brent futures rose 2% overnight to USD 76.25/b with markets thin thanks to the US public holiday. There was no WTI settlement due to the public holiday in the US. Markets will be waiting for news out of the OPEC seminar currently taking place in Vienna and in particular any commentary from Saudi energy minister.