President Biden announces he will run again

US President Joe Biden has announced he will run for president again in the 2024 election. That could set up a repeat of the vote between Biden and former president Donald Trump, one of the leading Republican candidates who has announced so far. A second Biden presidency is likely to carry on the themes of the first—public spending aimed at boosting participation in the labour force, measures to reduce inflation, increasing US resilience to trade interruptions—along with engagement with international partners on issues like climate change, Russia’s war on Ukraine and managing the US-China relationship. In the immediate term though the focus is on getting over the debt ceiling debate with Republicans in Congress. At current estimates the US government may hit its debt ceiling by June or July.

The Conference Board of consumer confidence in the US fell to 101.3 in April, down from 104 a month earlier. That was the lowest reading in the index since July last year. The forward-looking expectations component dropped to 68.1, contributing to the decline, while a measure of current conditions was unchanged. A measure of labour conditions in the survey showed that more respondents thought jobs were “plentiful” while those saying they were “hard to get” declined in April month/month. Big ticket item purchases dropped across a range of potential purchases.

New home sales in the US rose in March, up 9.6% to an annualized rate of 683k, up from 623k a month earlier. A drop in mortgage rates in March, as financials markets swung lower in response to the stress affecting several banks in the US, likely helped to support purchases in the short term.

The UAE’s economy minister, Abdulla bin Touq al Marri, said more details on the introduction of corporate tax would be forthcoming, in an interview with Bloomberg. The minister said that income taxes were “not on the table at the moment.”

Lebanon’s CPI inflation rose to 263.8% y/y in March, up from 189.7% in February. Prices were 33.3% higher than the previous month. Inflation had been declining from the January 2022 peak of 239.7%, but a 90% official devaluation in February has prompted a renewed acceleration after the multi-year lows of 122.0% and 123.4% seen in December and January. Annual inflation has now been in triple digits for 33 consecutive months.

Today’s Economic Data and Events

• 10:00 GE Consumer confidence May: forecast -28
• 16:30 US Durable goods orders March: forecast 0.7%

Fixed Income

• A sell-off in risk assets along with no greater clarity on the US debt ceiling issue helped to support longer-dated US Treasury markets overnight. Yields on the 2yr dropped 13bps to 3.9544% while the 10yr yield fell 9bps to 3.3996%. Markets are still firming up their pricing for next week’s FOMC with a 25bps hike mostly priced in.
• European bonds also had a strong performance as investors moved toward haven assets. Yields on 10yr bunds fell 13bps to 2.379% while gilt yields fell 9bps to 3.687%.
• High yield bonds settled slightly lower overnight while emerging market USD-denominated bonds picked up slightly. An index of UAE USD-denominated bonds also closed higher.

FX

• The drop in risk sentiment helped to lift the dollar against peers overnight with the broad dollar index up 0.5%. EURUSD fell by 0.7% to 1.0973 while GBPUSD fell 0.6% to 1.2409. JPY received some haven bids with USDJPY down 0.4% at 133.76.
• Commodity currencies closed weaker with USDCAD up 0.6% at 1.3627 while AUDUSD fell 1% to 0.6626 and NZDUSD dropped 0.5% to 0.6137.

Equities

• Equity markets were hit by the general risk-off tone yesterday, with concerns over a renewed banking crisis to the fore. In the US, the S&P 500 dropped 1.6%, the first time in over three weeks that it had fallen by more that 1.0%. The Dow Jones dropped 1.0% and the NASDAQ ended the day 2.0% lower.
• In Europe, the DAX managed to close 0.1% higher but there were losses elsewhere. The FTSE 100 lost 0.3% and the CAC fell 0.6%.
• Locally, the ADX dropped 0.1% but the DFM added 0.2%. Saudi Arabia’s Tadawul ended up 0.9%.

Commodities

• Oil prices fell heavily overnight as anxiety grows over refinery demand amid depressed crack spreads. Brent futures fell 2.4% to USD 80.77/b while WTI dropped by 2.2% to USD 77.07/b. The spread of Singapore gasoil over Dubai crude has fallen to about USD 12/b from USD 20/b at the start of the month and as high as USD 40/b at the start of the year.
• Inventories in the US fell 6.1m bbl according to the API. Gasoline stockpiles dropped 1.9m bbl while distillate inventories rose by 1.7m bbl.