29 June 2021
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Saudi reserves dip in May

Saudi Arabia net foreign assets fell in May

By Daniel Richards

  • Economic data was slim to start the trading week with markets looking forward to Eurozone consumer confidence and German inflation numbers out later today. With the US non-farm payrolls the main economic event on Friday, markets may be in a general holding pattern until then.
  • Saudi Arabia’s net foreign assets fell in May by 0.8% from a month earlier to USD 432.6bn. Reserves are at their lowest level since the end of 2010 as the enormous build up during 2011-14, catalyzed by oil prices at more than USD 100/b has been eroded over the past years thanks to low and volatile oil prices. While reserves are drifting lower they have largely been stable since Q2 2020. Since May, oil prices have jumped considerably which should also help to replenish Saudi Arabia’s reserve position.
  • Indian finance minister Nirmala Sitharaman unveiled new support measures for the Indian economy on Monday as the country recovers from a deadly spike in coronavirus cases earlier in the year and contends with the prospect of higher oil prices, ongoing restrictions on global travel, and the risk of tightening policy in the US. The measures included a 50% expansion to the emergency loan guarantee programme to INR 4.5tn and a pledge to boost healthcare spending still further from that signposted in the highly expansionary budget revealed earlier in the year. In a bid to support the ailing tourism industry, 500,000 free tourist visas were announced, and the sector was also allowed access to the emergency credit provisions.

Today’s Economic Data and Events

10:00 UK Housing prices m/m June: forecast 0.7%

13:00 EC Consumer confidence June

16:00 GE CPI y/y June: forecast 2.4%

18:00 US Conference Board consumer confidence: forecast 119.

Fixed Income

  • End of month and end of quarter repositioning seemed to help US Treasuries at the start of the week with yields lower across the curve. On the 2yr UST yields fell by 1bp to 0.2543% while on the 10yr yields fell by almost 5bps to 1.4765%.
  • Emaar Properties mandated banks for a USD sukuk with a 10yr tenor. Emaar has a ‘BB+’ rating with a stable outlook from S&P. Elsewhere in the primary market, Qatar Petroleum is planning for a multi-tranche issue with USD 5yr, 10yr and 20yr and a 30yr Formosa bond. Ahli Bank has also mandated banks for a USD 5yr issue with size and yield to be determined by the market.
  • Fitch affirmed their rating on Taqa at ‘AA-‘ with a stable outlook.


  • Currency markets showed some two-way moves to start the week with a sharp pop in the US dollar against peers at the start of the US session. The dollar managed to hold onto the gains following a fade later in the session and rose marginally on the day with the DXY index up 0.04% at 91.887.
  • EURUSD traded down to 1.1902 midway through the day before managing to bounce back. However, the single currency still closed lower at 1.1925, down 0.08%. Several ECB officials commented on the rise in inflation, downplaying the potential for current high levels of inflation—by Eurozone standards—to persist beyond the recovery from the pandemic.
  • Elsewhere USDJPY managed to strengthen, a gain of 0.11% to 110.63 overnight while GBPUSD did pop substantially higher early in the day on hopes that the UK will be able to reopen its economy, and in full, thanks to the appointment of a new health minister. However, it drifted lower over the remainder of the day, closing at 1.3883, a gain of just 0.03%.


  • Fears regarding the rising number of Delta variant Covid-19 cases around the world, and the potential for this to slow or limit the global reopening from the pandemic, saw renewed stock rotation yesterday, with the emphasis changing back to growth stocks once again. As a result, tech stocks in the US had a bumper day, and the NASDAQ gained 1.0% yesterday while the blue chip Dow Jones lost -0.4%. The S&P 500 saw more muted gains of 0.2%.
  • In Europe, the prospect of another summer with very limited travel saw tourism and aviation firms take a sizeable hit, driving the primary indices lower on the week’s first day of trading. The DAX lost -0.3%, the FTSE 100 -0.9% and the CAC -1.0%.
  • Surging cases in Asia and Africa have also impacted equity markets at the start of the week, although some of the losses were less pronounced. The Nikkei lost -0.1%, the NIFFTY -0.3% and the Shanghai Composite closed flat. Shares in Asia are trending down once again in early trading this morning.
  • Within the region, the DFM lost -1.1% but the ADX gained 0.6% and the Tadawul closed almost flat, down -0.1%.


  • Oil prices started the week on a softer footing with decline in both WTI and Brent markets. WTI futures fell 1.5% to USD 72.91/b while Brent sank nearly 2% to USD 74.68/b. The rising number of cases of the Delta variant of Covid-19 is forcing several countries to reimpose or lengthen lockdown measures, acting as a demand drag in the near term.
  • OPEC+ is holds its joint technical committee today where it is expected to project a deficit of 1.9m b/d in the second half of 2021, helping to provide some room for the bloc to increase output and to keep oil prices well supported.

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Written By

Daniel Richards Senior Economist

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