09 May 2017
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UAE growth picks up

The Emirates NBD Dubai Economy Tracker Index rose to 57.7 in April from 56.6 in March, signalling the fastest rate of growth since February 2015.

By Khatija Haque

burj al arab

Retail sales data in Australia released this morning was much weaker than forecast, showing a decline of -0.1% m/m in March against expectations of a 0.3% m/m gain.  AUD is more than half a percent weaker against USD this morning on the release. Last week, RBA Governor Lowe highlighted the rise in private debt relative to wages in Australia as a cause for concern, saying that it made the economy less resilient to future shocks.

Asian equity markets are trading slightly lower this morning despite US equities eking out small gains overnight. With little economic data released yesterday there were few catalysts to move markets, and today is similarly quiet on the data front, with only German industrial production data for March and the JOLTS job openings survey in the US of note.

The Emirates NBD Dubai Economy Tracker Index rose to 57.7 in April from 56.6 in March, signalling the fastest rate of growth since February 2015.  Output and new order growth accelerated although firms continued to offer discounts and promotions in order to support demand. While employment did pick up in April, job growth remains relatively soft. 

Dubai’s construction sector enjoyed a strong boost in both new work and output in April, with firms indicating that new projects were getting underway. Activity in the wholesale & retail and travel & tourism sectors also saw strong growth last month, supporting our view that Dubai’s economy should see faster real GDP growth this year.  


Emirates NBD Dubai Economy Tracker

Source: Emirates NBD Research, IHS Markit

Day’s Economic Data and Events







Germany Industrial Production



US Wholesale Inventories



US JOLTS Job Openings






Source: Bloomberg.


Fixed Income

Lacking any other material catalyst, fixed income markets focused on accounting for the almost certain chance of a June rate hike in the US. Yields on 2yr and 10yr UST closed higher at 1.33% (+2bps) and 2.39% (+4bps) respectively. Receding safe haven bid on the back of lower political risks also weighed on sovereign bonds in Europe. 10yr Gilt yields closed 3bps higher at 1.15% while Bunds closed unchanged at 0.41%.

Credit spreads were largely unaffected amid oscillating oil prices. CDS levels on US IG and Euro Main were mostly unchanged at 62bps and 63bps respectively. Locally CDS levels on GCC sovereigns moved within a 2bp range with Saudi Arabia closing unchanged at 92bps and Qatar at 62bps (+2bps).

GCC cash bonds stay put at previous day’s levels as widening benchmark yields were offset by tightening credit spreads. Barclays GCC index closed with yield at 3.30% (-1bp) and OAS at 126bps (-4bps).

In the primary market Oman Electricity concluded its roadshow yesterday and will likely price a $500 million 10yr bond today. The existing OMGRID 25s closed yesterday at yield of 4.75% with Z-spread of 254bps. The new 10yr bond is expected to offer yield of over 5%.



USD strength remained the theme in currency markets overnight, as markets re-focused on interest rate differentials rather than political risk. While there is some chatter that the ECB could start to normalise monetary policy now that the French presidential elections are out of the way, most observers don’t expect a change in Eurozone monetary policy in the near term. In contrast, the market has fully priced in a 25bp rate hike in the US next month. 



Developed market equities closed lower in a classic case of ‘buy the rumour, sell the fact’ following the victory of Emmanuel Macron in the French Presidential election. The S&P 500 index closed flat while the Euro Stoxx 50 index dropped -0.5%.

Regional equities edged higher with the Tadawul adding +0.1% and the DFM index rallying +0.2%.

Drake & Scull pared early session losses to close +0.8% following comments from the CEO that the company expects to hear very soon from Saudi Aramco about settling half of the outstanding amount. Orascom Telecom jumped +1.4% after the company reported a profit of EGP 897.5mn in 2016 compared to a loss in 2015. The company also proposed to pay a dividend for the first time since 2013.



Oil markets managed to squeak out a gain to start the week but still remain at low levels, both benchmarks trading below USD 50/b. Saudi Arabia's oil minister gave strong signals that an extension to OPEC's production cut was coming while positive, if not definitive, support came from Russia. A contango of close to USD 2/b for 1-24 month Brent remains in place, near the widest it has been all year.


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Written By

Khatija Haque Head of Research & Chief Economist

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