UAE reports strong non-oil trade growth

WAM has reported that the UAE recorded non-oil trade of AED 1.24tn (USD 337bn) in H1 2023, growth of 14.4% compared the same period last year. This is on track for the government target which is for a total value of AED 2.5tn for 2023. China remains the top non-oil trade partner, with India, the US, Saudi Arabia, and Turkey making up the rest of the top five. The UAE has signed a series of CEPAs in recent quarters, including with Turkey, which are helping boost trade with key partners and the trade growth with Turkey was at 87.4% the highest so far this year. Non-oil exports were at AED 205bn, up 11.9% y/y, re-exports grew 9.9% to AED 341bn, while imports grew 17.5% to 693bn. The UAE’s major exports were gold, aluminium, oils, cigarettes, and copper wires, with gold accounting for 17.6% of exports, up from 14.3% in H1 last year.

China’s manufacturing PMI survey improved modestly in August as it rose to 49.7, up from 49.3 in July and beating the predicted 49.2. Nevertheless, this was the fifth consecutive month of contractionary readings, underscoring the ongoing pressures on the Chinese economy amidst a global slowdown. The government has introduced new economic support measures this week, but they have been relatively mild to date, and it remains to be seen if they will be sufficient to boost the flagging economy. The non-manufacturing survey was positive at 51.0, but this was down from 51.5 previously and lower than consensus 51.2.

In heartening data for the Fed, the US ADP labour market figure for August came in below expectations at 177,000, compared to the predicted 195,000, although July’s figure was revised up to 371,000, from 324,000 on the initial print. The August figure was the smallest in five months, although given a similar trend was seen last year it could be a seasonality issue rather than evidence of a marked slowdown in the labour market – we will be watching to see what the NFP report says at the close of the week. Meanwhile, the second print of Q2 GDP growth came in at 2.1% q/q annualised, down from the initial reading of 2.4%, as business investment was revised down.

Germany CPI inflation was at 6.4% y/y in August, slightly higher than the predicted 6.3% but lower than the 6.5% seen in July. Prices were 0.4% higher than the previous month. While price growth is moving slowly in the right direction, there has been little seen so far that will deter the ECB from the hawkish bias maintained by officials in their speeches around the Jackson Hole symposium last week; CPI data for the aggregate Eurozone will be released tomorrow.

Today’s Economic Data and Events

• 10:45 France CPI inflation, % y/y, August. Forecast: 4.6%
• 13:00 Eurozone CPI inflation, % y/y, August. Forecast: 5.1%

Fixed Income

• The downward revision to US GDP estimates for Q2 along with a softer ADP print helped to push US Treasuries higher overnight, although the curve did trade in an oscillating pattern. Yields on the 2yr UST fell below 4.85% at one point before fading the move and closing the day at 4.8859%, near unchanged. It was a similar story in the 10yr space with an initial move lower in yields to softer date faded by the end of the session to settle at 4.1139%, near unchanged.
• High-yield and emerging market USD bonds got a bid yesterday, likely helped by the steady drift lower in UST yields. Turkey’s 10yr Eurobond closed higher, though only marginally.

FX

• Currency markets had a mixed day overnight with EURUSD strengthening against the dollar, up 0.4% to 1.0923. Germany’s CPI for August came in slightly hotter than expected in year/year terms, firming up the idea that the ECB will need to hike rates again. Elsewhere GBPUSD rose 0.6% to 1.2721 while USDJPY added 0.3% to the detriment of the yen to settle at 146.24.
• Commodity currencies settled mixed with USDCAD moving in favour of the loonie, down 0.2% to 1.3532 while both AUDUSD and NZDUSD fell, down 0.1% to 0.6475 and 0.3% to 0.5955 respectively.

Equities

• US equity markets headed higher again yesterday after another round of comparatively weak data, though not so forcefully as the previous day. The Dow Jones, the S&P 500, and the NASDAQ added 0.1%, 0.4%, and 0.5% respectively.
• The day was more mixed in Europe. The FTSE 100 added 0.1%, but on the continent the German GDP print tempered any positivity. The DAX closed down 0.2%, while the CAC dropped 0.1%.
• Locally, the ADX fell 0.2% and the DFM closed 0.4% lower. In Saudi Arabia, the Tadawul added 1.2%.

Commodities

• Oil prices closed higher for a second day running, up 0.4% in Brent markets at USD 85.86/b and WTI gained 0.6% to USD 81.63/b. Commercial crude stocks in the US fell by 10.6m bbl last week, tracking the API print, while gasoline inventories also pulled lower. Oil production stayed flat at 12.8m b/d while product supplied edged marginally higher.