UAE targets substantial growth rates

• Data released in the US yesterday showed that the level of job openings remains highly elevated as the JOLTS figure came in above expectations at 11.27mn, compared to consensus projections of 11.0. This is down just modestly from the previous month’s 11.28mn, and so remains near record high levels. Meanwhile, the quits rate rose to 2.9%, reflecting workers’ confidence in the labour market and finding new positions. Meanwhile, the Conference board consumer confidence index ticked up modestly, coming in at 107.2m from a downwardly revised 105.7 the previous month. This was broadly in line with expectations, and appears to be bolstered by the strong labour market which is offsetting to some degree mounting concerns around accelerating inflation.
• In the latest of a recent run of disappointing data releases from Germany, the GfK consumer confidence index dipper more than expected in April, coming in at -15.5 compared to projections of -14.5. This was a 14-month low and illustrated a significant deterioration from the March reading of -8.5 as respondents cited concerns about inflation and the war in Ukraine. Income expectations fell to -22.1 which was the lowest reading since the Global Financial Crisis.
• UAE economy minister Abdulla bin Touq told reporters on the sidelines of the Annual Investment Meeting in Dubai that if the aim is to ‘double our economy from AED 1.4tn to AED 3tn in seven years’ then an annual growth rate of around 6%-7% would be necessary, a target he hoped to achieve this year. The minister also reiterated the importance of attracting more FDI.
• Qatar is set to invest USD 5bn in Egypt, according to a statement from the Egyptian government which followed meetings between officials from the two countries. This follows on from last week’s announcements that Abu Dhabi investment fund ADQ was investing USD 2bn in Egypt, and that the IMF were holding discussions with the North African country. Egyptian finances have come under pressure from the conflict in Ukraine which has pushed up the cost of food imports and will constrain tourism receipts this year, on top of the pressures already posed by global monetary tightening. The 100bps out-of-schedule rate hike last week, and the depreciation of the pound following a period of prolonged stability, have been seen as a precursor to securing international support.

Today’s key economic data releases and events

15:00 US MBA mortgage applications, week to March 25

16:00 Germany CPI inflation, % y/y, March. Forecast: 6.2%

Fixed Income

• US Treasuries had another day of relatively wide moves, responding positively to the news that Russia would consider de-escalating its operations around the Ukrainian capital of Kyiv. Later in the day, however, those moves were faded, with the 2yr UST ending the day slightly lower as yields added almost 4bps to close at 2.3646%. On the 10yr, the rally sustained until the end of the day—and is persisting this morning—with yields falling more than 6bps overnight to close at 2.3944%. The main takeaway was that the 2s10s curve inverted to -0.234bps, its first move into negative since mid-2019.
• The president of the Philadelphia Federal Reserve, Patrick Harker, said he was ready to support a 50bps hike at the May FOMC should data support it but that he still supports a “deliberate, methodical” approach to hiking rates.
• European bond markets responded positively to the news coming out of Ukraine though they still held losses for the day. Yields on 10yr gilts added more than 2bps to 1.639% while the 10yr bund yield rose more than 5bps to 0.628%.
• Emerging market bonds by contrast were up almost uniformly overnight. South African bonds rallied with 10yr yields off by 5bps to 9.962%. Indian 10yrs were also marginally stronger with yields down by less than 2bps.

FX

• The potential for a de-escalation of the war, at least around the Ukrainian capital of Kyiv, helped to push the Euro substantially higher overnight with EURUSD moving up to nearly 1.1150 at one point. The single currency settled up 0.9% at 1.1086. USDJPY continues to respond in counterintuitive moves with the ‘risk-off’ move yesterday supporting the yen even as the BoJ remains highly accommodative. USDJPY closed down by 0.8% at 122.88. GBPUSD also got some support from the proposed Russian withdrawal from the north of Ukraine region though the gains were more limited: the pair settled up less than 0.1% at 1.3093.
• Commodity currencies showed some choppy trading but responded generally positively to the move toward risk assets. USDCAD settled at 1.2497, down 0.2%, while AUD added 0.27% to 0.7509 and NZDUSD added 0.6% to 0.6935.

Equities

• Japan’s Nikkei closed up 1.1% on Tuesday, recouping Monday’s losses, after the Bank of Japan pledged to keep monetary policy extraordinarily accommodative, vowing unlimited purchases to curb yields. The Topix added 0.9%. Elsewhere in East Asia, the Hang Seng added 0.1% while the Shanghai Composite dropped -0.3% as Shanghai faces a lockdown in two parts.
• European equity markets closed higher yesterday, bolstered by optimism around talks between Ukraine and Russia in Istanbul. Despite the parlous GfK consumer confidence reading in the morning, Germany’s DAX index ended the day up 2.8%, followed by the UK’s FTSE 100 which gained 0.9%. In France, the CAC added 3.1% and is back at levels last seen prior to Russia’s invasion of its neighbour.
• The bullish tone continued in the US, where all three major indices closed higher on ceasefire hopes. The Dow Jones, the S&P 500 and the NASDAQ added 1.0%, 1.2% and 1.8% respectively.
• Locally, equities continue to enjoy positive momentum, driven by higher oil prices and major planned IPOs. The DFM closed up 0.9% and the ADX 0.7%.

Commodities

• Oil prices fell sharply on the news that Russia has proposed to divert forces away from its attacks on Kyiv. Brent futures fell to as low as USD 105/b from nearly USD 115/b prior to the announcement but then pared those losses over the rest of the day. Brent settled down 2% at USD 110.23/b while WTI closed at USD 104.24/b, down 1.6%.
• Data from the API showed a draw of 3m bbl in US crude inventories last week with official numbers out from the EIA later this evening.
• The UAE’s energy minister, Suhail al Mazrouei, affirmed again that OPEC+ is trying to keep oil markets stable by avoiding adding too much too quickly and that if OPEC+ debates “politics into the organization” that it will not end up benefitting consumers. OPEC+ meets tomorrow with our expectation that they will roll over planned production increases.

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