UK consumer confidence surges

• Consumer confidence in the UK is at its highest levels since May 2016, according to a YouGov gauge. Job security posted the highest reading on record, and the outlook for business activity continues to improve. The UK is moving apace with its vaccination programme, with the over-25s now called forward for their jabs. For the time being the June 21 date for the end of domestic restrictions remains in play, but this is at a cost of ongoing restrictions on international travel.
• Markets have been quiet ahead of the US CPI print due on June 10. Projections are for y/y inflation to take another leg up, to 4.7% from 4.2% in April. Another high reading will add fuel to the debate about whether this shift upwards really is transitory or if it is a signal that the Federal Reserve should start considering tightening policy.
• Kuwait saw a real GDP contraction of -8.9% in 2020 as the pandemic crisis took hold, according to a release from the country’s Central Statistical Bureau. Q4 saw a y/y real contraction of 20.2%. The oil sector accounted for 51.1% of the economy at fixed rates in Q4.
• Japan’s first quarter contraction was slighter than stated at the first reading. The economy shrank by -1.0% q/q, compared to the earlier reading of -1.3%. The annualised contraction was -3.9% rather than -5.1%. Nevertheless, the Japanese economy remains under pressure given states of emergency declared in various provinces in recent weeks, and the viability of the Olympic Games remains in question.

Today’s Economic Data and Events

13:00 eurozone GDP q/q Q1 final print: forecast -0.6%

Fixed Income

• US Treasuries hewed to a narrow range overnight with yields on 10yr USTs showing a two way move. Yields moved up to around 1.58% midway through the day before coming off in the evening session to settle around 1.57%. There has been seemingly no significant response to comments from US Treasury secretary that higher interest rates would be a “plus” for the US economy.
• Oman mandated several banks to carry out a USD sukuk offering which would be its second issuance this year. Elsewhere Ahli United Bank from Kuwait is preparing a USD sukuk and Saudi Aramco has mandated banks for a USD sukuk.

FX

• Currency markets had been roughly flat for much of the trading day to start the week but there was a general move against the USD toward the end of the session. EURUSD moved nearer to 1.22 after a brief plunge to around 1.2140 mid-day. USDJPY pushed to around 109.20 overnight but the yen has weakened in early trade today as revised GDP data for Q1 set up for a soft Q2.
• GBPUSD ended the day flat, having earlier moved up to 1.4190 as markets remain optimistic on the scale of recovery possible in the UK economy.

Equities

• Equity markets were fairly quiet yesterday. In Europe, the FTSE 100 closed up 0.1% and the DAX closed down -0.1%. The CAC gained 0.4%.
• In the US, the S&P 500 and the Dow Jones both closed down modestly (-0.1% and -0.4% respectively) while the NASDAQ gained 0.5%.
• Regional equities started the week on the front foot. The DFM (0.7%), the ADX (0.3% and the Tadawul (0.3%) all closed higher. The EGX 30 lost -0.2% however, and is now down -6.8% ytd.

Commodities

• Oil prices have edged back from recent highs with Brent futures trading back closer to USD 71/b after having hit as high as USD 72.20/b in trade yesterday. WTI prices have a brief move up to nearly USD 70/b before giving most of the gain back and have been brought back to a USD 68/b handle.
• The IAEA noted that negotiations between Iran and the JCPOA party members are at a “decisive phase,” highlighting that Iran was not cooperating with some investigation into traces of radioactive particles at sites that were hitherto unknown.

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