UK GDP growth rebounds to the upside

UK GDP expanded 0.5% m/m in October, exceeding expectations of 0.4% growth. This marked a rebound from the -0.6% contraction recorded in September when the unscheduled bank holiday for Queen Elizabeth II’s funeral weighed on output. Industrial production was flat in October, but manufacturing output expanded by 0.7% m/m and construction by 0.8%. Services were up 0.6%. The stronger-than-anticipated GDP print comes ahead of the BoE’s rate decision on Thursday but while the data could lead to some dissension to the higher side, the most likely outcome remains that the MPC slows the pace of hikes with a 50bps move higher.

CPI inflation in India slowed to 5.9% y/y in November, down from 6.8% the previous month. This was far slower than the consensus prediction of 6.4% and marked the first time in 2022 that price growth had come in under the upper limit of the RBI’s 2%-6.0% target range. The central bank already slowed the pace of its hikes at its meeting last week and has the space to pause its tightening cycle now. Meanwhile, India’s October industrial production data was also released yesterday, declining 4.0% from September’s output. This followed a 3.1% contraction in September and was far lower than the predicted 1.0% contraction. The contraction was across all sectors save petroleum products and basic metals. The Indian economy is coming under greater pressure from the global slowdown and 225bps of hikes by the RBI.

Sheikh Mohammed bin Rashid has approved the second phase of the Dubai Urban Master Plan, which includes turning Dubai into a 20-minute city, where residents can access 80% of their needs and destinations within 20 minutes. The WAM statement also lays out plans to boost spending on housing for citizens with a budget of AED 65bn.

Today’s Economic Data and Events

• 11:00 UK unemployment rate 3mths, October. Forecast: 3.7%
• 14:00 Germany ZEW survey expectations, December. Forecast: -26.4
• 14:00 Germany ZEW survey current situation, December. Forecast: -57.0
• 17:30 US CPI inflation, % y/y, November. Forecast: 7.3%

Fixed Income

• Yields on USTs rose on Monday ahead with the 10y adding 3bps to 3.6113 and the 2y also adding 3bps to 4.3754. There has been no commentary from Fed officials owing to the blackout period prior to Wednesday’s FOMC meeting.
• In the UK, 10y gilt yields also closed higher, adding 2bps to 3.201, while Germany’s 10y bund closed up 1bps at 1.935%.

FX

• There were some gains for the dollar as a haven play ahead of the key CPI print later today and the major central bank meetings due towards the end of the week. The dollar index ended the day 0.3% higher at 105.131 after initially selling off through the morning.
• The dollar’s gains were largely against the yen and the commodity currencies as it was little moved against EUR and GBP, with the single currency closing basically flat at 1.0537 while GBP added 0.1% to 1.2269.

Equities

• The trading week started with Asian equity markets selling off, following on from the US moves on Friday post the PPI inflation data and exacerbated by news around surging Covid-19 cases in China. The Hang Seng fell 2.2% while the Nikkei lost a more modest 0.2%. The selling continued in Europe as the FTSE 100 and the CAC dropped 0.4% and the DAX lost 0.5%.
• Locally, the DFM dropped 0.2% and the ADX 0.9%. Saudi Arabia’s Tadawul ended the day 1.0% lower.
• There were gains in the US however as the NASDAQ, S&P 500, and the Dow Jones gained 1.2%, 1.4% and 1.6% respectively.

Commodities

• Oil saw a volatile day yesterday with both benchmarks oscillating between bought and sold through the day. Buying picked up later in the session s optimism around China reopening rose and in the end both closed up, with Brent futures adding 2.5% to USD 77.99/b and WTI 3.0% to USD 73.17/b.

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