UK unemployment ticks up in February

UK unemployment ticked up to 3.8% in the 3m to February from 3.7% previously, and jobless claims rose by 28.2k last month, suggesting some softening in the labour market. However average weekly earnings in the 3m to February was still robust at 5.9% y/y, and 6.6% y/y excluding bonuses. The focus today will be on March inflation data which is expected to slow to 9.8% y/y from 10.4% in February.

Germany’s ZEW investor survey came in well below forecasts in April, with the headline index falling to 4.1 from 13.0 in March. The weaker sentiment was attributed to concerns about the banking sector  and still high inflation, which is likely to lead to further rate hikes in the Eurozone, further limiting credit availability. The current conditions component of the survey improved in April, but remains well below pre-pandemic levels.

US housing starts slowed by a less than expected -0.8% m/m in March as an increase in construction of single-family homes offset a decline in multifamily buildings. However, building permits fell -8.8% m/m last month, more than the market had forecast, suggesting construction may slow in the coming months.  

The IMF’s mission chief to Saudi Arabia expects the voluntary production cuts to be offset by higher prices, with a positive overall impact on the Saudi budget this year. Saudi Arabia announced earlier this month that it would cut production by 500k b/d from May through the end of the year, implying a decline of more than 4% in 2023 average oil production.  

Today’s Economic Data and Events

• 10:00 UK CPI (Mar) forecast 9.8% y/y
• 10:00 UK core CPI (Mar) forecast 6.0% y/y
• 13:00 EZ final CPI (Mar) forecast 6.9% y/y
• 13:00 EZ core CPI (Mar) forecast 5.7% y/y

Fixed Income

• US Treasuries ended the day mixed in a day short on fundamentals. Yields on the 2yr UST pulled slightly higher, closing at 4.1967% while the 10yr yield dropped by 2bps to 3.5756%. Raphael Bostic, head of the Atlanta Fed, said he supported raising rates further and then holding them for “quite some time” which is helping to firm up the odds for a 25bps hike at the May FOMC meeting in a few weeks.
• Damac priced a USD 400m 3yr sukuk at 7.75%, tighter than initial guidance of more than 8%. Market interest was reportedly above USD 1.15bn.  

FX

• The dollar snapped a few days of gains and turned lower overnight against most peers. EURUSD added 0.4% to 1.0972 while GBPUSD rose the same amount to closet at 1.2425. USDJPY turned lower, closing down by 0.3% at 134.12.
• Commodity currencies were also broadly stronger against the US dollar with AUDUSD up 0.4% at 0.6725 while NZDUSD added 0.4% to 0.6208. USDCAD closed closer to flat at 1.339.

Equities

• There was little direction in US equity markets overnight, with earnings season and the concerns about a recession ultimately resulting in little change at the close of the session. The S&P 500 closed up 0.1% while the Dow Jones and the NASDAQ both dropped by less than 0.1%.
• There was greater momentum in Europe where the STOXX 600 added 0.4%. The CAC gained 0.5% and the DAX 0.6%, while the FTSE 100 ended the day 0.4% higher.
• Locally, the DFM and the ADX both dropped 0.1% while the Saudi Arabian Tadawul gained 1.2%.  

Commodities

• Oil prices ended the day flat with Brent futures at USD 84.77/b, WTI at USD 80.86/b and Murban closing at USD 85.14/b. Iraq is set to resume exports via a pipeline that terminates at an export hub in Turkey as agreement has been reached between the central government and the Kurdistan Regional Government.
• Data from the API showed a draw in crude inventories of 2.7m bbl last week along with decent drops in gasoline and distillate stockpiles.