16 March 2021
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US Empire manufacturing exceeds expectations

In the US, the Empire manufacturing survey rose to 17.4 in March, a significant increase from February, and beating survey expectations of 15.0.

By Daniel Richards

  • In the US, the Empire manufacturing survey rose to 17.4 in March, a significant increase from February’s 12.1, and beating survey expectations of 15.0. Notably, input prices rose the most since 2011, which will further fuel the reflation conversation given the potential pass-through to the consumer.
  • Bank of England Governor Andrew Bailey spoke to the BBC yesterday, outlining his more positive outlook on the UK economy. The central bank is due to meet on Wednesday, and while Bailey said that he still had more firepower if needed, the conversation has largely moved away from the prospect of negative rates being introduced in the UK as the outlook brightens. Nevertheless, Bailey cautioned that the recovery would be uneven, and highlighted how the pandemic crisis has exacerbated existing inequalities. The more positive outlook is shared by the British public, according to an Ipsos Mori report released yesterday which saw a 14 point increase to 43% in the number of Britons who think that the economy will improve over the next 12 months.
  • The UAE central bank said on Monday that the drawdown from its Targeted Economic Support Scheme (TESS) was AED 22bn in March, half what it was in Q2 2020 at the height of the covid-related crisis in the UAE. Around 175k customers are still benefitting from deferred payments under the scheme, down from 320k at the peak.  Governor Alahmadi also noted that liquidity in the banking system was back to prepandemic levels. 
  • Consumer inflation in Saudi Arabia slowed to 5.2% y/y in February from 5.7% y/y in January, the slowest since last July when VAT and customs duties were raised. Prices declined -0.1% m/m in February. We expect the annual inflation rate to slow sharply in H2 21 as last year's tax increases fall into the base. 

Today’s Economic Data and Events

14:00 Eurozone ZEW survey expectations (Mar)

16:30 US retail sales m/m (Feb): forecast -0.5%

17:15 US industrial production m/m (Feb): forecast 0.3%

Fixed income

  • Benchmark government bonds generally trended higher at the start of the week in a market waiting for the outcome of the FOMC later this week. Yields broadly trended lower through the course of trading with 10yr bund yields slipping the most at almost 3bps to settle at -0.335% while yields on 10yr UST yields were down by almost 2bps at 1.6055%.
  • Performance in emerging markets was mixed with yields ending lower in Indian and South African 10yrs while yields were up sharply in Turkish LCCY bonds ahead of the CBRT this week where market expectations are for a 100bps hike.


  • The dollar was generally bid overnight even as there were few economic catalysts to push the market one way or the other. The DXY index ended up 0.17% at 91.833 with GBPUSD and EURUSD providing most of the gains. Sterling was off by 0.17% at 1.39 while EURUSD fell 0.2% to close at 1.1929.
  • Among the gainers, however, were CAD which appreciated modestly against the greenback and NZD which gained 0.25% to settle at 0.7194.


  • Global equity markets were largely positive yesterday, bolstered by the US stimulus package and hopes around the recovery from the pandemic crisis, which is driving a recovery in sectors which to now have lagged tech. Nevertheless, in the US it was the tech-heavy NASDAQ which was the biggest gainer yesterday, climbing 1.1% - although it is still down -4.5% compared to where it was a month ago. The Dow Jones gained 0.5% and the S&P 500 0.7%.
  • Things were more muted in Europe, where there was a modest sell-off across the board. The FTSE 100 and the CAC both lost -0.2% and the DAX -0.3%.
  • Within the region, the DFM gained 0.7% and the Tadawul lost -0.2%.


  • Oil prices fell to start the week with Brent down by 0.49% at USD 68.88/b and WTI giving up 0.3% at USD 65.39/b. Both contracts are down by more than 1% in early trading today.
  • Signs are emerging for a recovery in US shale production by the middle of the year. The EIA’s Drilling Productivity Report expects total output from shale basins at 7.46m b/d in April 2021, down m/m. However, increases in the Permian basins following on from a rising rig count and rising production/rig levels could see output turn upward considerably by the end of the year.

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Written By

Daniel Richards Senior Economist

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