US initial jobless claims tick down

There was a drop-off in US initial jobless claims in the week ending 13 May, bucking the rising trend seen in earlier weeks. Initial claims disappointed relative to expectations, and fell by 22K, in the biggest drop since 2021 to reach 242K. Continuing claims also came in lower than consensus expectations and fell to just shy of 1.8m in the week ending 6 May, from 1.807m the week prior. Reports suggest that earlier data may have been inflated due to fraudulent claims.

The US conference board leading indicator fell 0.6% in April, in line with expectations, and followed a 1.2% decline the month prior. There was widespread weakness across the underlying components of the index. The aggregate measure was 4.4% lower over the most recent 6 months (October 2022 - April 2023), a steeper fall than seen in the previous 6-months (April – October 2022). The leading indicator continues to point to a contraction in aggregate economic activity this year.

As had been widely expected, the Egyptian Central Bank elected to keep the benchmark deposit rate unchanged at 18.25%, after having raised rates by 200bps at their March meeting. Although inflation dipped slightly in April to 30.6% y/y from 32.6% in March, further price rises in coming months appear likely.

The IMF concluded a staff visit with Qatar, with the Fund highlighting that they expect growth to normalize, although remain robust, after hosting the World cup in 2022. The near-term outlook was expected to be favourable as a result of continued LNG expansion and strong domestic demand.

Today’s Economic Data and Events

• 10:00 GE PPI (Apr) Forecast: -0.5% m/m

Fixed Income

• Optimism that a debt deal will be reached in the US helped to lift risk assets overnight and pushed US Treasuries lower. Yields on the 2yr UST added almost 10bps over the day to settle at 4.2517%, their highest level since the rally in USTs prompted by the collapse of SVB. Yields on the 10yr also pushed higher, up by 8bps to 3.6457%. Lorie Logan, head of the Dallas Fed, said that incoming US data could allow the Fed to “skip a meeting” but also noted that it wasn’t “there yet.”
• The slump in DM bonds extended to Europe where bund yields added 11bps to 2.441% while gilt yields added more than 12bps to close a little shy of 4%. Emerging market USD bonds still remained under pressure, however.
• Egyptian bonds saw a modest pick up ahead of the Central Bank of Egypt keeping rates on hold at 18.25%. Egyptian NDFs pulled tighter overnight.
• Nogaholding of Bahrain priced a USD 750m 10yr sukuk at a yield of 6.625%.

FX

• The dollar pulled higher against most peers, extending its gains for the week. EURUSD dropped 0.7% to 1.077, its weakest close since March this year. GBPUSD also pulled lower, closing at 1.2394 or down 0.1%. USDJPY continued to rally, up 0.8% to 138.71.
• Commodity currencies didn’t escape the selling with USDCAD down 0.4% at 1.3503 while AUDUSD sank 0.6% to 0.6622 and NZDUSD fell by 0.4% to 0.6226.

Equities

• US equities rose to a nine-month high on news of a possible vote on raising the debt ceiling next week. The Dow Jones, S&P 500 and NASDAQ rose 0.3%, 0.9% and 1.5%, respectively.
• Equities in European markets also rose on Thursday. The Eurostoxx 50 gained 1%, the DAX rose by 1.3% and the FTSE 100 ticked up 0.3%.
• Locally the DFM fell 0.3%, while the Tadawul gained 0.6%.

Commodities

• Oil prices were lower overnight even with little fundamental cause. Brent futures fell 1.4% to close at USD 75.86/b while WTI dropped by 1.4% to USD 71.86/b. In the near term, substantial wildfires are continuing to disrupt Canadian oil production with as much as 240k b/d offline.