- The World Bank is reducing its global growth forecast for 2022 to 3.2% from 4.1%, due to the impacts from Russia's invasion of Ukraine, according to its President David Malpass. He added that the World Bank was responding to the added economic stresses from the war by proposing a new, 15-month crisis financing target of USD 170bn, with a goal to commit about USD 50bn of this financing over the next three months. Malpass said the biggest component of the bank's growth forecast reduction was a 4.1% contraction in the Europe and Central Asia region, comprising Ukraine, Russia and surrounding countries. Forecasts also are being cut for advanced and many developing economies because of spikes in food and energy prices caused by war-related supply disruptions. Malpass said the financing partly will support countries that have taken in refugees from Ukraine and will also help address problems in countries affected by food shortages. He added that World Bank and IMF member countries this week will be discussing new assistance for Ukraine and expects specific commitments to be announced by several donor countries.
- The National Association of Home Builders/Wells Fargo Housing Market index dropped two points to 77 this month. The fourth straight monthly decline pushed the index to its lowest level since last September. A reading above 50 indicates that more builders view conditions as good rather than poor. The drop comes as surging mortgage rates and constrained supply chains boosted housing costs, shutting out some first-time buyers from the market, a survey showed on Monday. The housing market is under the spotlight as the Federal Reserve adopts an aggressive monetary policy stance in its fight against sky-high inflation, sending the 30-year fixed mortgage rate above 5% for first time in over a decade. According to government data, the backlog of houses approved for construction but yet to be started hit an all-time high in February. Annual house prices continue to post double-digit growth. Consumers expected home prices and rents to rise sharply this year, a separate survey by the New York Fed showed yesterday.
- India's annual wholesale inflation rate accelerated to 14.55% y/y in March, as rising input costs for products such as fuel, metals and chemicals have pushed up wholesale prices, a proxy for producer prices. Fuel prices rose 34.52% y/y, versus their 31.50% y/y rise in February. Headline retail inflation accelerated to 6.95% y/y in March, its highest in 17 months and above the upper limit of the central bank's tolerance band for a third straight month, putting pressure on the bank to raise interest rates. Earlier this month, the Reserve Bank of India said it had started to move away from its ultra-loose monetary policy, under which its key lending rate lies at a record low, as its priorities shift to fighting surging inflation in the wake of the Russia-Ukraine war.
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The UAE announced new entry and residence rules that are aimed at attracting human capital and boosting the competitiveness and flexibility of the job market. Amendments were announced to allow Golden Residence holders to sponsor their family members including spouse and children regardless of their age, and to sponsor support services laborers without limiting their number. Additionally, another benefits for family members that allow them to stay in the UAE in the event of the death of the original holder of the Golden Residence until the end of their permit duration. The visa categories now include Scientists, Professionals, Exceptional Talents, Real Estate Investors, Entrepreneurs, Outstanding Students and Graduates, in addition to a new track that provides a 5 -year residency for skilled employees, without sponsor or employer. The newly defined categories, will add depth to existing entry requirements, moving in-step with recent government policy measures that are aimed at creating deeper workforce pool for the UAE economy.
Today’s Economic Data and Events
16:30 US Building Permits (Mar) Forecast 1.825M
Fixed Income
- In thin trading thanks to holidays in much of Europe, US Treasuries held to relatively narrow ranges. Yields on the 2yr UST fell less than 1bps to 2.448% while the 10yr added more than 2bps to settle at 2.8527%. The spread between the two closed out overnight at almost 40bps, its widest level since mid-February.
- James Bullard, president of the St Louis Federal Reserve bank, said that he “wouldn’t rule out” hikes larger than 50bps at upcoming meetings to push the Federal Funds rate up to 3.5% this year. The May FOMC is in little over two weeks’ time with markets essentially 100% pricing in a 50bps hike.
- European bond markets remained closed thanks to Easter Monday holidays.
FX
- The dollar started the week off strongly with a 0.28% gain in the DXY index as investors turned toward havens and thanks to still hawkish expectations for the Federal Reserve. EURUSD fell 0.3% to 1.0782 overnight while GBPUSD closed down a similar amount to 1.31019. USDJPY meanwhile continues to rise higher, up 0.4% overnight and is up 0.5% today to 127.62.
- In commodity currencies USDCAD held relatively steady while AUDUSD dipped 0.5% to 0.6730 and NZDUSD dropped by 0.6% to 0.7349.
Equities
- US benchmark indices closed lower at the start of the week as investors look ahead to a hawkish turn from the Fed at the start of May. The Dow Jones dropped by 0.1% while the S&P was flat and the NASDAQ settled down by 0.1%. European markets were closed thanks to holidays.
- Asian markets have again opened mixed with the Nikkei adding 0.3% while the Hang Seng is down a sharpy 2.8%
- Local markets settled lower with the DFM down by 0.4% and the ADX falling 0.2% overnight. The Tadawul was a notable regional outperformer with gains of almost 0.4%.
Commodities
- Oil prices are being buffeted and buttressed by fears of a considerable demand slowdown in China while supply is interrupted from Libya. Brent futures managed to rise 1.3% overnight to USD 113.16/b and WTI added 1.2% to USD 108.21/b but both benchmarks showed some considerable two-way trading.
- Oil output in Libya has dropped by 500k b/d as authorities shut-in production at the country’s largest field thanks to political unrest. Several oil terminals have stopped loading oil on to tankers as well.
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Emirates NBD Research