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Chinese data mixed

Daniel Richards - MENA Economist
Published Date: 15 June 2022


  • Data out of China was mixed this morning, with industrial production surprisingly showing more signs of health than consumption in May. Output was up 0.7% y/y compared with the -2.9% y/y slump recorded in April when there were more lockdowns in place. Car production was a key driver of the recovery, with the number of cars produced rising to 1.99mn, from 1.28mn.  However, retail sales were down -6.7% y/y last month, an improvement on the -11.1% seen in April but still indicative of serious challenges to Chinese growth in the second quarter.
  • UK unemployment ticked up to 3.8% over the three months to April, up modestly from the 50-year low of 3.7% on the previous month’s reading and confounding consensus expectations that it would decline to 3.6%. This was driven by an increase in the labour force. The number of jobs added over the period rose to 177,000, compared to 83,000 over the three months to March. With a 90,000 rise in payrolled employees in May and a new record in job openings, the labour market clearly remains in comparatively robust shape but the uptick in headline unemployment suggests that the steady improvement that has been in play since the worst of the pandemic crisis is over. Other labour market data was also suggestive of difficulties, as average weekly earnings ex bonuses rose 4.2% y/y, leaving real wages in negative territory as inflation accelerates, despite the labour market tightness. The data is likely good enough for Bank of England to continue with its 25bps hikes this week but given the weak GDP data yesterday a 50bps hike is less likely.
  • Germany’s ZEW surveys for June were an improvement on the previous month but still indicative of an economy under pressure. The current situation came in at -27.6, compared with -36.5 and beating the consensus projection of -31.0, while survey expectations were at -28.0 – better than May’s -34.3 but not quite hitting expectations of -26.8. As such, both components of the survey remain deeply depressed with Germany still getting hit by accelerating inflation, the conflict in Ukraine, and the supply chain issues still emanating from lockdowns in China which are dragging on the manufacturing sector.
  • The UAE federal government will boost its budgeted spending by AED 1.23bn (USD 334.9mn) according to a statement from the Federal National Council yesterday.

Key economic data and events today

16:30 US retail sales, m/m, May. Forecast: 0.1%

22:00 US FOMC rate decision, upper bound. Forecast: 1.5%

Fixed Income

  • Bond markets continued to sell off ahead of the conclusion of the FOMC meeting later today where markets are pricing in a 75bps hike to the Fed funds rate from the Federal Reserve. Yields on the 2yr UST added another 7bps to close at 3.4267% overnight while the 10yr yield added 11bps to 3.4733%. European bond markets were likewise offered with 10yr bund yields up almost 12bps to 1.744% and the 10yr gilt yield up 6bps to 2.584%.
  • Markets will remain choppy until the release of the FOMC decision though how well a 75bps hike is indeed priced into the market remains to be seen.


  • The dollar remained on the upswing overnight with another day of large gains. Most came at the expense of USDJPY which added another 0.78% to close at 135.47, its highest level since Q4 1998, while GBPUSD fell to less than 1.20, its lowest level since March 2020. A stridently hawkish Fed tonight could set currency markets up for further disorderly sell-offs in favour of the dollar. EURUSD reversed some initial gains to settle at 1.0416, roughly flat on the day.
  • Commodity currencies extended their losses with USDCAD adding 0.4% to 1.295 while AUDUSD fell by 0.75% to 0.6871 and NZDUSD dropped by 0.69% to 0.6216.


  • The day started comparatively stronger in Asia than in recent sessions, as the Shanghai Composite added 1.0% and the Hang Seng closed flat, although there were further losses for Japanese stocks as the Nikkei closed 1.3% lower. Sentiment remained negative in Europe as the FTSE 100, the DAX and the CAC dropped -0.3%, -0.9% and -1.2% respectively.
  • In the US, the NASDAQ managed to claw back some losses, though with a gain of 0.2% over the session it remains down over 30% ytd. The S&P 500 (-0.4%) and the Dow Jones (-0.5%) both fell again.
  • Locally, the DFM and the ADX both gained (0.3% and 0.9%) but the Tadawul closed down -0.3% on the day.


  • Oil prices closed lower overnight with Brent down by 0.9% to USD 121.17/b and WTI off by 1.65% to USD 118.93/b. There are few immediate fundamental catalysts to affect the market which will likely be waiting for news from the Fed to set another clear direction.
  • The API reported a modest tick higher in US crude inventories of less than 800k bbl while there were draws in gasoline. Official numbers will be out from the EIA later.

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