Markets look ahead to NFP this week

Economic data were fairly muted at the end of the week with financial markets also seeing choppy moves as the US was out for a public holiday. In the week ahead, focus will be on Eurozone inflation which is expected to have slowed in November to 10.4% y/y, down from 10.7% recorded a month earlier. The US non-farm payrolls number for November will also be released at the end of the week with 190k jobs expected to have been added.

The central bank of the UAE and Reserve Bank of India are looking into establishing direct dirham-rupee trading to enhance the trading relationship between the two countries. The UAE and India signed a comprehensive economic partnership agreement in February with the aim of enhancing and simplifying trade between the two partners.

Today’s Economic Data and Events

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Fixed Income

• US Treasuries pulled higher at the end of the week in quiet post-Thanksgiving trading. Yields on the 2yr UST fell 2bps to 4.4526% while the 10yr UST yield dropped a bit more than 1bps to 3.6776%. European bonds were sold heavily on Friday, however, with an eye to the release of this week’s Eurozone inflation print. Bund yields jumped 12bps to 1.968% while French 10yr yields added 14bps to 2.429%. Gilt yields also closed higher, up 8bps to 3.111%.
• S&P revised their outlook on Bahrain’s sovereign rating to positive from stable and affirmed the rating at ‘B+’, citing improvements in Bahrain’s fiscal position as the motivation for changing the outlook. S&P also raised the rating on Oman to ‘BB’ with a stable outlook.

FX

• The dollar suffered another week of selling as there was a broad risk-on tone to markets and expectations for more aggressive hiking from the Fed are being discounted, rightly or wrongly. Friday showed a bit more dollar strength against peers, though trading was muted given the post-Thanksgiving period in the US. EURUSD dropped 0.14% at the end of the week to 1.0395 while GBPUSD fell 0.17% to 1.2092. USDJPY added almost 0.5% to 139.19.
• Commodity currencies were also weaker with USDCAD up 0.32% at 1.338 while AUDUSD fell 0.19% to 0.6751 and NZDUSD dropped 0.27% to 0.6247.

Equities

• Equity markets were broadly positive last week. In the US, the three benchmark indices closed higher as the NASDAQ, the S&P 500 and the Dow Jones gained 0.7% w/w, 2.0% and 2.4% respectively.
• An outlier was the Hang Seng which lost -2.3% w/w, weighed down by ongoing Covid-19 developments in China. There were gains elsewhere in Asia as the Nikkei added 1.3% w/w.
• In Europe, the composite STOXX 600 gained 1.7% w/w. The FTSE 100 added 1.4%. Locally, the DFM dropped -1.4% on the week while the ADX gained 0.6%.

Commodities

• Oil prices fell for a third week in a row as demand worries persist and cracks emerge in the severity of price cap to be imposed on Russian oil. Brent futures fell 2% on Friday to USD 83.63/b, their lowest level since January this year. WTI futures dropped 2% to USD 76.28/b.
• The EU extended negotiations on the oil price cap until Nov 28 as they failed to reach a unanimous decision among members. Poland and Baltic nations are reportedly seeking a much more punitive level to be imposed on Russia while countries with a large shipping industries are seeking prices closer to what Russia is currently earning.

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