October 09, 2017 [ W E E K LY E C O N O M I C C O M M E N TA R Y ] WEEKLY ANALYSIS FOR THE MOST CRITICAL ECONOMIC AND FINANCIAL DEVELOPMENTS MACRO & MARKETS COMMENTARY» The storm impacted job report showed the first decline in job creation in the Unites States since 2010 but better than expected wage growth. Manufacturing and Non-manufacturing activities came better than expected during September (according the recent PMI data). The robust in macroeconomic activities fueled expectations the FED would raise rate for third time in 2017.» The US dollar touched its highest level since the 15th of August during its daily trading session. However, the greenback erased some of its gains on Friday. Dollar spot index (DXY - the index that tracks the performance of the U.S. dollar against major world currencies) rose for the fourth consecutive week, the longest wave of weekly surge since October last year. The index rose by 78% (or 0.72 points), closing its weekly trading session at 93.8 points on the 06th of October, compared to 93.97 at last week s close. The single currency, however, closed the week lower against the greenback driven mainly by the USD appreciation. The EUR / USD fell by 0.71% [or 84 pips], closing its trading session at $1.1730 per Euro on Friday, the 06th of October 2017.» Crude oil prices fell during the week as a new storm Nate approached the US Gulf coast according to the U.S National Hurricane Center. The new storm was expected to affect the refineries demand. On the flip side, Saudi Arabia and Russia reiterated their pledge to shrink a global oil glut. WEEKLY CHANGES AGAINST THE USD MAJOR MARKETS 12% 0% (12%) (0.24%) (4.61%) (3.34%) (0.71%) (2.48%) 0.12% 0.95% 1.11% (0.87%) GOLD WTI BRENT EUR GBP JPY CNY US 10Y Yield GE 10Y Yield IFO Business Climate Survey: It is a survey that measures the business climate in Germany. It is based on 7000 survey responses from firms in the manufacturing, construction, wholesale, and retail sectors.
TREASURY RESEARCH WEEKLY ECONOMIC COMMENTARY 09 OCT 2017 PAGE 2» West Texas Intermediate future contracts (November 2017 Delivery) dropped for the first time in the last five weeks, declining by 4.61% [or $2.38] per barrel to $49.29. Brent crude future contracts (December 2017 Delivery) dropped by 3.34% [or $1.92] per barrel, closing at $55.62 on Friday, the 06th of October 2017.» U.S Treasury sell-off intensified last week driven by Job report, solid PMI data and the hawkish tone from Fed s official about interest rate path. Yield on the benchmark 10 year Treasury note gained 2.6 basis points (bps) or 1.11% during the week, closing its weekly trading session at 2.36% on the 6th of October 2017 [the highest since July 2017]. ECONOMIC DATA & EVENTS FROM THE LAST WEEK. U.S.A & CANADA GDP growth in the United States was revised up to 3.1% Q/Q in Q2 2017 third estimate compared to 3% previously estimated. Initial jobless claims in the United States fell to 260K in the week ending September 30 compared to 272K in the preceding week Change in nonfarm payroll came in at -33K in September following the revised up reading to 169K in August. Unemployment rate unexpectedly fell to 4.2% in September from 4.4% in August. MBA mortgage applications fell 0.4% in the week ending September 29 following - 0.5% in the prior week. Durable goods orders increase was revised up to 2% in August final estimate from 1.7% previously estimated. Factory orders rose 1.2% in August compared to -3.3% in July. ISM manufacturing rose to 60.8 in September from 58.8 in August. Manufacturing PMI was revised up to 53.1 in September final estimate from 53 previously estimated. Unemployment rate in Canada kept stable at 6.2% in September, the same as in August. Net change in employment fell below expected to 10K in September from 22.2K in August. Manufacturing PMI edged up to 55 in September from 54.6 in August. UK & JAPAN Houses prices in United Kingdom rose 0.8% M/M in September following the revised up increase to 1.5% M/M in August. Manufacturing PMI fell below expected to 55.9 in September from the revised down reading to 56.7 in August. Composite PMI rose more than expected to 54.1 in September from 54 in August. In Japan, manufacturing PMI was revised up to 52.9 in September final estimate from 52.6 previously estimated. Manufacturing index rose above expected to 22 in Q3 2017 from 17 in the prior quarter. All industry index rose 7.7% in Q3 following 8% increase in the previous quarter. Non-manufacturing index remained stable at 23 in Q3 2017, same as in the previous quarter. EUROZONE Unemployment rate in the Euro Area unexpectedly remained at 9.1% in August, the same as in July.
TREASURY RESEARCH WEEKLY ECONOMIC COMMENTARY 09 OCT 2017 PAGE 3 Manufacturing PMI was revised down to 58.1 in September final estimate from 58.2 previously estimated. Composite PMI was kept unchanged at 56.7 in September final estimate. In Germany, factory orders increased 3.6% M/M in August following the revised down decline to 0.4% M/M in July. Manufacturing PMI was kept unchanged at 60.6 in September final estimate as expected. Composite PMI was revised down to 57.7 in September final estimate from 57.8 previously estimated. Manufacturing PMI in France was revised up to 56.1 in September final estimate from 56 previously estimated. Composite PMI was revised down to 57.1 in September final estimate from 57.2 previously estimated. Italian retail sales unexpectedly fell 0.3% M/M in August following the revised up decline to 0.4% M/M in July. Manufacturing PMI kept stable at 56.3 in September, the same as in August. Composite PMI unexpectedly fell to 54.3 in September from 55.8 in August. Net unemployment in Spain fell to 27.9 thousand in September from 46.4 thousand registered in August. Manufacturing PMI rose to 54.3 in September compared to 52.4 in August. Composite PMI unexpectedly rose to 56.4 in September from 55.3 in August. EMERGING MARKET, Inflation in Brazil came in at 0.16% M/M in September following 0.19% M/M in August. On yearly basis, inflation accelerated to 2.54% in September from 2.46% in August. Industrial production fell 0.8% M/M in August following the revised down increase to 0.7% M/M in July. Manufacturing PMI kept stable at 50.9 in September, the same as in August. Composite PMI rose above the fifty limit to 51.1 in September from 49.6 in August. On October 04, the Reserve bank of India kept its repurchase rate, reserve repo rate, and cash reserve ratio unchanged at 6%, 5.75%, and 4% as expected. Manufacturing PMI remained stable at 51.2 in September, same as in August. Composite PMI rose to 51.1 in September from 49 in August. Manufacturing PMI in China fell below expectations to 51 in September from 51.6 in August. Russian gold and FOREX reserve fell to $424 billion in the week ending September 29 compared to $427.1 billion in the previous week. GDP growth was confirmed at 2.5% Y/Y in Q2 final estimate, the same as previously estimated. Inflation decelerated to 3% Y/Y in September from 3.3% Y/Y in August. Core inflation came in at 0.3% M/M in September compared to 2.5% M/M in August. Manufacturing PMI rose slightly to 51.9 in September from 51.6 in August. Composite PMI rose to 54.8 in September from 54.2 in August. GCC & MENA, Saudi PMI fell to 55.5 in September from 55.8 in August. Emirati PMI fell to 55.1 in September from 57.3 in August. Inflation in Turkey accelerated to 11.2% Y/Y in September as expected compared to 10.68% Y/Y in August. Manufacturing PMI fell to 53.5 in September from 55.3 in August.
TREASURY RESEARCH WEEKLY ECONOMIC COMMENTARY 09 OCT 2017 PAGE 4 WEEKLY CLOSING FX CHART POUND STERLING WEEKLY CLOSING FX CHART EURO & JAPANESE YEN 1.80 GBP/USD Oct 06 CLOSE $1.3066 1.60 EUR / USD Oct 06 CLOSE $1.1730 USD / JPY Oct 06 CLOSE 112.65 140 1.70 1.50 120 1.60 1.40 100 1.50 1.30 80 60 1.40 1.20 40 1.30 1.10 20 1.20 1.00 0 WEEKLY CLOSING CRUDE OIL USD PER BARREL WEEKLY CLOSING SPOT GOLD USD PER OUNCE 150 NYMEX WTI Crude Weekly closing Oct 06 CLOSE $49.29 ICE Brent Crude Weekly closing Oct 06 CLOSE $55.62 Gold Spot price, quoted as US Dollars per Troy Ounce Oct 06 CLOSE $1276.68 130 110 90 70 50 30 10 WEEKLY CLOSING GOVERNMENT BOND YIELDS USA & GERMANY WEEKLY CLOSING GOVERNMENT BOND YIELDS ITALY & SPAIN U.S 10 - year government Bond Oct 06 CLOSE 2.36% Italy 10 - year government Bond Oct 06 CLOSE 2.14% 3.7 Germany 10 - year government Bond Oct 06 CLOSE 0.46% 6.5 Spain 10 - year government Bond Oct 06 CLOSE 1.70% 3.0 2.3 4.5 1.6 0.9 2.5 0.2 0.5 0.5
TREASURY RESEARCH WEEKLY ECONOMIC COMMENTARY 09 OCT 2017 PAGE 5 PROFIT RATE BENCHMARK ENERGY / COMMODITIES USD TENOR LIBOR SIBOR SAR - DEP LAST PRICE WTD 1 - Month 1.2350 1.4638 1.27 GOLD - SPOT 1,276.68 (0.24%) 3 - Month 1.3503 1.7900 1.57 SILVER - SPOT 16.84 1.09% 6 - Month 1.5188 2.0450 1.79 ALUMINUM - LME 3 MTH 2,153.00 2.43% 9 - Month - - - COPPER - LME 3 MTH 6,666.50 2.86% 12 - Month 1.8046 2.2413 1.97 WTI - NYMEX 49.29 (4.61%) BRENT - ICE 55.62 (3.34%) Foreign Exchange STOCKS INDEXES WEEKLY CLOSING Spot SAR Equ WTD Index Closed WTD GBP / USD 1.3066 4.8998 (2.48%) S&P 500 2,549 1.19% EUR / USD 1.173 4.3988 (0.71%) Dow Jones 22,774 1.65% AUD / USD 0.7767 2.9126 (0.86%) NASDAQ 6,590 1.45% USD / CHF 0.9797 3.8277 1.18% FTSE 100 7,523 2.04% USD / CAD 1.2529 2.9931 0.46% DAX Index 12,956 0.99% USD / JPY 112.65 0.0333 0.12% CAC Index 5,360 0.56% USD / CNY 6.4755 0.5791 (0.28%) Nikkei 225 20,691 1.64% USD / SAR 3.7503 1.0000 0.00% TASI Index 7,259 (0.33%) WEEK AHEAD ECONOMIC CALENDAR DATE COUNTRY ECONOMIC RELEASE /EVENTS PERIOD EXPECTED * PRIOR IMPORTANCE Mon 09/10 09:00 GE Industrial Production SA MoM Aug 0.90% 0.00% Tue 10/10 00:00 CH Money Supply M2 YoY Sep 9.00% 8.90% Tue 10/10 09:45 FR Industrial Production YoY Aug 1.50% 3.70% Tue 10/10 09:45 FR Industrial Production MoM Aug 0.40% 0.50% Tue 10/10 11:30 UK Manufacturing Production MoM Aug 0.20% 0.50% Tue 10/10 11:30 UK Industrial Production MoM Aug 0.20% 0.20% Wed 11/10 10:00 SP CPI YoY Sep F 1.80% 1.80% Wed 11/10 10:00 SP CPI EU Harmonised YoY Sep F 1.90% 1.90% Wed 11/10 14:00 US MBA Mortgage Applications Oct-06 -- -0.40% Thu 12/10 09:45 FR CPI YoY Sep F 1.00% 1.00% Thu 12/10 15:30 US Initial Jobless Claims Oct-07 252k 260k Thu 12/10 15:30 US PPI Final Demand MoM Sep 0.40% 0.20% Fri 13/10 09:00 GE CPI YoY Sep F 1.80% 1.80% Fri 13/10 15:30 US Retail Sales Advance MoM Sep 1.60% -0.20% Fri 13/10 17:00 US U. of Mich. Sentiment Oct P 95 95.1 Source: Bloomberg for forecasting
TREASURY RESEARCH WEEKLY ECONOMIC COMMENTARY 09 OCT 2017 PAGE 6 THE WEEKLY ECONOMIC COMMENTARY IS PREPARED & EDITED BY: ABDULKARIM I. ALKADRI Research - Senior Analyst +966 11 479 8297 / +966 542 188 565 aialkadri@bankalbilad.com TREASURY CONTACT LIST SAMER.M.A. FARHOUD General Manager - Treasury Division +966 11 479 8288 Sm.farhoud@Bankalbilad.com SAJJAD HUSSAIN Chief Dealer +966 11 479 8588 S.hussain@bankalbilad.com FOREIGN EXCHANGE +966 11 479 8282 +966 11 479 8888 Ext. 9424 Fxdesk@bankalbilad.com MONEY MARKET +966 11 479 8935 +966 11 479 8888 Ext. 9427 MMDesk@bankalbilad.com SALES & BANKNOTES +966 11 479 8880 Salesdesk@bankalbilad.com TREASURY SUPPORT +966 11 479 8270 Halosaimi@bankalbilad.com DISCLOSURE APPENDIX ANALYST DISCLAIMER Research analyst (s) responsible for the content of this research report certify that the views expressed and attributed to the research analyst (s) in the research report accurately reflect their personal views about the subject matters discussed. No part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the research report. The views of the author (s) do not necessarily reflect the views of Bank Al Bilad and are subject to change without notice. ADDITIONAL DISCLOSURES This report is dated as at 09 October 2017. All market data included in this report are dated as at close 07 October 2017, unless otherwise indicated in this report. DISCLAIMER This report is prepared for information purpose only. It should not be construed as an offer to sell or a solicitation of an offer to purchase or subscribe to any investment. Although the information contained in this report is obtained from many sources believed to be reliable, Bank Al Bilad does not guarantee its completeness or accuracy. To the extent permitted by applicable laws and regulations in the Kingdom of Saudi Arabia, neither Bank Al Bilad nor any of its affiliates, their directors, officers and employees will be liable or have any responsibility of any kind for any loss or damage that may be incurred as a result of using the information contained in this report.