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Middle East Daily
EHSAN KHOMAN
Head of Commodities, ESG and
Emerging Markets Research –
EMEA
DIFC Branch – Dubai
T:+971 (4)387 5033
E: ehsan.khoman@ae.mufg.jp
SOOJIN KIM
Research Analyst
DIFC Branch – Dubai
T: +44(4)387 5031
E: soojin.kim@ae.mufg.jp
MUFG Bank, Ltd. and MUFG Securities plc
A member of MUFG, a global financial group
Middle East Daily
GLOBAL MARKETS
US manufacturing weakens moderately further in April amid tariff turmoil. The ISM manufacturing index decreased by 0.3ppts to 48.7 (consensus 47.9) in April. The compositional breakdown was mixed, with robust new orders (up 2.0ppts to 47.2), offsetting weakness in the production component (down 4.3ppts to 44.0). Critically, the new export orders component fell sharply by 6.5ppts to 43.1 – lowest level since May 2020 – reflecting the onset of US tariffs. Survey respondents noted that the recently “imposed 145% tariff rate on Chinese imports is significantly affecting 2025 profitability” and that, with tariff costs implemented, it is “not feasible for businesses or customers to sustain the pricing required to provide an acceptable margin”.
US nonfarm payrolls for April in focus. The US Bureau of Labour Statistics is set to release nonfarm payroll numbers for April today (2 May) with consensus pointing to a sharper hiring slowdown in sectors such as logistics, leisure and hospitality, given the impact of tariffs. Our US rates strategist believes that the markets will read a NFP print between 100-150k positively (consensus 138k), given that is the range which is suffice to maintain unemployment steady (see here).
China is evaluating the possibility of trade talks with the US. China’s Commerce Ministry declared that it is assessing the prospects of trade talks with the US. The Ministry requested that the US demonstrate “sincerity” towards China and to correct its “wrong practices” by removing unilateral tariffs as a condition for deliberations.
MIDDLE EAST - MACRO / MARKETS
IMF cuts its MENA regional growth projections for 2025-26. The International Monetary Fund (IMF) has lowered its growth projections for the MENA region in 2025 to 2.6% (4.0% prior) and in 2026 to 3.4% (4.2% prior). This reflects in its view spillovers from global trade apprehensions, elevated policy uncertainties, a more gradual recovery in crude oil output as well as lingering effects from conflicts in the region. For MENA oil exporters, the IMF projects growth at 2.3% in 2025 and 3.1% in 2026, but with marked divergences between GCC (robust growth in the non-oil sector) and non-GCC oil exporters (concerns over capacity constraints and fiscal unwinding). For the MENA oil importers, despite being impact by conflicts with curtailments in the form of trade and tourism disruptions, the IMF estimates growth at a benign 3.4% in 2025 and 4.1% in 2026.
IMF releases its latest breakeven oil price estimates. As part of its Regional Economic Outlook (REO) for the MENA region that was released yesterday (1 May), the IMF updated breakeven oil price estimates for major energy exporters. The fiscal breakeven oil price – the price needed to balance the government’s budget which is dependent on government spending, non-oil revenues and barrels of oil (or equivalent) included in the budget – points to only Qatar (USD45/b), the UAE (USD50/b) and Oman (USD57/b) as positioned to meet budgets without having to borrow or drawdown on existing buffers, at today’s prevailing oil price. Separately, the external breakeven oil price – the value that balances the current account which is more immune to intragovernmental transfers – shows mixed performance this year relative to 2024. We note that the external breakeven price are viewed by some as the more prudent measure relative to fiscal breakevens, as the former factors for capital entering the country from exports, instead of how this increase is distributed amongst the Ministry of Finance, the national oil companies and the sovereign wealth fund(s).
CREDIT TRADING
End of day comment – 01 May 2025. Very low volume day today. In the morning, new issues traded. New DPWDU 35s cleared mostly in a 99.25/375 range and unchanged in spread having been priced at 98.944/+145bp. In other names, the initial continuous steepening of the UST curve provided again a good bid in 5y area bonds, though without much trades. Things changed a bit post 3pm US numbers and subsequent UST sell off which triggered a short bout of activity and street selling across names. Once settled the markets looks 2/3bp tighter going out but with the little activity, it is hard to read anything into the price action. NFP should be the next trigger away from new issue activity.
COMMODITIES / ENERGY
Revising our oil price call lower on loosening fundamentals. After posting the worst month since November 2021, Brent crude has bounced back this overnight on China-US trade optimism. Against this backdrop, the narrative remains gravitationally bearish – indeed, the US administration’s volatile tariff policy strategy, especially those involving China, has made traders that were already skittish on the longstanding oversupply this year (that pre-dates President Trump’s second term), nervous about loosening fundamentals. With this, today’s ongoing oil oversupply, coupled with heightened implied volatility, has prompted us to recently mark-to-market our Brent oil price levels lower to USD66/b (USD73/b prior) and USD62/b (USD76/b prior), in 2025 and 2026, respectively (see here).
