Daily Economic Update

US: Market pricing for an interest rate cut in December drifts upwards on dovish Fed speak. Fed Governor and short-listed Fed chair candidate Christopher Waller continued to advocate for an interest rate cut at the FOMC December 9-10 meeting, saying his “concern is mainly labor market, in terms of our dual mandate,” though he expected to “see a more meeting-by-meeting approach” after that. Meanwhile, San Francisco Fed President Mary Daly (a non-voting member), who previously expressed uncertainty about the move in December, leaned towards supporting a rate cut, emphasizing "on the labor market, I don't feel as confident we can get ahead of it," and “it's vulnerable enough now that the risk is it'll have a nonlinear change." The latest Fed remarks, following comments from key FOMC voting member New York Fed President John Williams last Friday about a “room for a further adjustment [in policy interest rates] in the near term”, have steadily lifted the chance for a 25-bps rate cut next month to over 80% from below 40% at some point last week, as per the futures market. Still, given a wide divergence in views amid a lack of some key official economic data, this market pricing may remain volatile over the coming days, underscoring heightened uncertainty about a rate cut at the December meeting.

China/Japan: Beijing escalates dispute over Taiwan at the UN, Japan plans to deploy missiles to a military base close to Taiwan as tensions rise. On Friday, Beijing escalated the matter to the United Nations, formally accusing Japan of threatening “armed intervention” and pledging to “resolutely defend” its sovereignty – marking its strongest rhetoric to date. Following that, Japan's defense minister confirmed plans to deploy missiles to Yonaguni Island, an island close to Taiwan, as part of a broader military buildup across the southern island chain, aimed at reducing the risk of an armed attack amid growing concerns over China’s military strength and potential conflict over Taiwan. China, meanwhile, condemned Japan’s plan to deploy missiles near Taiwan, calling it a deliberate move to “stir regional tensions and provoke confrontation” as diplomatic friction between the two nations deepens. Last week, Beijing issued a travel advisory prompting tour operators to cancel group bookings amid rising uncertainty. Tourism makes up about 7% of Japan’s GDP (according to the World Travel & Tourism Council) and has been a growth driver, with visitors from mainland China and Hong Kong accounting for roughly 25% of arrivals. On the trade front, China is Japan’s second-largest export market, purchasing around $125 billion of goods in 2024, according to UN COMTRADE data; any sustained restrictions or consumer backlash could dampen export volumes, particularly in high-value sectors. These measures signal more than a diplomatic salvo: they risk denting Japan’s economic recovery. A tourism hit is already evident, while seafood exporters could face lost revenue in China’s vast market. Japan’s export momentum – growing at a solid 3.6% y/y in October – may stall if sentiment sours further. Further escalation could sap regional confidence, compounding Japan’s growth challenges as domestic demand remains tepid and global trade slows. 

Kuwait: Strong non-interest income for Kuwaiti banks in Q3 drove revenue growth and led to a better net profit trend. A high-level summary of the results of the nine listed Kuwaiti banks shows that y/y net profit growth was mostly positive in Q3, reversing course after a mixed Q2. Following a weak Q1, the recovery in operating income growth that occurred in Q2 was sustained in Q3, particularly driven by non-interest income, where seven banks recorded double-digit y/y growth for the second consecutive quarter. The y/y increase in net interest income remains relatively modest, driven by balance sheet growth as NIMs are mostly either materially lower or broadly unchanged compared with the same period last year. Risk costs ticked up in Q3 but remained mostly lower in 9M2025 than the same period last year, indicating generally robust asset quality; NPL ratios were broadly steady YTD with the exception of a relatively large jump for one bank. Cost-to-income ratios were mixed, but with cost growth in 9M2025 mostly softening from the 2024 pace, standing at mid-single digits for the three largest banks, down from double digits in 2024.

UAE: Dubai approves its largest ever budget for 2026–28. Dubai’s government approved the 2026-28 budget with a record high AED302.7 billion ($82.4 billion) in expenditures and AED329.2 billion ($89.6 billion) in revenues over the three-year budget cycle, signaling strong support for its economic growth and diversification targets but also a commitment to fiscal sustainability. In 2026, revenues are projected to increase by almost 11% budget-on-budget to AED107.7 billion and total expenditures by 15.3% b/b to AED99.5 billion. The budget prioritizes social development, infrastructure, and innovation, with infrastructure alone accounting for a massive 48% of spending and up from 46% in the previous budget. The bulk of infrastructure spending will be on transport and renewable energy projects. Health, education, housing, and welfare spending comprise 28% of the budget and security and justice 18%. Strategic investments will also target digital transformation, artificial intelligence, and entrepreneurship, which aligns with the Dubai Economic Agenda D33 and Dubai Plan 2033. The government anticipates an operating fiscal surplus of up to 5% of GDP in 2026, reinforcing confidence in Dubai’s financial framework. The approval of Dubai’s 2026 budget follows the passage of the federal government budget (AED92.4 billion), which was also a record and up nearly 30% on the 2025 budget. This should provide solid support for non-oil growth over the medium-to-long term and provide a good foundation for realizing the authorities’ goal of doubling GDP within a decade and ensuring sustainable growth. Meanwhile, the UAE government plans to invest $50 billion in Canada as part of an investment framework agreement between the two countries targeting energy, AI, logistics, mining, and other strategic industries.
 

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