Producer inflation in China reaches its highest level in 4 years

The British bank Barclays is returning to the Saudi market by opening a new office in the King Abdullah Financial Center in Riyadh, more than a decade after it withdrew from it, in a step that reflects the continued interest of international financial institutions in investment opportunities in the Kingdom, despite the security and economic challenges imposed by the regional war and the escalation of Houthi attacks.

On Monday, the bank announced the opening of its new office, after obtaining a license to practice investment banking services and global markets activities in the Kingdom, and completing in 2025 the procedures for obtaining a license for its regional headquarters in Riyadh, according to what was reported by “Bloomberg.”

Barclays appointed Majed Al-Hassoun as CEO and head of investment banking at Barclays Capital Saudi Arabia, according to the bank’s statement.

The bank’s obtaining a regional headquarters license represents an important step in its return to the Kingdom, in light of the Kingdom’s tendency to attract international institutions and companies to establish their regional headquarters in Riyadh, linking this to its continued access to business opportunities and contracts with government agencies.

Barclays' expansion in the Kingdom comes as part of a broader strategy to strengthen its presence in the Middle East. The bank's CEO in the Asia-Pacific region, Jaideep Khanna, told Bloomberg in October that the bank is betting strongly on the opportunities available in the region, indicating its plans to strengthen its business in Turkey as well.

The bank strengthened its presence in the Gulf private banking sector through new appointments, and also transferred a banker specializing in capital markets from London to Dubai to assume a broader regional role.

On November 1, the Saudi Capital Market Authority announced that Barclays Capital Saudi had fulfilled the requirements to begin practicing the activities of arranging and providing advice in the securities business, which it is licensed to practice according to the decision of the Authority’s Board issued on October 26, 2025. This comes as a continuation of the bank’s step in October 2025, when it announced that it had obtained a temporary license from the Authority to practice investment banking services and global markets activities, in preparation for activating its business in the Kingdom.

The CEO of Barclays Group, CS Venkatakrishnan, had previously confirmed that Saudi Arabia represents a key focus in the bank’s growth strategy in the Middle East region, expressing his aspiration to support the Kingdom’s ambitions within the framework of “Vision 2030.”

Official Chinese data revealed a widening gap between producer and consumer prices in October, with factory price inflation accelerating to the highest level in about four and a half years, driven by rising costs of energy and raw materials, while consumer inflation slowed due to weak domestic demand, which still limits the ability of companies to pass on increases in production costs to consumers.

The National Bureau of Statistics announced, on Monday, that the producer price index rose by 5.7 percent on an annual basis during October, compared to an increase of 5 percent in September, exceeding analysts’ expectations of an increase of 5.3 percent. This represents the fastest rate of increase since June 2022, when the index rose 6.1 percent, according to LSEG data.

On the other hand, the consumer price index recorded an increase of 0.7 percent on an annual basis, down from 0.9 percent in the previous month, and came below analysts’ expectations of 0.8 percent. Core inflation, which excludes more volatile food and energy prices, also slowed to 0.8 percent from 1 percent in September.

This discrepancy reflects the impact of rising global energy prices, in light of the war in the Middle East, on production costs, especially in the sectors of coal mining, oil and natural gas extraction and processing, chemical industries, and other energy-intensive activities. But these pressures have not been fully transmitted to the prices of goods and services that consumers buy, in light of the continued weakness of household spending in the second largest economy in the world.

Nguyen Hoang Nam, an economist specializing in China at Capital Economics, said that the price shock resulting from the conflict in the Middle East will keep inflation high in the coming months, but its impact is expected to decline next year. He expected producer prices to return to deflation, as was the case before the outbreak of war, while he expected consumer price inflation to average 0.4 percent during 2027.

Deflationary pressures despite the recovery in exports

The data comes at a time when the Chinese economy is still facing an imbalance between strong production and weak domestic demand, despite its growth more than expected during the third quarter, supported by the resilience of exports in the face of trade challenges and the slowdown in consumer activity.

An official with the Chinese State Planning Commission warned last month that external shocks were beginning to have a greater impact on economic activity, as the gap between strong supply and weak domestic demand persisted.

Analysts believe that Chinese companies are facing difficulty in passing on the increase in energy and raw materials prices to customers and consumers, which puts pressure on their profit margins and reflects the continued deflationary pressures inherent in the economy, despite the return of price indicators to the positive zone.

Zhang Qiwei, chief economist at Pinpoint Asset Management, said that consumer price inflation remaining at low levels reflects continued weakness in domestic demand, noting that the authorities have not yet launched major economic stimulus. He added that strong export growth may be one of the reasons why Beijing is not in a rush to approve a new stimulus package.

The Chinese economy had faced more than three years of deflationary pressures before the war in the Middle East led to higher energy costs and moved the producer and consumer price indexes towards positive growth. But the slowdown in the real estate market and weak consumption continue to hamper the recovery in domestic demand.

On the other hand, deflationary pressures and a weak currency have contributed to enhancing the competitiveness of Chinese exports, which has increased policymakers’ reliance on external demand to support growth, at a time when the authorities are still cautious about launching large-scale fiscal stimulus. Measures to support capital market stability and limit the rapid rise of the yuan, which is pressuring exporters' margins, have also not succeeded in bringing about a tangible improvement in consumer confidence.

This also comes amid a decline in the shares of companies related to artificial intelligence in the Chinese market, after high valuations and concerns about the demand for these technologies and US export restrictions, which may add further pressure on consumer spending.

The US dollar maintained most of its gains in Monday's trading, approaching its highest levels against the euro in a year and a half, and a seven-month peak against the Australian dollar, after recording on Friday its largest daily rise in about six months, supported by strong US jobs data that reinforced expectations of raising interest rates in December.

The dollar index, which measures the performance of the US currency against a basket of six major currencies, stabilized at 102.20 points in early trading, after jumping about 0.7 percent on Friday, following data showing an acceleration in job growth in the United States during October, coinciding with a decline in the unemployment rate.

On the other hand, the euro rose 0.1 percent to $1.11485, after falling 0.7 percent on Friday, recording $1.1132, a level close to its lowest level since May 2025. The Australian dollar also rose 0.3 percent to $0.6875, after falling by more than 1 percent in the previous session to the lowest level since March 31.

The dollar fell 0.2 percent against the Japanese yen to 158.185 yen, after rising 0.6 percent on Friday. The Governor of the Bank of Japan, Kazuo Ueda, said that the central bank expects core inflation to remain near its target of 2 percent, while acknowledging the existence of some upside risks.

Rate hike bets are coming back strong

US jobs data reinforced expectations that the Federal Reserve will raise interest rates at its next meeting, as futures indicate a probability of about 79 percent to increase interest rates on December 9, compared to about 71 percent a week ago, according to the “Feed Watch” tool of the CME Group.

These bets had declined earlier, with a widespread wave of selling in global technology stocks, amid investor concerns about the prospects for investment in artificial intelligence and its profitability, as well as the possibilities of tightening regulatory restrictions on the sector, especially after the Democrats’ victory in the US midterm elections.

Barclays analysts said that the Democrats' victory strengthened the test of investment bets in artificial intelligence, in light of the risks of tightening regulation and a slowdown in the capital spending cycle, but they pointed out, in return, that economic indicators are still surprising markets with stronger performance than expected, which supports the attractiveness of the dollar.

Statements from Federal Reserve officials also reinforced expectations for monetary policy tightening. New York Federal Reserve Bank President John Williams said that the growth of the US economy has shown remarkable resilience in the face of successive shocks, but he stressed that inflation is still high and that returning it to the 2 percent target is necessary.

For his part, the President of the Federal Reserve Bank of St. Louis, Alberto Musalem, said that inflation is still at the forefront of concerns raised by the business sector in his region, while the President of the Federal Reserve Bank of San Francisco, Mary Daly, indicated that the central bank may need to continue raising interest rates, despite the losses witnessed in technology stocks.

In other currency markets, the British pound rose 0.1 percent to 1.3360 dollars, while the dollar fell 0.1 percent against the Canadian dollar to 1.4119 Canadian dollars, after recording an increase of about 1.1 percent on Friday, following data that showed unexpected job losses in Canada.

The New Zealand dollar is rebounding

In New Zealand, the New Zealand dollar rose 0.4 percent to 0.5557 US dollars, recovering from the lowest level in seven months recorded at the end of last week, after the preliminary results of the parliamentary elections showed a very close competition, which weakened the position of the current government and postponed deciding the identity of the ruling coalition.

Preliminary results showed that the National Party, led by Prime Minister Christopher Luxon, along with the ACT New Zealand and New Zealand First parties, won 67 seats in the 131-seat Parliament, one seat more than the number needed to form a majority.

But about 400,000 votes, representing approximately 15 percent of the total votes, are still being counted, and the official results are scheduled to be announced on November 27. Luxon and Labor leader Chris Hipkins said they would wait for the final results before starting formal negotiations to form a government coalition.