Economic Weekly Wrap
04 Aug 2025 - 08 Aug 2025

Concerns of slowdown in the US economy resurfaced after US jobs report signalled much slower growth in Jul’25. As per the non-farm payrolls data, only 73,000 jobs were added in Jul’25 much lower than anticipated (110,000). Additionally, the data for the last 2-months also has been revised down significantly. The unemployment rate also edged up to 4.2% (4.1% in Jun’25). The disappointing data has raised the likelihood (80%) of Fed rate cut in Sep’25, despite the hawkish tone by Fed chair in the last meeting. Separately, US Michigan consumer sentiment index rose for the 2nd straight month to 61.7 in Jul’25 (60.7 in Jun’25), while the inflation expectations moderated (4.5% from 5% in Jun’25). OPEC+ in principle agreed to accelerate output hike from Sep’25 which could possibly lower oil and gasoline prices. In India manufacturing PMI rose to a 16-month high to 59.1 in Jul’25 (58.4 in Jun’25).

Global equity indices closed lower as investors monitored the news of tariffs. US indices ended lower amidst dismal jobs report. S&P 500 dropped the most followed by Dow Jones. Sensex moderated further with losses in metal and oil & gas stocks. However, it is trading higher today, in line with Asian stocks

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Global currencies closed higher against US$. DXY fell notably following weakness in economic data, particularly labour market. JPY strengthened the most, backed by safe-haven demand. INR appreciated as oil prices fell significantly. It is trading much stronger even today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Global 10Y yields closed lower. US 10Y yield fell sharply by 16bps, tracking weaker than expected macro data (non-farm payrolls, unemployment rate, and ISM manufacturing index). Thus increasing the chances of a rate cut by Fed in Sep’25. India’s 10Y remains range-bound tracking global cues. It is trading notably lower today at 6.34%, eyeing RBI’s rate decision later this week

Fig 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Fig 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research, *Includes LTRO

Fig 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research

Note: Mutual Fund data as of 29 Jul and 30 Jul 2025

Oil prices moderated further as OPEC+ pushed for bumper supply increase.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

As the tariff timeline looms for new trade deals, countries have ramped up efforts to secure better deals with last minute negotiations. EU has suggested it will pause the retaliatory tariff as it continues further negotiations, while Switzerland is expected to impose 39% tariffs on US. Separately, in China, the services activity (private sector survey) rose at its fastest pace to 52.6 (14-month high) in Jul’25 from 50.6 in Jun’25 supported by stronger demand. In contrast, the official services PMI slipped marginally to 50 in Jul’25 against 50.1 in Jun’25. Services activity in Japan picked up pace as it expanded to 53.6 in Jul’25 (5-month high) from 51.7 in Jun’25, driven by higher demand and growth in new business orders. Price pressure cooled-off as input cost inflation dropped to 17-month low. In India this week, MPC is expected to maintain status quo on rates on the back of the ongoing tariff developments.

Barring Nikkei, other global equity indices rebounded. US indices bounced back posting their biggest daily gains since May’25, amidst renewed expectations of a rate cut in Sep’25. Better than expected earnings report provided further support. Sensex edged up with gains in metal and real estate stocks. However, it is trading lower today, while other Asian stocks are trading mixed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Global currencies closed mixed against US$. DXY fell by (-) 0.4%, as signs of slowdown in economic activity continue to persist. JPY strengthened the most, while EUR depreciated. INR also fell, even as oil prices remain lower. It is trading even weaker today, while other Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Major global 10Y yields continued to slide. US 10Y yield fell by 2bps, tracking another set of weak macro data (factory orders). Amidst ongoing economic uncertainty in the US, investors’ demand for other safer assets helped lower German and Japan 10Y bond yields. India’s 10Y also fell by 5bps, following global cues and decline in oil prices. It is trading further lower today at 6.31%.

Fig 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Fig 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research, *Includes LTRO

Fig 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research

Note: Mutual Fund data as of 30 Jul and 31 Jul 2025

Oil prices continued to slide, as more supply is to be added from Sep’25.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

In the US, overall trade deficit narrowed down to US$ 60.2bn (2-year low) in Jun’25 from US$ 11.5bn in May’25. The exports were down by 0.5% at US$ 277.3bn (US$ 278mn in May’25), while imports declined by 3.7% at US$ 337.5mn. This is largely led by lower imports of consumer goods and industrial supplies and materials. The lower trade deficit would have significantly contributed to GDP growth in Q2CY25 which rebounded by 3% from after contracting by 0.5% in Q1. Services PMI (ISM) moderated marginally to 50.1 in Jul’25 (50.8 in Jun’25) even as orders remained steady but weakness was noted in employment activity. In the coming week, US President is expected to announce tariffs on Pharma and semiconductors, with tariffs on pharma to be as high as 250%. In India, the focus will shift towards upcoming rate decision by RBI. We expect a status quo.

Global equity indices closed mixed. US indices ended lower as investors monitored weaker than expected economic data. On the other hand, Shanghai Comp surged past the 3600-mark led by a rally in telecommunication and consumer electronic stocks. Sensex slipped with losses in oil & gas stocks. However, it is trading higher today, in line with other Asian stocks.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Global currencies closed mixed against US$. DXY ended flat, along with CNY and EUR. JPY and INR depreciated the most. Uncertainty around the timing of rate hike by BoJ has impacted the strength of Yen. INR fell by 0.2%. However, it is trading stronger today, while other Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Major global 10Y yields closed mixed. While yields in Japan, Germany and China ended lower/flat, they inched up elsewhere. US 10Y yield rose by 2bps, tracking broad steadiness in services activity. Demand for safer assets and expectation of lower policy rates in the US impacted Japan’s yield. India’s 10Y yield rose by 1bps. It is trading flat today at 6.33%, ahead of RBI’s decision.

Fig 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Fig 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research, *Includes LTRO

Fig 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research

Note: Mutual Fund data as of 30 Jul and 31 Jul 2025

Oil prices slipped further amidst weaker global demand. Current Brent crude oil prices are around $43.00, with various factors influencing market dynamics.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

In India, the Central Bank in line with expectations, maintained status quo on rates and on stance. GDP growth was retained at 6.5% for FY26, while inflation projection was revised downwards to 3.1% from 3.7% earlier for FY26. Furthermore, inflation has been projected at 4.9% for Q1FY27. On tariff front, US President has announced an additional tariff of 25% on India in the form of ‘penalty’ for Russian crude oil imports. These will be effective form 27 Aug and has raised the total tariff to as high as 50%. There are also reports of 100% tariffs to be imposed on semiconductor chips. This is expected to adversely impact both Taiwan and Japan. Separately in China, exports growth rose by 7%, much higher than expectation, while imports climbed up 4% in Jul’25 (highest jump in over a year). Investor will turn their focus towards BoE decision scheduled later today.

Barring domestic indices and Hang Seng, other global indices rebounded. US indices advanced as investors monitored better than expected earnings report. Sensex continued its downward momentum with losses in real estate and IT stocks. It is trading lower today; other Asian stocks are trading higher.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except CNY, all other currencies closed higher. DXY fell by (-) 0.6%, as investors processed weaker than expected services PMI data and signals of rise in prices. Also, talks of new Fed Chair nominee is making market participants jittery. INR rose by 0.1%, supported by continued decline in oil prices. It is trading even stronger today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Major global yields inched up. US 10Y yield rose by 2bps, due to weak demand in the weekly auction. Rise in price sub-index of ISM services has also raised concerns regarding risks of stagflation. India’s 10Y yield rose most significantly, by 8bps, tracking RBI’s hawkish pause signal. However, it is trading a tad lower today at 6.41%, following global cues (additional 25% tariff on India).

Fig 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Fig 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research, *Includes LTRO

Fig 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research

Note: Mutual Fund data as of 01 Aug and 04 Aug 2025

Oil prices slid amidst planned supply increase from OPEC+. Current Brent crude oil prices are around $43.00, according to recent market data.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

In the US, as per the labour department, weekly jobless claims inched up marginally by 7,000 to 226,000 tad higher than expected (221,000). On the other hand, nonfarm productivity rose at much faster pace than expected by 2.4% (est.: 2%) in AprJun’25 period after declining by 1.8% in Jan-Mar’25 period. Separately, BoE with a narrow vote of 5-4 decided to reduce rates by 25bps, bringing down the policy rate to 4%. As per the projection, inflation is expected to peak to 4% mark in Sep’25 and is expected to remain above the target mark of 2% in the coming 2-years. It was noted that bank will continues with its ‘gradual and careful’ approach on easing, with Governor calling this a ‘finely balanced situation’. In Germany, industry output declined in Jun’25 by 1.9% (lowest level since May’20) on a MoM basis after contracting by 0.1% in the previous month.

Global indices closed mixed. US indices closed lower reversing its previous day gains amidst mixed data on labour market. FTSE also closed lower as investors tracked mixed earnings. Sensex rebounded with gains in IT and auto stocks. However, it is trading lower today while other Asian stocks are trading higher.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except CNY and INR, other currencies closed higher against the US$. DXY also rose by 0.2%, supported by continued rise in bond yields. GBP noted significant gains, amidst hawkish BoE narrow rate cut decision. INR ended broadly steady, as oil prices remain low. It is trading much stronger today, while other Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Fig 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Fig 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research, *Includes LTRO

Fig 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research

Note: Mutual Fund data as of 01 Aug and 04 Aug 2025

Oil prices declined further, as tariff-related tensions cloud demand outlook.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research