Economic Weekly Wrap
06 May 2024 - 10 May 2024

Non-farm payrolls in the US rose by 175k in Apr’24, much lower than estimated 240k and also lower than 315k in Mar’24. Unemployment rate also rose, to 3.9% in Apr’24 from 3.8% in Mar’24. Average hourly earnings also rose at a slower pace, by 0.2% (MoM) in Apr’24 versus 0.3% in the previous month. Separately, ISM services index fell to 49.4 from 51.4 in Mar’24, led by steep decline in new export orders, and employment. All these data points suggest that economic activity in the US is indeed slowing and has solidified hopes of a rate cut by the central bank in Sep’24 (48.8% chance as per CME FedWatch tool). Elsewhere in Asia, China’s Caixin services PMI also suggests slowdown in activity with index moderating to 52.5 in Apr’24 from 52.7 in Mar’24. In Australia too, services activity has slowed with PMI easing to 53.6 from

Global stocks ended mixed. US indices closed in green after softer than expected jobs report raised bets of Fed cutting rates earlier than anticipated. Hang Sang gained the most, supported by rally in tech stocks. Sensex declined by 1%, dragged down by losses in real estate and capital good stocks. However, it is trading higher today, in line with other Asian

Barring INR (flat) and CNY (lower), other global currencies ended higher. DXY dropped by 0.3% after the data reported lower job addition in Apr’24 and unemployment inched up to 3.9% (3.8% earlier). Amidst reports of possible intervention by government authority, JPY strengthened by 0.4%. INR ended However, it is trading stronger today, in line with other Asian currencies.

Global yields closed sharply lower, led by 7bps decline in US 10Y yield. Less hawkish comments from Fed in their policy and weaker than anticipated employment data, impacted investor sentiments. Weak growth outlook for Europe also played a role. India’s 10Y yield fell by 1bps. Today, following global cues, it is trading even lower at 13%.

Oil prices fell by 8%, driven by fears of weak global demand.

Softer than expected labour market data in the US has refuelled hopes of maybe 2 rate cuts (cumulative 50bps) by Fed this year. Probability of rate cut in Sep’24 has also risen to 66.6% as per CME FedWatch Tool. This has led to sharp decline in global yields and US$. As a result, gold prices have gained. Markets now await rate decision of BoE. In Europe, services activity seems to be rebounding with Eurozone PMI at 11-month high of 53.3 in Apr’24 versus 51.5 in Mar’24. Germany and France also noted improvement in performance. This is driven by renewed domestic demand, as new export orders continue to dip. Notably, price pressures are also seen reviving, which could pose a concern for Central Banks. Elsewhere in Asia, activity remains solid in India (most robust growth in 14 years) and balanced in Japan (PMI at 54.3 versus 54.1).

Global stocks ended mixed. Recent commentary by Fed officials buoyed some hopes of a possible rate cut by Fed this year, with inflation remaining sticky. US stocks advanced higher supported by gains in energy index. Hang Sang continue to climb higher. Sensex virtually ended flat with gains in real estate It is trading higher today, in line with other Asian stocks.

Global currencies ended mixed. DXY remains steady post softer than expected jobs report and the focus shift towards commentary by Fed officials and consumer confidence index. JPY weakened by 0.6%. INR depreciated by 0.1% amidst a rise in oil prices. However, it is trading stronger today, in line with other Asian

Global yields fell sharply, led by 9bps decline in US 10Y yield. Smaller than expected job additions in the US have revived hopes of 2 rate cuts by Fed this Probability of a rate cut in Sep’24 has also increased to 66.6%. India’s 10Y yield fell by 5bps, following global cues. It is trading flat today at 7.11%.

Oil prices inched back up, tracking price hike by Saudi Arabia and Israel’s attack on

China’s exports rebounded in Apr’24 as they rose by 1.5% (in line with expectation) after falling by (-) 7.5% in Mar’24, led by exports of automobiles, home appliances, and LCD panels. Imports also performed well, rising by 8.4% (est.: 4%) in Apr’24 versus (-) 1.9% decline in Mar’24. This was driven by commodities like crude oil, natural gas, plastics, steel, and medicine. Exports to US and Europe fell, indicating stress still remains due to weak demand. In Europe, Germany continues to struggle as industrial production in Feb’24 was down by (-) 0.4%, following 2.1% rise in Jan’24. Separately, Japan’s central bank in its minutes acknowledged that inflation is expected to hit BoJ’s 2% mark soon. As a result, members deem it “necessary to deepen discussion on the timing and degree of policy interest rate hikes”. Analysts believe that BoJ may hike rates sooner than what markets had priced in.

Global indices ended mixed. Dow Jones continued to rally despite some weakness in tech stocks. Fed Official-Susan Collins stated it might take longer than expected to get inflation back to the target FTSE inched up ahead of the rate decision. Sensex slipped and was dragged down by losses in banking stocks. It is trading lower today, while other Asian stocks are trading higher.

Except INR (flat), other global currencies ended lower. DXY gained further as investor continued to monitor commentary by Fed officials. Amidst news of possible intervention by the government, JPY weakened. GBP slid as investors anticipate a possible deviation by BoE from other central banks. INR is trading stronger today, while other Asian currencies are trading.

Global yields closed higher. US 10Y yield rose by 4bps, as Fed auctioned US$ 42bn worth 10Y Investors also await inflation numbers due next week for more guidance on rate trajectory. India’s 10Y yield rose by 1bps, tracking gains in oil prices. It is trading further higher at 7.14% today.

Oil prices rose, supported by more than expected drawdown of US

Initial jobless claims in the US rose by 22k to 231k (est.:214k) for the week ending 4 May 2024. Continuing claims remained broadly steady at 1.78mn versus 1.79mn in the previous week. The softer than expected labour market data has increased the hopes of Fed’s rate cut in Sep’24. Even Bank of England policy signals that there might be 1-2 rate cuts this year. The Central Bank stated that it was confidence that 2% inflation target will be met in the near-term and incoming data will be monitored for future rate decisions. It also expects Q1 GDP at 0.4% and Q2 at 0.2%. Markets are pricing in 2 rate cuts this year, starting from Aug’24 most likely. Meanwhile, Sweden’s Riksbank lowered rates by 25bps to 3.75% in its latest policy.

Domestically, government officials have indicated that government has met its fiscal deficit target of 5.8% in FY24.

Global indices ended Dow Jones gained for the 7th straight session led by renewed optimism of rate cut supported by recent data (jobless claims). FTSE edged up amidst BoE’s rate decision which was in line with expectation. Sensex ended in red amidst volatility, pressure from FIIs selling and election jitters. It is trading lower today, while other Asian stocks are trading mixed.

Except JPY and INR (flat), other global currencies ended higher against the DXY weakened after weekly jobless claims rose to its highest level since Aug’23, signalling softness in the labour market. GBP climbed after the rate decisions, with the governor signalling a dovish tone. INR is trading stronger today, while other Asian currencies are trading mixed.

Barring US and UK, other global closed higher. US 10Y fell by 4bps, following softer than expected labour market data, raising hopes of a rate cut in Sep’24. In UK, investors assessed BoE policy to gauge the timing of rate cuts this year. India’s 10Y yield ended flat, but is trading slightly lower at 12% today.

Oil prices rose further, supported by higher imports from China and no breakthrough in peace deal between Israel and Hamas.