Economic Weekly Wrap
06 Oct 2025 - 10 Oct 2025

In the US, ISM services PMI reading came in lower than expected at 50% in Sep’25 (from 52% in Aug’25). Weakness was noted in business activity (49.9% from 55%). Employment though inched up (47.2% from 46.5%), remained in the contractionary zone for the 4th straight month. Investors will monitor developments around US government shutdown. They will also track the OPEC+ decision, given the oil prices have slipped amidst oversupply and a decision on possibly reducing curbs on output, imposed previously during the Covid-19 period. Next, Reserve Bank of New Zealand is expected to reduce rates this week, by 25bps to 2.75%. New Zealand’s economy had contracted in Q2CY26 due to weak housing market and tariff related uncertainty.

Except Hang Seng, other global indices closed broadly higher. US stocks rose, with both Dow Jones and S&P 500 closing at a record high as investors continue to expect rate cuts from the Fed. Nikkei rose tracking developments surrounding the election of the new PM. Sensex closed higher led by gains in metals and consumer durable stocks. It is trading further higher today, in line with other Asian indices.

Table 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Note: Indian market was closed on 02-10-2025, Chinese market are closed since 01-10-2025

Global currencies ended mixed. DXY fell amidst a sharp drop in US ISM services index. Mixed commentary from Fed officials also impacted sentiments. Amongst major currencies, both EUR and GBP gained. INR continued to remain under pressure and traded near a lifetime low. It is trading tad higher today, while other Asian currencies are trading mixed.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: Indian market was closed on 02-10-2025, Chinese market are closed since 01-10-2025

Global 10Y yields closed mixed. US 10Y edged up by 4bps shrugging of any concerns related to the ongoing government shutdown.UK 10Y yield declined amidst the contrasting commentaries by Government and Fed Governor on scaling back financial regulation. India’s 10Y yield fell by 3bps, tracking commentary by RBI. It is trading further lower today at 6.50%.

Table 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Note: Indian market was closed on 02-10-2025, Chinese market are closed since 01-10-2025

Table 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Note: Indian market was closed on 02-10-2025

Table 5 – Liquidity

Source: RBI, Bank of Baroda Research

Note: Indian market was closed on 02-10-2025

Table 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research | Note: Mutual Fund data as of 26 Sep and 29 Sep 2025

Oil prices rose marginally amidst reports of fire in a key US refinery.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets remained cautious in a data light trading day. The major momentum was seen in the Nikkei index which continued touching its record high for the 2nd straight session in a row. This is supported by optimism over Japan’s ruling party leader Sanae Takaichis’s recent victory. The gain in Nikkei was also supported by a weaker yen amidst anticipation of softer pace of interest rate hike by BoJ under the new political shift. Japan’s 10Y yield also firmed up amidst anticipation of fiscal expansion. Elsewhere, investors were cautious of France’s political crisis as the new PM resigned only after 26 days in the role. On tariff front, US President spoke of the 25% tariff on medium and heavy-duty truck to take effect on 1 Nov. On domestic front, India’s services PMI was a tad lower at 60.9 in Sep’25 from 61.6, albeit buoyancy in new order intakes

Global indices ended mixed as investors processed political developments in France and Japan along with the US government shutdown. Nikkei rose sharply by 4.8% (record high), as investors reassessed bet of BOJ’s rate hikes. S&P 500 also touched a historic high driven by AI optimism. Sensex rose led by tech stocks. It is trading further higher today, in line with other Asian indices.

Table 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Note: China’s data as of 30 Sep and 29 Sep

Global currencies ended mixed. JPY declined on fading hopes of rate hikes after election of the new PM. In Europe, resignation of the PM weighed on investor sentiments with EUR falling by 0.3%. INR ended stable. It is trading marginally stronger today, while other Asian currencies are trading mixed.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: China’s data as of 30 Sep and 29 Sep

Global yields witnessed broad based sell off. UK’s 10Y yield rose the most ahead of the weekly earnings data. US 10Y yield also edged up following comments by one of the Fed officials which hinted at eyeing inflation trajectory closely. India’s 10Y yield rose a tad and is trading at 6.51% today.

Table 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Note: China’s data as of 30 Sep and 29 Sep

Table 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Table 5 – Liquidity

Source: RBI, Bank of Baroda Research

Table 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research | Note: Mutual Fund data as of 1 Oct and 30 Sep 2025

Oil prices rose after OPEC+ announced a lower-than-expected output hike.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets remained watchful against the backdrop of political developments in France and Japan. ECB President spoke of concerns over likely miss of the budget plan. The softening of yen continued as traders pared down expectations of rate hike by BoJ. Concerns over US government shutdown continued to weigh on gold. Its record high rally persisted for 7th session in a row. Among other developments has been the commentary of Minneapolis Fed President who spoke against drastic rate cuts stoking inflationary concerns. On domestic front, RBI came up with draft directions on amending the existing standardised approach framework for credit risk calculation. Major revisions centre around granular risk weight treatment for corporates, MSMEs and real estate, revision in the credit conversion factors and adjustments to the risk weights rated by credit rating agencies.

Global stocks ended mixed. In the US, a continued government shutdown weighed on sentiments, pushing stocks lower. In Asia, Nikkei ended flat as investors await more clarity on the policies of the new PM. Sensex edged up by 0.2%, led by gains in real estate and oil and gas stocks. It is trading further higher today, while other Asian markets are trading mixed.

Table 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Note: China’s data as of 30 Sep and 29 Sep, Hang Seng was also closed on 7 Oct

Global currencies ended broadly weaker against the dollar. JPY and EUR declined further tracking political developments. DXY was 0.5% higher. INR continued to trade near a historic low. It is trading at similar levels today, while other Asian currencies are trading mixed.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: China’s data as of 30 Sep and 29 Sep

The risk off sentiments over recent global political developments led to higher demand for sovereign asset class. US 10Y yield fell the most as concerns over US government shutdown remained elevated. India’s 10Y yield fell a tad tracking global yields. It is trading at 6.50% today.

Table 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Note: China’s data as of 30 Sep and 29 Sep

Table 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Table 5 – Liquidity

Source: RBI, Bank of Baroda Research

Table 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research | Note: Mutual Fund data as of 1 Oct and 30 Sep 2025

Oil prices ended flat as investors weighed supply-demand dynamics.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Among major developments has been China’s recent curbs on rare earth exports. The restrictions centre on excluding unauthorised overseas corporations. This could have ripple effect as China is the major global supplier. US President spoke of a likely truce between Israel and Hamas. Fed minutes reflected that growing concerns of labour market conditions have supported the current easing. However, dissent among Fed officials existed over persistence of higher inflation. ECB officials spoke of limited space for monetary easing amidst gradual economic recovery. Bank of Thailand kept policy rate unchanged against expectation of a 25bps rate cut citing financial stability. Separately, IMF Chief commented that India has emerged as a key growth engine supported by policy fundamentals.

Global indices ended mixed. In the US, investors assessed the minutes of Fed meeting and mixed commentaries from Fed officials. While Dow Jones ended broadly flat, S&P 500 rose. Nikkei dipped by 0.5% on profit taking after a strong rally. Sensex dipped by 0.2%, as real estate and power stocks slid. It is however trading higher today, in line with other Asian markets.

Table 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research
Note: China’s data as of 30 Sep and 29 Sep

Global currencies continued to weaken against the dollar. DXY rose by 0.3% despite dovish Fed minutes. JPY depreciated further and traded near an 8-month low as investors weighed BoJ’s rate trajectory. INR dipped to a record low following global cues. It is trading stronger today, while other Asian currencies are trading mixed.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research
Note: China’s data as of 30 Sep and 29 Sep

The risk off sentiments continued to push global yields lower. Germany’s 10Y yield softened the most over weaker industrial production data. Elsewhere, yields traded thinly. India’s 10Y yield fell a tad in the absence of fresh cues. It is trading at 6.52% today

Table 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research
Note: China’s data as of 30 Sep and 29 Sep

Table 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Table 5 – Liquidity

Source: RBI, Bank of Baroda Research

Table 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research
Note: Mutual Fund data as of 3 Oct and 6 Oct 2025

Oil prices rose as an EIA report showed a pickup in US oil consumption.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

DXY firmed up as majority of the Fed officials reiterated inflationary concerns. Elsewhere, one of BoE officials’ spoke of a cautious policy approach amidst fears of de-anchoring of household inflation expectations. ECB minutes highlighted that interest rates are likely to remain unchanged in future. In other development, officials of France have pointed out that fiscal consolidation will be maintained. Oil prices faced downside pressure as Israel has approved a framework for releasing hostages of Gaza. Among macro releases, trade data in Germany showed signs of stress with exports falling more than anticipated on a sequential basis and faster pace of decline in imports. In Japan, PPI witnessed sequential uptick further raising doubts about BoJ’s action. On domestic front, weekly domestic auctions will be monitored.

Global indices ended mixed. In the US, investors monitor the impact of government shutdown. In Japan, hopes of fiscal support to propel growth supported investor sentiments. Non-ferrous and rare earth metals related stocks jumped the most in China. Sensex rose by 0.5%, led by metals and tech stocks. It is trading even higher today, while other Asian markets are trading lower.

Table 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except INR (flat), other global currencies continued to weaken against the dollar. DXY rose by 0.6% tracking comments of Fed officials. Yen was driven by expectation of BoJ’s action to be on hold. Germany’s weak trade data impacted EUR. INR ended flat, near its all-time low. It is trading steady even today, while other Asian currencies are trading mixed.

Table 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Global yields trajectory continued to be guided by risk off sentiments. UK’s 10Y yield rose the most tracking comments of one of the BoE officials’ who advocated rate hike. Even commentaries of Fed officials led to some momentum in US 10Y yield. India’s 10Y yield inched up tracking global yields. It is trading at the same level today.

Table 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Table 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Table 5 – Liquidity

Source: RBI, Bank of Baroda Research

Table 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research
Note: Mutual Fund data as of 3 Oct and 6 Oct 2025

Oil prices fell, led by easing geopolitical tensions.

Table 7 – Commodities

Source: Bloomberg, Bank of Baroda Research