Economic Weekly Wrap
09 June 2025 - 13 Jun 2025

US labour market added 139,000 jobs in May’25, higher than an estimated 130,000 increase. Unemployment rate was steady at 4.2%. The report allayed some fears around the strength of labour market despite a grim growth outlook. Separately, GDP growth in the Eurozone was revised up to 0.6% in Q1 2025, from 0.3% earlier. Similarly, Japan’s GDP contracted at a slower pace of 0.2% compared with a decline of 0.7% estimated earlier. In China, CPI inflation declined at an unchanged rate of 0.1% in May’25. On the other hand, PPI deflation exacerbated to 3.3% from 2.7% in Apr’25. Exports growth also moderated to 4.8% in May’25 from 8.1% in Apr’25, as exports to the US dropped sharply despite the trade truce. Imports declined by 3.4%, as domestic demand continues to remain weak. In India, RBI surprised markets by a jumbo rate cut and CRR cut.

Global stocks ended higher. US stocks rose the most, supported by strong US payroll data, easing fears of recession. Hang Seng traded cautiously tracking trade developments. Sensex firmed up, supported by RBI’s outsized cut and liquidity support through lower CRR. It is trading higher today in line with Asian stocks, supported by receding impasse between US-China on critical minerals

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except INR, other global currencies depreciated. DXY rose by 0.5% supported by a strong US labour market report. EUR declined as Germany’s industrial production and exports showed weakness. INR rose after RBI’s policy decision. It is trading marginally weaker today, while Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

US 10Y yield rose at the sharpest pace tracking some firmness in average hourly earnings. Apart from this, traders also awaited the US$ 22bn auction for the 30Y tenor securities. Elsewhere, yields traded thinly. India’s 10Y yield inched up as a change in stance by the RBI led to some repricing. The new benchmark security is trading at 6.24% today.

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 3 Jun and 4 Jun 2025

Oil prices continued to climb driven by enthusiasm over US-China trade talks.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets saw tentative trading as focus remained firmly on the ongoing trade negotiations between US and China. Easing trade tensions between the World’s largest economies is likely to support investor sentiments and will be positive for the global growth outlook. Earlier, data showed a sharp 34.5% drop in China’s exports to the US, the most since the Covid-19 pandemic. In the US, New York Fed survey noted a moderation in consumers’ inflation expectations across the board. Consumers’ 1Y inflation expectations dipped to 3.2% from 3.6% earlier, while 3Y and 5Y inflation expectations also moderated to 3% (3.2% earlier) and 2.6% (2.7% earlier) respectively. Separately, BoJ Governor stated that more rate hikes are likely if inflation moves towards its 2% target. For now, markets expect the BoJ to hold rates steady in its meeting next week.

Except Dow and FTSE, global stocks ended higher. Investors are pricing in optimistic outcome of second day of US-China trade talks, concerning technology and rare earth elements shipments. Hang Seng rose the most, followed by Nikkei. Sensex rose by 0.3%, as investor’s sentiments remained upbeat. It is trading lower today while Asian stocks are trading higher.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except INR, other global currencies ended higher against the dollar. DXY declined by 0.3% as investors turned their focus towards US-China trade talks. JPY rose as bets of rate hike have increased. INR closed broadly unchanged. It is trading stronger today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Except Japan and India, global yields softened. US 10Y yield edged down as New York Fed’s expectations moderated. Japan’s 10Y yield firmed up as BoJ Governor expressed concerns over inflation deflecting its target. India’s 10Y yield inched up as RBI decided to discontinue daily VRR. The new benchmark security is trading at 6.27% today.

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 4 Jun and 5 Jun 2025

Oil prices rose further anticipating a positive outcome of US-China trade talks.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

US and China agreed on an in-principle framework aimed at de-escalating trade tensions. The deal which includes key export items such as rare earth metals and magnets, now awaits ratification from the heads of the two nations. Notably, World Bank has cut its global growth estimates to 2.3% in 2025 from 2.7%, citing trade concerns. Growth forecasts for all major economies have seen a downgrade in 2025 led by the Euro Area (90bps), US (50bps) and Japan (30bps). For China, growth estimate has been kept unchanged at 4.5%. India’s GDP growth is expected at 6.3% in FY26 vs. 6.7% estimated earlier. Separately, in the UK, unemployment rate edged up to 4.6% between Feb-Apr’25 from 4.5% in Q1 2025. Wage growth (ex. bonuses) also slowed to 5.2% in Feb-Apr’25 from 5.5% in Jan-Mar’25. Weakening momentum in labour market has vindicated the case for further easing by the BoE.

Global stocks closed mixed. US stocks got relief from optimism over US-China trade talks. However, Hang Seng softened weighed down by technology stocks. Sensex moderated, led by real estate stocks. It is trading higher today, in line with other Asian stocks. However, an extension of US Court of Appeals to US President on tariffs can lead to some volatility in the markets.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Global currencies ended mixed as investors monitored US-China trade talks. DXY rose by 0.2% on positive comments from US Commerce Secretary. GBP depreciated by 0.4% as UK’s labour market slowed. INR ended flat. However, it is trading stronger today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

UK’s 10Y yield softened the most as labour market weakened. Even Germany’s 10Y yield moderated despite a key ECB official hinting at cautious approach to further monetary easing. The correction in India’s 10Y yield continued. The cut off yield in today’s T-Bill auction will hold the cue for direction of short-term rates. The new benchmark security is trading at 6.28% today.

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 4 Jun and 5 Jun 2025

Oil prices declined marginally tracking the outcome of US-China trade talks.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

CPI inflation in the US moderated to 0.1% in May’25 (est. 0.2%), after increasing 0.2% in Apr’25 (MoM). This was led by a drop in gasoline prices, even as prices of food and shelter increased. Core CPI (ex. food and energy) also decelerated from 0.2% in Apr’25, to 0.1% in May’25. The moderation in CPI despite higher tariffs has raised the likelihood of a restart in Fed rate cut cycle. The probability of a rate cut in Sep’25 has increased to 60% from ~53% on 10 Jun 2025. Separately, investors also monitored comments from US and China on the recently concluded trade talks, while awaiting the fine print of the agreement. However, a flare up in geo-political tensions in the Middle East might dent risk sentiments. In India, CPI inflation is expected to moderate to 2.7% in May’25 (BoB Estimate), led by softening food inflation.

US stocks showed pessimism as softer inflation print in the US raised concerns of meagre outlook on growth. Asian stocks got support from the positive outcome of US-China trade deal. Hang Seng rose the most driven by a rally in EV and technology stocks. Sensex inched up a tad. It is trading higher today, while Asian stocks are trading lower.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except CNY, other global currencies appreciated against the dollar. DXY fell by 0.5% as a moderation in CPI has paved the way for Fed rate cuts. Amongst major currencies, EUR gained the most by 0.5%. INR too appreciated by 0.1%. It is trading further higher today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

US 10Y yield fell the most tracking a moderation in US CPI. Elsewhere, 10Y yields traded in a narrow range. India’s 10Y yield inched up a tad. The cut off yield of T-bill papers have come off which hint at lower short-term rates. The new benchmark 10Y security is trading at 6.3% today. Any sharp drop in CPI data might lend support.

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 4 Jun and 5 Jun 2025

Oil prices rose to ~3-month high amidst escalating tensions in the Middle East.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Simmering tensions in the Middle-East dented investor sentiments, as Israel and Iran appear on the brink of a war. As a result, demand for safe-haven assets is likely to increase suggesting an upside in DXY, gold prices and sovereign bonds, while EM assets are likely to see a capital flight. Oil prices have jumped up sharply today, and a prolonged war can have a similar effect on other commodity prices, due to supply chain disruptions, threatening to derail the progress made in bringing global inflation lower. Separately, US PPI rose by 0.1% in May’25 (est. +0.2%), after declining 0.2% in Apr’25, suggesting that underlying price pressures remain largely contained. US jobless claims remained elevated at 248,000, unchanged from the previous week. In UK, GDP declined by 0.3% in Apr’25 following a 0.2% increase in Mar’25, due to tariff uncertainty and tax hikes.

Global stocks ended mixed. A slew of factors are at play ranging from escalation of geopolitical risk, weakness in high frequency data in US and UK, countering the positive development on US-China trade front. Hang Seng fell the most, while US stocks inched up. Sensex’s decline was broad-based across sectors. It is trading further lower today, in line with other Asian stocks.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except INR, other global currencies gained. DXY slipped by 0.7% as odds of Fed rate cuts have increased after soft inflation readings. EUR strengthened to its highest since Nov’21. JPY rose on safe-haven demand. INR declined marginally. It is trading further weaker today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

UK’s 10Y yield softened the most, supported by muted GDP data. In US as well, 10Y yield inched down on soft macro data (PPI and jobless claims). Germany’s, 10Y yield moderated despite an ECB official hinting that most of the rate cuts have been frontloaded. India’s 10Y yield fell, and is trading at 6.32% today

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 9 Jun and 10 Jun 2025

Crude softened as weak global macro indicators outweighed geopolitical risk. However, oil prices are trading sharply higher today.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research