Economic Weekly Wrap
13 May 2025 - 16 May 2025
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13 May 2025
Global markets were buoyed by de-escalation in US-China trade war. While China agreed to reduce tariff on US imports to 10% (from 145%), US also lowered its tariffs on Chinese goods to 30% (from 145%), for a period of 90-days. Both the nations have agreed to continue negotiations on a possible trade deal. This was welcomed by Fed officials who stated that a trade deal will lower risks to economic growth. Separately, PPI inflation in China declined by 2.7% in Apr’25 compared with a decline of 2.5% in Mar’25. CPI inflation rose by 0.1% in Apr’25, after declining by 0.4% in Mar’25 (MoM). In the UK, BoE officials expressed concerns over rising inflationary risks. Focus this week shifts to US CPI and retail sales data, as well as progress on other trade deal. In India, markets remained upbeat tracking easing geo-political tensions.
Global indices ended higher. US indices surged after reports of trade truce between US and China, as both countries agreed to lower tariffs for the span of 90 days. With this, investors have pared down rate cut expectations by the Fed. Amidst news of ceasefire, Sensex rallied with broad based gains across indices. However, it is trading lower today while Asian stocks are trading mixed.
Fig 1 – Stock markets
09-05-2025 12-05-2025 Change, % Dow Jones 41,249 42,410 2.8 S & P 500 5,660 5,844 3.3 FTSE 8,559 8,605 0.5 Nikkei 37,503 37,644 0.4 Hang Seng 22,868 23,549 3.0 Shanghai Comp 3,342 3,369 0.8 Sensex 79,454 82,430 3.7 Nifty 24,008 24,925 3.8 Source: Bloomberg, Bank of Baroda Research
DXY and CNY rallied as US-China agreed on a trade deal to provide temporary relief on escalated tariffs. JPY depreciated the most as risk sentiment improved. EUR also depreciated. INR is trading stronger today, while other Asian currencies are trading mixed.
Fig 2 – Currencies
09-05-2025 12-05-2025 Change, % EUR/USD (1 EUR / USD) 1.1250 1.1087 (1.4) GBP/USD (1 GBP / USD) 1.3306 1.3176 (1.0) USD/JPY (JPY / 1 USD) 145.91 148.46 (1.7) USD/INR (INR / 1 USD) 85.72 85.83 (0.1) USD/CNY (CNY / 1 USD) 7.2382 7.2053 0.5 DXY Index 100.34 101.79 1.4 Source: Bloomberg, Bank of Baroda Research │Note: India's market was closed on 12 May 2025
Except UK and India, other global yields ended higher as investors turned optimistic on announcement of US and China trade truce. Additionally, easing of geopolitical tensions also supported global yields. Germany's 10 yield climbed higher ahead of the release of Zew economic sentiment. India's 10Y yield is trading at 6.33% today, new benchmark security is trading at 6.29%.
Fig 3 – Bond 10Y yield
09-05-2025 12-05-2025 Change, bps US 4.38 4.46 8 UK 4.57 4.56 (2) Germany 2.55 2.64 9 Japan 1.36 1.38 2 China 1.65 1.70 5 India 6.40 6.38 (2) Source: Bloomberg, Bank of Baroda Research │Note: India's market was closed on 12 May 2025
Fig 4 – Short term rates
07-05-2025 08-05-2025 Change, bps Tbill-91 days 5.87 5.87 0 Tbill-182 days 5.88 5.87 (1) Tbill-364 days 5.85 5.85 0 G-Sec 2Y 5.92 6.03 11 India OIS-2M 5.84 5.83 (1) India OIS-9M 5.62 5.68 6 SONIA int rate benchmark 4.46 4.46 0 US SOFR 4.32 4.30 (2) Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
08-05-2025 09-05-2025 Change (Rs tn) Net Liquidity (-deficit/+surplus) 1.3 1.7 0.4 Reverse Repo 0 0 0 Repo* 0.3 0.3 0 Source: RBI, Bank of Baroda Research, *Includes LTRO │Note: India's market was closed on 12 May 2025
Fig 6 – Capital market flows
07-05-2025 08-05-2025 Change (US$ mn/Rs cr) FII (US$ mn) 181.5 465.1 283.5 Debt (167.5) 179.1 346.6 Equity 349.1 286.0 (63.1) Mutual funds (Rs cr) (2,069.3) (8,906.3) (6,837.0) Debt (5,113.7) (7,235.1) (2,121.5) Equity 3,044.4 (1,671.1) (4,715.5) Source: Bloomberg, Bank of Baroda Research| Note: Mutual Fund data as of 5 May and 6 May 2025 │Note: India's market was closed on 12 May 2025
Oil prices rose further on optimism surrounding US-China trade negotiations.
Fig 7 – Commodities
09-05-2025 12-05-2025 Change, % Brent crude (US$/bbl) 63.9 65.0 1.6 Gold (US$/ Troy Ounce) 3325.0 3236.9 (2.6) Copper (US$/ MT) 9441.2 9477.3 0.4 Zinc (US$/MT) 2579.6 2586.3 0.3 Aluminium (US$/MT) 2382.5 2412.5 1.3 Source: Bloomberg, Bank of Baroda Research
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14 May 2025
US CPI rose less than expected by 0.2% in Apr'25 versus an estimated 0.3% increase (MoM), led by a marked moderation in food prices. On a YoY basis, inflation rose by 2.3% compared with an increase of 2.4% in Mar'25. Cooling inflation coupled with easing trade tensions has brought back the possibility of Fed rate cuts on the table, albeit with caution. Separately in the UK, labour market showed signs of cooling off with an increase in unemployment rate, decline in job vacancies and slowdown in wage growth. In Germany, ZEW's economic sentiment index rose sharply to 25.2 in May'25 from -14 in Apr'25. This was led by hopes of an economic recovery amidst supportive fiscal and monetary policy, along with progress in trade negotiations. In India, CPI inflation cooled further led by a substantial moderation in food inflation, paving way for more rate cuts.
Global indices ended mixed. Investors monitored ongoing developments surrounding US-China trade truce and lower than expected inflation print in the US. Hang Seng noted losses in technology stocks ahead of key earnings report. Sensex ended in red with broad based decline across sectors, barring capital goods. However, it is trading higher today in line with other Asian stocks.
Fig 1 – Stock markets
12-05-2025 13-05-2025 Change, % Dow Jones 42,410 42,140 (0.6) S & P 500 5,844 5,887 0.7 FTSE 8,605 8,603 0 Nikkei 37,644 38,183 1.4 Hang Seng 23,549 23,108 (1.9) Shanghai Comp 3,369 3,375 0.2 Sensex 82,430 81,148 (1.6) Nifty 24,925 24,578 (1.4) Source: Bloomberg, Bank of Baroda Research
Global currencies rose as the dollar rally took a breather. DXY dipped by 0.8% after a cooler than expected inflation report. EUR edged up by 0.9% tracking an improvement in Germany's economic sentiment index. CNY and INR were broadly unchanged. INR is trading stronger, in line with other Asian currencies.
Fig 2 – Currencies
12-05-2025 13-05-2025 Change, % EUR/USD (1 EUR / USD) 1.1087 1.1185 0.9 GBP/USD (1 GBP / USD) 1.3176 1.3306 1.0 USD/JPY (JPY / 1 USD) 148.46 147.48 0.7 USD/INR (INR / 1 USD) 85.38 85.35 0 USD/CNY (CNY / 1 USD) 7.2053 7.2046 0 DXY Index 101.79 101.00 (0.8) Source: Bloomberg, Bank of Baroda Research
Except UK and Germany, other global yields ended lower. US 10Y yield was down amidst tamer than expected CPI. Thereby, giving room to Fed to lower rates in gradual manner with rate cuts expected as early as Sep'25. Germany's 10 yield inched up ahead of inflation data. India's 10Y yield moderated supported by lower inflation. It is trading at 6.32% today.
Fig 3 – Bond 10Y yield
12-05-2025 13-05-2025 Change, bps US 4.47 4.47 (1) UK 4.64 4.67 3 Germany 2.65 2.68 3 Japan 1.46 1.44 (1) China 1.68 1.66 (2) India 6.38 6.33 (5) Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
09-05-2025 13-05-2025 Change, bps Tbill-91 days 5.89 5.85 (4) Tbill-182 days 5.91 5.88 (3) Tbill-364 days 5.89 5.86 (3) G-Sec 2Y 6.04 5.96 (8) India OIS-2M 5.84 5.82 (2) India OIS-9M 5.66 5.66 0 SONIA int rate benchmark 4.21 4.21 0 US SOFR 4.28 4.28 0 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
09-05-2025 13-05-2025 Change (Rs tn) Net Liquidity (-deficit/+surplus) 1.7 1.5 (0.2) Reverse Repo 0 0 0 Repo* 0.3 0.3 0 Source: RBI, Bank of Baroda Research, *Includes LTRO
Fig 6 – Capital market flows
08-05-2025 09-05-2025 Change (US$ mn/Rs cr) FII (US$ mn) 192.6 (303.0) (495.5) Debt (93.4) (24.1) 69.3 Equity 286.0 (278.9) (564.9) Mutual funds (Rs cr) (2,746.0) (7,533.4) (4,787.4) Debt (5,662.1) (7,301.5) (1,639.4) Equity 2,916.1 (231.9) (3,148.0) Source: Bloomberg, Bank of Baroda Research| Note: Mutual Fund data as of 7 May and 8 May 2025
Oil prices inched up driven by demand optimism amidst US-China trade truce.
Fig 7 – Commodities
12-05-2025 13-05-2025 Change, % Brent crude (US$/bbl) 65.0 66.6 2.6 Gold (US$/ Troy Ounce) 3236.4 3250.3 0.4 Copper (US$/ MT) 9544.4 9618.7 0.8 Zinc (US$/MT) 2652.6 2677.7 0.9 Aluminium (US$/MT) 2480.0 2490.0 0.4 Source: Bloomberg, Bank of Baroda Research
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15 May 2025
Fed policymakers re-emphasised the need for caution amidst tariff driven uncertainty, even as they expressed confidence in the strength of labour market. Several policymakers reiterated that the impact of tariffs on growth and inflation will require careful monitoring and will in turn impact the rate trajectory. Markets now await Fed Chair's speech later in the day for more clues about the rate outlook. Separately, CPI inflation in Germany cooled down to 2.2% in Apr'25 from 2.3% in Apr'25, matching the preliminary estimate. In Japan, PPI inflation remained sticky at 4% in Apr'25, suggesting underlying price pressures. Labour market showed signs of strength in Australia, with a sharp increase in employment, paving the way for more rate cuts. WPI inflation in India eased to 0.9% in Apr'25, led by a sharp decline in prices of vegetables and pulses.
Global indices ended mixed. Investors' optimism surrounding US and China trade truce faded as they awaited retail sales data in US and commentary by Fed Chair. Hang Sang surged with gains in technology stocks. Sensex rebounded supported by lower inflation data (6-year low). Metal and real estate were top gainers. However, it is trading lower today in line with Asian stocks.
Fig 1 – Stock markets
13-05-2025 14-05-2025 Change, % Dow Jones 42,140 42,051 (0.2) S & P 500 5,887 5,893 0.1 FTSE 8,603 8,585 (0.2) Nikkei 38,183 38,128 (0.1) Hang Seng 23,108 23,641 2.3 Shanghai Comp 3,375 3,404 0.9 Sensex 81,148 81,331 0.2 Nifty 24,578 24,667 0.4 Source: Bloomberg, Bank of Baroda Research
Global currencies ended mixed. DXY closed steady as investors awaited comments from Fed Chair due today. JPY rose by 0.5% on hopes of rate hikes amidst sticky PPI. GBP declined ahead of GDP release. INR appreciated. However, it is trading weaker today, in line with other Asian currencies.
Fig 2 – Currencies
13-05-2025 14-05-2025 Change, % EUR/USD (1 EUR / USD) 1.1185 1.1175 (0.1) GBP/USD (1 GBP / USD) 1.3306 1.3263 (0.3) USD/JPY (JPY / 1 USD) 147.48 146.75 0.5 USD/INR (INR / 1 USD) 85.35 85.28 0.1 USD/CNY (CNY / 1 USD) 7.2046 7.2084 (0.1) DXY Index 101.00 101.04 0 Source: Bloomberg, Bank of Baroda Research
Except India, other global yields ended higher. US 10Y yield rose by 7bps (3-month high) despite softer than expected CPI. There are also lingering concerns around budget package that would add to US debt. Germany's 10 yield rose, even as inflation cooled off to a 6-month low. India's 10Y yield eased further. It is trading at 6.30% today, while the new benchmark security is trading at 6.26%
Fig 3 – Bond 10Y yield
13-05-2025 14-05-2025 Change, bps US 4.47 4.54 7 UK 4.67 4.71 4 Germany 2.68 2.70 2 Japan 1.44 1.46 2 China 1.66 1.67 1 India 6.33 6.29 (4) Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
13-05-2025 14-05-2025 Change, bps Tbill-91 days 5.85 5.80 (5) Tbill-182 days 5.88 5.84 (4) Tbill-364 days 5.86 5.81 (5) G-Sec 2Y 5.96 5.91 (5) India OIS-2M 5.82 5.79 (3) India OIS-9M 5.66 5.64 (2) SONIA int rate benchmark 4.21 4.21 0 US SOFR 4.28 4.30 2 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
13-05-2025 14-05-2025 Change (Rs tn) Net Liquidity (-deficit/+surplus) 1.5 1.8 0.3 Reverse Repo 0 0 0 Repo* 0.3 0.3 0 Source: RBI, Bank of Baroda Research, *Includes LTRO
Fig 6 – Capital market flows
09-05-2025 13-05-2025 Change (US$ mn/Rs cr) FII (US$ mn) (303.0) (315.8) (12.8) Debt (24.1) (335.1) (311.0) Equity (278.9) 19.4 298.2 Mutual funds (Rs cr) 2,886.0 2,240.3 (645.7) Debt (2,943.3) 90.4 3,033.7 Equity 5,829.3 2,149.8 (3,679.4) Source: Bloomberg, Bank of Baroda Research| Note: Mutual Fund data as of 9 May and 12 May 2025
Oil prices declined amidst an increase in US crude inventories.
Fig 7 – Commodities
13-05-2025 14-05-2025 Change, % Brent crude (US$/bbl) 66.6 66.1 (0.8) Gold (US$/ Troy Ounce) 3250.3 3177.3 (2.2) Copper (US$/ MT) 9618.7 9621.3 0 Zinc (US$/MT) 2677.7 2742.7 2.4 Aluminium (US$/MT) 2490.0 2528.5 1.5 Source: Bloomberg, Bank of Baroda Research
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16 May 2025
Preliminary data from the US reflects the impact of tariffs on growth and inflation. US retail sales decelerated to 0.1% in Apr'25 from 1.7% in Mar'25, as demand softened. PPI declined 0.5% in Apr'25, marking the largest decline in 5 years, after a flat reading in Mar'25 led largely by a drop in services even as goods inflation remained steady. Separately, manufacturing production declined by 0.4% in Apr'25, compared with an increase of 0.4% last month led by a decline in auto production. Fed Chair in his speech stressed on the need for greater focus on inflation. On the other hand, GDP growth in the UK rose more than expected by 0.7% (est. 0.6%) in Q1 2025 from 0.1% in Q4 2024. However, GDP growth in Japan contracted by 0.2% in Q1 (est. -0.1%), led by a sharp decline in exports. In India, trade deficit widened to US$ 26.4bn in Apr'25 as imports surged. Separately, government data showed that unemployment rate (for 15 years and above) was 5.1% in Apr'25.
Global indices ended mixed. US indices closed in green as investors monitored macro data including softer retail sales and lower producer prices. Nikkei fell weighed down by a stronger yen. Sensex advanced with gains in real estate and auto stocks. However, it is trading lower today in line with Asian peers.
Fig 1 – Stock markets
14-05-2025 15-05-2025 Change, % Dow Jones 42,051 42,323 0.6 S & P 500 5,893 5,917 0.4 FTSE 8,585 8,634 0.6 Nikkei 38,128 37,756 (1.0) Hang Seng 23,641 23,453 (0.8) Shanghai Comp 3,404 3,381 (0.7) Sensex 81,331 82,531 1.5 Nifty 24,667 25,062 1.6 Source: Bloomberg, Bank of Baroda Research
Except INR, other global currencies ended higher. DXY fell amidst a sharp deceleration in US retail sales. GBP rose buoyed by positive GDP. JPY also appreciated on hope of rate hikes. INR fell amidst dollar demand from importers. However, it is trading stronger today, in line with other Asian currencies.
Fig 2 – Currencies
14-05-2025 15-05-2025 Change, % EUR/USD (1 EUR / USD) 1.1175 1.1187 0.1 GBP/USD (1 GBP / USD) 1.3263 1.3305 0.3 USD/JPY (JPY / 1 USD) 146.75 145.67 0.7 USD/INR (INR / 1 USD) 85.28 85.55 (0.3) USD/CNY (CNY / 1 USD) 7.2084 7.2074 0 DXY Index 101.04 100.88 (0.2) Source: Bloomberg, Bank of Baroda Research
Global yields closed mixed. US 10 yields dropped as investors priced in two rate cuts amidst weaker economic data. Investors tracked commentary by Fed chair as he stressed on inflation-first strategy. Germany and UK's 10 yield eased by 8bp and 5bps. India's 10Y inched up by1bps and is trading at 6.26% today, while the new benchmark security is trading at 6.22%.
Fig 3 – Bond 10Y yield
14-05-2025 15-05-2025 Change, bps US 4.54 4.43 (10) UK 4.71 4.66 (5) Germany 2.70 2.62 (8) Japan 1.46 1.48 2 China 1.67 1.68 0 India 6.29 6.27 (1) Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
14-05-2025 15-05-2025 Change, bps Tbill-91 days 5.80 5.80 0 Tbill-182 days 5.84 5.79 (5) Tbill-364 days 5.81 5.80 (1) G-Sec 2Y 5.91 5.88 (3) India OIS-2M 5.79 5.77 (2) India OIS-9M 5.64 5.65 1 SONIA int rate benchmark 4.21 4.21 0 US SOFR 4.30 4.29 (1) Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
14-05-2025 15-05-2025 Change (Rs tn) Net Liquidity (-deficit/+surplus) 1.8 2.2 0.4 Reverse Repo 0 0 0 Repo* 0.3 0.3 0 Source: RBI, Bank of Baroda Research, *Includes LTRO
Fig 6 – Capital market flows
13-05-2025 14-05-2025 Change (US$ mn/Rs cr) FII (US$ mn) (315.8) (37.2) 278.6 Debt (335.1) (146.2) 188.9 Equity 19.4 109.1 89.7 Mutual funds (Rs cr) 2,240.3 1,782.2 (458.1) Debt 90.4 (1,766.3) (1,856.7) Equity 2,149.8 3,548.5 1,398.7 Source: Bloomberg, Bank of Baroda Research| Note: Mutual Fund data as of 12 May and 13 May 2025
Oil prices slid on expectations of US-Iran deal, which could lift sanctions.
Fig 7 – Commodities
14-05-2025 15-05-2025 Change, % Brent crude (US$/bbl) 66.1 64.5 (2.4) Gold (US$/ Troy Ounce) 3177.3 3240.1 2.0 Copper (US$/ MT) 9621.3 9616.7 0 Zinc (US$/MT) 2742.7 2702.1 (1.5) Aluminium (US$/MT) 2528.5 2489.0 (1.6) Source: Bloomberg, Bank of Baroda Research
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