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Macro data in the US is giving mixed signals, pointing out that the economy may not be slowing as much as anticipated. While retail sales fell (-1% MoM) more than expected (-0.5%) in Mar’23 versus Feb’23 (-0.2%), on the other hand, industrial production (0.4% in Mar’23 versus est.: 0.2%) and consumer sentiment index (63.5 in Apr’23 versus est.: 62.1) improved. In addition, a member of Fed Reserve Board, Christopher Waller, suggested that Fed tightening should continue as inflation still remains at elevated. This pushed yields and DXY up. In Singapore, MAS left its monetary policy unchanged (after 5 successive tightening moves earlier), despite elevated core inflation (5.5% in Jan-Feb’23 versus 5.1% in Q4). It also warned of a steeper than anticipated decline in economic in CY23 owing to global factors.
Barring US, other global indices ended higher. Recent macro data of US, indicates that Fed may possibly continue with the rate hikes in May (82% chance) and June. European indices ended higher led by a rally in banking stocks, with a news of a takeover deal. Sensex rose with strong gains reported by banking and real estate stocks. However, it is trading lower today, while other Asian stocks are trading mixed.
Source: Bloomberg, Bank of Baroda Research
Apart from CNY (flat), other global currencies ended lower against the dollar. US industrial production slowed less than anticipated and raised the likelihood of rate hikes. DXY climbed up by 0.5%. GBP rose by 0.9% ahead of CPI and employment data. INR appreciated by 0.3%, but it is trading weaker today, in line with other Asian currencies.
Except Japan and China (flat), other global yields closed higher. In the US, industrial production and consumer sentiment index, both increased beyond market expectations. In addition, a key Fed official also indicated that Fed rates will have to go up further to tame inflation. As a results, 10Y yields in US jumped by 7bps. India’s 10Y yield rose by 3bps (7.22%). It is trading broadly steady at 7.23% today.
Source: RBI, Bank of Baroda Research
Source: Bloomberg, Bank of Baroda Research │Note: Mutual funds data as of 3 Apr 2023 and 5 Apr 2023
Global oil prices rose by 0.3% and by 2.5% during the week to settle at US$ 86.3/bbl, as IEA predicts boost in consumption demand, led by China.
Latest data from China points that reopening of the economy has helped GDP growth as it rose by 4.5% (YoY) in Q1CY23 (est.: 4%) from 2.9% in Q4. Even in QoQ terms, activity was up by 2.2% (est.: 2.1%) and 0.6% in Q4. Industry-wise, services sector activity outperformed the others. Retail sales in Mar’23 also rebounded and were up by 10.6% (est.: 8%) versus 3.5% during Jan-Feb’23. Industrial production too picked up, by 3.9% in Mar’23 (est.: 4.7%) from 2.4%. Only FAI growth disappointed as it slowed to 5.1% in CYTD23 from 5.5% in Jan-Feb’23. Even US data is indicating that economy is not slowing as much as anticipated (corporate results, homebuilder sentiment), thus pushing yields and DXY up.
Barring Sensex, other global indices ended higher as investors monitored corporate earnings report from US with attention towards banking sector in the wake of recent banking crisis. FTSE too ended in green led by gains in mining and oil & gas stocks. However, Sensex ended in red led by sharp sell-off in IT stocks but is trading higher today. Asian Indices are trading mixed.
Global currencies slipped against the dollar. DXY edged up by 0.5% amidst renewed expectation of Fed raising rates (86% chance of 25bps hike) in May on the back of strong economic data. Euro declined (0.6%) the most, while Australian dollar inched up ahead of the release of RBA's minutes. INR fell by 0.1% and is trading further weaker today. Asian currencies are trading mixed.
Global yields closed higher, with 10Y yield in US rising the most (+9bps), followed by Germany (+3bps). Better than expected corporate results at the beginning of the earning season and recent improvement in macro data, has reignited concerns that Fed will hike rates in its May’23 meeting as well. India’s 10Y yield too inched up, by 2bps (7.23%). It is trading flat today.
Global oil prices eased, as US crude oil and gas production in Shale basins is expected to hit record high in May’23.
UShousing starts are seen stabilising on the hopes of Fed pausing its rate hike cycle this year (expected from Jun’23). Single-family home building rose for the 2nd consecutive month in Mar’23 (+2.7% MoM) and future construction permits also rebounded. 30Y fixed mortgage rates have fallen from the peak of 7.1% in Nov’22 to 6.3% as of last week. On the other hand, in Europe, UK and Germany posted grim macro data. Germany’s ZEW economic sentiment index fell to 4.1 in Apr’23 (est.: 15.3) from 13 in Mar’23, owing to high inflation rates and tight financial conditions. In UK, unemployment rate rose by 0.1% to 3.8% during Dec’22-Feb’23 period—highest since Q2CY22 and also up from estimated 3.7%.
Global indices ended mixed as investors monitor corporate earnings report and anticipate Fed rate decision. FTSE extended its rally for 8th day led by gains in travel and leisure as well as commodity linked sectors. However, Sensex ended in red, dragged down by losses in power and consumer durable stocks. It is trading lower today while other Asian indices are trading mixed.
Barring INR, other global currencies ended higher. DXY retreated yet gain. Fed's outlook was in focus with mixed signals in the commentary by Fed officials (one expecting 25bps hike and then a pause, while another expects rates to peak to 5.50%-5.75%). INR depreciated by 0.1% and is trading weaker today. Asian currencies are trading mixed.
Global yields closed mixed, with 10Y yield in UK rising by 6bps, German Bund ending flat, and others declining. US 10Y yield was down by 2bps, as investors anticipate Fed action post its May’23 meeting and also monitor uncertainty around Congress raising the debt ceiling. India’s 10Y yield too declined, by 3bps (7.20%). It is trading even lower today at 7.19%.
Global oil prices remained flat, as benefits from falling US crude inventories were negated by concerns over weak demand, if Fed decides to hike again.
Fed’s beige book indicates that economic activity remains broadly unchanged. Signs of stress are visible in manufacturing activity and lending volumes. Further, producer prices have begun to cool down, while consumer prices still remain elevated, owing to steady demand. Wage growth is moderating but still remains at elevated levels. Analysts are now expecting one or two more rate hikes by Fed, while the probability of rate cut in CY23 has narrowed. In UK, while CPI in Mar’23 eased to 10.1% from 10.4% in Feb’23, it still remains above the 10% mark and also above market expectation of 9.8%. This has raised the likelihood of at least one more rate hike by BoE.
Most of global indices ended lower with focus turning towards Fed meet and corporate earnings. Fed’s Beige Book highlighted that little has changed in the economy, though access to credit has narrowed in the wake of banking crisis. Sensex declined for 3rd straight day led by losses in IT and power stocks. However, it is trading higher today while other Asian indices are trading lower.
Barring GBP, other global currencies ended lower. DXY climbed up by 0.2% with better than expected results posted by US Banks. GBP firmed up after UK’s inflation print came in hotter than expected and raised the likelihood of more hikes by BoE. INR depreciated by 0.2% despite fall in oil prices. Though, it is trading stronger today and other Asian currencies are trading mixed.
Except China and India (flat), other global yields inched up. 10Y yield in UK rose the most (+11bps), followed by Germany and US. UK’s elevated inflation print for Mar’23 has reignited fears of more rate hikes by BoE. Further, probability of Fed cutting rates this year has narrowed considerably. India’s 10Y yield remained unchanged and is trading lower today at 7.19%.
Global oil prices fell as dollar strengthened, and worries around global demand persist amidst possibility of more rate hikes by Fed and BoE.
Latest US data shows that existing home sales have again begun to decline in Mar’23 (4.4mn units versus est.: 4.5mn and 4.6mn in Feb’23). On a MoM basis, sales were down by (-) 2.4% versus est.: (-) 1.8% and 14.5% increase in Feb’23. This is largely owing to reversal in mortgage rates. Further, labour market is also beginning to show signs of stress as initial jobless claims were up by 5k to 245k for the week ending 15 April. However, as 4-week moving average remains broadly steady (-0.5k, to 239,750), Fed is widely expected to increase rates by another 25bps in May’23. This has reignited fears of recession, leading to decline in equity markets, and bond yields. Oil prices were impacted by possibility of muted global demand and higher supplies from Russia.
Global indices ended mixed. Investors digested earnings report from across the globe. US indices ended in red after disappointing string of data releases signalling broad weakness in the economy. Sensex rebounded and inched up after declining for 3 days in a row led by marginal gains in power and cap goods stocks. It is trading higher today while other Asian indices are trading lower.
Barring GBP (flat), other global currencies ended higher. Weakness in DXY (0.1%) was evident as fear of recession is back (subdued US data). Despite this, Fed is likely to raise rates in the upcoming meet. INR appreciated by 0.1% as oil prices slipped amidst concerns over subdued demand. It is trading even stronger today while other Asian currencies are trading mixed.
Except China and India (flat), other global yields declined. 10Y yield in UK fell the most (-9bps), followed by Germany and US. Weaker than expected data from the US (home sales, jobless claims) has reignited fears of recession. India’s 10Y yield remained flat but is trading a tad higher at 7.21% today.
Global oil prices fell by 2.4%, over concerns of muted global demand, and higher oil supplies from Russia in Apr’23 (expected to be highest since 2019).
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