Economic Weekly Wrap
21 April 2025 - 25 April 2025

US Fed Chair Jerome Powell cautioned markets by stating that tariffs are “likely to generate at least a temporary rise in inflation”. In addition he also acknowledged that the pace of growth slowed in Q1CY25. As a result, Fed is likely to await for more clarity before taking any call on rate decisions. Re-affirming this view, latest data shows that housing starts eased to 1.32mn units in Mar’25 (est.: 1.42mn) from 1.49mn units in Feb’25. For the week ending 5 Apr’25, continuing jobless claims rose to 1.89mn (est.: 1.87mn) from 1.84mn last week. Separately, in Europe, amidst rising tariff uncertainty and risks to growth, ECB lowered its key policy rate by 25bps. The statement hinted that even steeper cuts in future, to support growth. In Japan, inflation in Mar’25 (3.6%) continues to remain higher than BoJ’s target, but the central bank is expected to keep rates on hold for now in its meeting next week.

Global indices ended mixed. Investors will turn their focus towards upcoming corporate results scheduled this week. Amidst the tariff uncertainty, analysts expect the US profit growth to be lower this year. Nikkei rebounded as investors monitored trade negotiations. Sensex is trading higher today, while other Asian stocks are trading mixed as PBOC keeps lending rates unchanged.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Note: All markets, except Japan and China, were closed on 18 Apr 2025

Global currencies ended mixed. EUR slid after the ECB lowered benchmark rates by 25bps. Trade talks between US and Japan provided reprieve to greenback. INR strengthened amidst easing inflation and return of the FIIs. It is trading further stronger today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: Brackets indicate depreciation against US$; markets (except China and Japan) were closed on 18 Apr

In a holiday shortened week, US 10Y ended 5bps higher, as Fed Chair Powell cautioned that there were upside risks to inflation, even as economy is showing signs of weakening (initial jobless claims). Yields in Europe reacted to ECB rate cut. India’s 10Y yield softened by 2bps, supported by auction day demand. It is trading further lower today at 6.36%.

Fig 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Note: All markets, except Japan and China, were closed on 18 Apr 2025

Fig 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Note: All markets were closed on 18 Apr 2025

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research

*Includes LTRO

Fig 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research

Oil prices rose, tracking fresh US sanctions on Iran, and OPEC’s supply cuts.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Note: All markets were closed on 18 Apr 2025

Amidst escalating tariff war and rising tensions between the US government and the central bank, US stocks declined, dollar weakened, treasury yields inched up and gold prices also jumped. Recently, US announced upto 3,521% tariff on solar imports from certain south east Asian countries (mainly Cambodia, Malaysia, Thailand and Vietnam). Domestically, to protect Indian steel producers, central government has decided to levy 12% temporary tariffs on certain steel imports from China. Also, in a major relief to the banking sector, RBI released the final guidelines for LCR by banks (to be implemented from Apr’26), which are more liberal than draft rules. Trimmed run-off factor rates for stable deposits (7.5%) and less stable deposits (12%) was a key change. Further, run-off factor for funding from nonfinancial entities has also been reduced from 100% to 40%.

Global indices ended mixed. US indices closed lower as investor monitored US President’s remarks on Fed Chair. Notably, corporate earnings will remain in focus. Sensex continued its upward momentum led by a rally in power and real estate stocks. However, it is trading lower today while other Asian stocks are trading mixed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Note: Markets in UK and HK were closed on 21 Apr 2025

Global currencies ended higher. The dollar index weakened to a 3-year low as the US-Sino trade conflict intensified. Notably, the EUR gained strength as it emerged as a viable alternative. INR appreciated given lower crude prices. It is trading weaker today, other Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: Brackets indicate depreciation against US$; Markets in Europe were closed on 21 Apr 2025

Barring US and China, 10Y yields elsewhere declined. The US 10Y rose sharply by 9bps, as increased strains between the US government and central bank kept investor demand on edge. India’s 10Y yield fell by 6bps, supported by hopes of further rate cut by RBI in the near-term and more liquidity infusion measures. Tracking global cues, it is trading a tad higher today at 6.33%.

Fig 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Note: Markets in Europe were closed on 21 Apr 2025

Fig 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Note: All markets were closed on 18 Apr 2025

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 16 and 17 Apr 2025

Oil prices fell, reacting to progress around US-Iran talks, and demand concerns.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Note: Markets in Europe were closed on 21 Apr 2025

IMF in its latest update on global economic outlook has acknowledged that the ongoing trade war will have a “major negative shock” on overall growth prospects. In these uncertain times, investments are expected to get paused/reduced, credit to businesses will also take a hit. As a result, global growth is now expected at 2.8% in CY25 versus 3.3% estimated in Jan’25. Growth in US is also going to be lower at 1.8% (2.7% earlier). Inflation in advanced economies will be higher, particularly in the US (3% versus 2% earlier). These developments will also impact India (FY26 GDP at 6.2% versus 6.5%). Looking at high frequency data, Australia’s both manufacturing (51.7 versus 52.1 in Mar’25) and services (51.4 versus 51.6) activity slowed in Apr’25. In Japan, pace of contraction in manufacturing sector eased in Apr’25 (48.9 versus 46.6), and services activity improved (52.2 versus 50).

Barring Nikkei, other global indices ended higher. US indices closed in green amidst optimism surrounding a possible trade deal between US and China. Additionally, positive remarks by US President on Fed chair boosted investor sentiments. Sensex advanced further with gains in real estate and consumer durable stocks. It is trading higher today in line with other Asian stocks.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Note: Markets in UK and HK were closed on 21 Apr 2025

Except GBP, other global currencies ended lower. DXY strengthened in a relief rally amidst de-escalation of trade tensions between US and China. EUR slid given the return of risk-on sentiment. INR depreciated amidst higher crude prices. It is trading weaker today, other Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: Brackets indicate depreciation against US$; Markets in Europe were closed on 21 Apr 2025

Barring Japan and India, 10Y yields declined elsewhere. Yields fell the most in Germany and UK, followed by the US. ECB’s stance to stand ready to support growth, cooled yields down. In the US, mixed-safe haven demand pulled longterm yields down and pushed short-term yields higher. India’s 10Y yield closed flat. Tracking global cues, it is trading lower today at 6.30%.

Fig 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Note: Markets in Europe were closed on 21 Apr 2025

Fig 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research

Note: *Includes LTRO

Fig 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research

Note: Mutual Fund data as of 16 and 17 Apr 2025

Oil prices recovered, tracking news of fresh US sanctions on Iran

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Note: Markets in Europe were closed on 21 Apr 2025

Latest flash PMIs indicate that manufacturing activity in the US improved in Apr’25 (50.7 from 50.2 in Mar’25), even as output prices rose to 29-month high, driven by tariffs. Service sector activity eased (51.4 versus 54.4). New home sales jumped by 7.4% (MoM) in Mar’25 to 724k, supported by lower mortgage rates. Elsewhere in Europe, contraction in manufacturing moderated in Germany and France, while it quickened in UK. In both Eurozone and UK, services activity fell into contraction in Apr’25. In Asia, South Korea’s Q1CY25 GDP fell by (-) 0.1% (est.: +0.1%)—first contraction since Q4CY20, and lower than 1.2% rise in Q4CY24, due to 12.4% decline in construction output. Domestically, minutes of RBI’s Apr’25 meeting reflected a dovish stance. All members agreed that less restrictive policy was needed to support growth, amidst global tariff shocks, given inflation is under control.

Barring Shanghai Comp, other global indices rallied higher. US indices gathered further momentum amidst softer stance by US on possibly levying lower tariffs on China. Technology and consumer discretionary stocks were the biggest gainers. Sensex closed in green with gains in IT and auto stocks. However, it is trading lower today while other Asian stocks are trading mixed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except CNY, other global currencies ended lower. Greenback gained amidst signs of easing trade tensions given flexibility in negotiations. Yen slid, due to lower demand for safe haven. INR depreciated and is trading weaker even today. Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: Brackets indicate depreciation against US dollar

Barring US, 10Y yields rose elsewhere. US 10Y yield eased as Trump administration softened its stance on trade war with China. This helped recover investor sentiments globally. India’s 10Y yield rose a tad by 1bps, even as oil prices declined. Tracking global cues, it is trading higher today at 6.35%.

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

Note: Includes LTRO

Fig 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research

Note: Mutual Fund data as of 17 and 21 Apr 2025

Oil prices fell, as news reports indicate OPEC’s plans to ramp up production in May and Jun’25.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

US macro data is pointing towards mixed trends in growth. For instance, durable goods orders in Mar’25 jumped by 9.2% (MoM) following 0.9% increase in Feb’25. This was led by steep increase in orders for non-defence aircraft and parts. Core capital goods orders (non-defence excluding aircraft) however rose at a muted pace (0.1% versus -0.3%). Also, real estate sector appears to be under pressure with existing home sales declining by (-) 5.9% (MoM) in Mar’2, compared with 4.2% increase in Feb’25. Further, initial jobless claims in the US rose by 6k in the week ending 19 Apr to 222k. Analysts expect US GDP growth to have flattened in Q1CY25. IMF and Fed’s beige book have also highlighted concerns regarding the possible impact of tariffs on growth. Even Germany expects flat growth in CY25, due trade war shock. In contrast, India is expected to finalise trade deal with US soon.

Global indices closed mixed. US indices advanced with easing of trade tensions as US toned down on tariff rhetoric. The rally was led by technology stocks and supported by better than expected corporate earnings. Sensex closed in red with losses in real estate and IT stocks. However, it is trading higher today in line with other Asian stocks.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except CNY, other global currencies ended higher. DXY retreated amidst weaker PMI data and Fed’s Beige book noted some concerns on economic outlook due to heightened uncertainty. INR appreciated supported by FIIs inflow. It is trading stronger today while Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: Brackets indicate depreciation against US dollar

Barring China, 10Y yields fell elsewhere. US 10Y yield fell the most (-7bps), followed by UK and Germany. In the US, investor demand improved as tensions between US and China as well as US government and Fed appeared to soften. India’s 10Y yield also fell by 1bps, as oil prices remain muted. It is trading range bound even today at 6.33%.

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 21 and 22 Apr 2025

Oil prices rose a tad, supported by seasonal demand, and low US inventories.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research