Economic Weekly Wrap
22 April 2024 - 26 April 2024

Recent reports of possible de-escalation in the ongoing conflict in the Middle East between Iran and Israel gained prominence, after Iran signalled the possibility of no retaliation against Israel. Investors have downsized the possibility of rate cut by Fed which was earlier expected in Jun’24 and now has been postponed to Sep’24, given the hotter-than-expected inflation data, tight labour market and ongoing geopolitical conflict. Separately, Bundesbank’s official recently made comments stating that ECB is expected to cut rates by Jun’24, but noted there are ‘still some caveats’. Investors will closely track US GDP, global PMI readings and BoJ’s guidance on rate hike this week.

Global indices ended mixed. Investors monitored quarterly earnings reports and scaled back expectations of rate cut possibilities by Fed. Developments surrounding the tensions in Middle East also kept investors on the edge. Nikkei dropped the most led by a slump in semiconductor shares. On other hand, Sensex ended in green, supported by gains in banking and metal stocks. It is trading higher today, in line with other Asian stocks.

Global currencies ended mixed. DXY rose by 0.1%, as Israel’s attack on Iran and hawkish comments of Fed officials, impacted investor sentiments. Other safe-haven currencies like JPY and Swiss Franc pared gains. INR rose by 0.1%, as oil prices remain below US$ 90/bbl mark. It is trading stronger today, while other Asian peers are trading mixed.

Global yields closed mixed. US 10Y yield fell by 1bps as investors assess the impact of Israel’s attack on Iran. UK 10Y yield fell the most, following comments of BoE deputy governor Ramsden stating that UK inflation might come in lower than bank’s projection in the next 3 years. Following stickiness in oil prices, India’s 10Y yield rose by 4bps to 7.23%. It is trading at similar levels today.

Oil prices were broadly steady as tensions in Middle East persist.

As the concerns around Middle East conflict eased, global indices rebounded with demand for safe haven assets waning. Prices for gold and oil moderated. In the upcoming policy meet, investors anticipate BoJ will not change rates after Governor commented to ‘proceed cautiously’ and first assess the impact of recent policy change. Separately, Australia’s composite PMI scaled up to a 2-year high (53.6 in Apr’24 from 53.3 in Mar’24) and in Japan, business activity climbed up at its fastest pace in over 8-months (52.6 from 51.7 in Mar). Investors will closely await India’s flash PMI reading and release of US PCE data scheduled this week.

Barring Shanghai Comp, other global indices ended higher. US indices rebounded after ending lower as investors continued to monitor quarterly earnings reports. FTSE closed at a record high amidst growing expectations of a rate cut. Sensex continued to climb up supported by a strong rally in consumer durables and capital good stocks. It is trading higher today, in line with other Asian stocks.

Except INR, other global currencies ended broadly weaker against the dollar. EUR and GBP depreciated as both ECB and BoE are expected to cut rates before the Fed. JPY depreciated to its weakest since Jun’90, ahead of BoJ’s policy meeting. INR appreciated by 0.1% as oil prices eased. It is trading further stronger today, in line with other Asian currencies.

Except Japan, other global yields edged down. 10Y yield in UK fell the most by 3bps amidst expectations that the BoE is likely to cut rates in Jun’24. On the other hand, Japan’s 10Y yield rose by 4bps as investors turned their focus on upcoming BoJ policy amidst a sustained weakness in JPY. India’s 10Y yield fell by 4bps amidst easing tensions in Middle East. It is trading further lower at 7.17% today

Oil prices moderated as tensions in Middle East eased

In the US, new orders for durable goods climbed up by 2.6% to US$ 283.4bn in Mar’24 from 0.7% in Feb’24 on a monthly basis, reflecting strength in the economy. New orders excluding defence climbed by 2.3% and orders excluding transportation were up by 0.2% in Mar’24. Investors will turn their focus towards US GDP and PCE data which is Fed’s preferred gauge of inflation and might shed some light on Fed’s trajectory on rate outlook. The rate cut possibility in Jun’24 has dwindled. Separately, Indonesia’s central bank surprised with a first rate hike since Oct’23 with 7-day rate increased to 25bps to 6.25% (highest since 2016). The objective was to strengthen the currency which has fallen to a 4-year low.

Barring Dow Jones and FTSE, other global indices ended higher. US indices ended lower with focus turning towards US GDP and PCE data. Nikkei extended its gains for the third day in a row as investors await outcome from the ongoing BoJ policy meet. Sensex continued to climb higher led by gains in metal and oil & gas stocks. However, it is trading lower today, in line with other Asian stocks.

Global currencies traded in thin ranges ahead of key US macro data. EUR, CNY and INR were little changed from their last close. On the other hand, JPY depreciated further by 0.3% to breach the 155/$ mark, intensifying expectations of a possible intervention by BoJ. INR is trading weaker today, while other Asian currencies are trading mixed.

Global yields ended higher. 10Y yield in Germany rose sharply by 9bps as Ifo’s business climate index rose more than expected. In US as well, 10Y yield rose as durables goods orders surprised positively. Following global cues, India’s 10Y yield also edged up by 2bps. Traders also await the g-sec auctions on Friday. It is trading flat at 7.19% today.

Oil prices eased amidst prospects of delayed rate cuts in US.

Growth in US economy slowed down to 1.6% at annualized pace in Q1CY24 from 3.4% in Q4CY23. The moderation was on account of deceleration in consumer spending, exports and government spending. On the other hand, inflation accelerated in Q1 driven by jump in services inflation (excl housing and energy) at 5.1%. This come ahead of the key PCE data which is Fed’s preferred gauge of inflation. Additionally, jobless claims dropped to 2-month low to 207,000 last week. Separately BoJ kept the policy rate unchanged in line with expectation. Following this decision, Yen dropped to a fresh low.

Global indices ended mixed. US indices ended lower as investors monitored lower than expected US GDP print. Furthermore, disappointing earnings results also weighed on investor sentiment. Nikkei dropped the most amongst other indices. On the other hand, Sensex jumped by 0.7% led by rally in metal and power stocks. It is trading higher today, in line with other Asian stocks.

Global indices ended mixed. US indices ended lower as investors monitored lower than expected US GDP print. Furthermore, disappointing earnings results also weighed on investor sentiment. Nikkei dropped the most amongst other indices. On the other hand, Sensex jumped by 0.7% led by rally in metal and power stocks. It is trading higher today, in line with other Asian stocks.

Except JPY (lower) and INR (flat), other major currencies rose against the dollar. DXY fell by (-) 0.2%, as risk appetite of investors improved, demand for safe haven fell. GBP and EUR gained the most. INR remained unchanged as gains from improved risk sentiment were outweighed by rise in oil prices. However, it is trading lower today, in line with other Asian currencies.

Oil prices rose, supported by US treasury secretary comments and tensions in Middle East.