Economic Weekly Wrap
24 March 2025 - 28 March 2025

Trump administration has indicated that there might be some “flexibility” in terms of reciprocal tariffs imposed by the US. Hopes of talks between China and US Presidents on tariff situation has also has positive impact on US equity markets. In the UK, after BoE showed no hurry to cut rates aggressively, focus has now shifted to FM Reeves’ spring statement later this week. Government is expected to continue with its tax proposals and job cuts, in the wake of rising borrowings. Elsewhere, flash PMIs for Mar’25 show that economic activity contracted in Japan, while it improved in Australia. Japan’s manufacturing PMI is down to 46.5 (48.4 in Feb’25) and services PMI has fallen to 49.5 from 53.7 last month. Domestically, private data shows that share of premium real estate (>Rs 1.5cr) has risen to 17% in CY24, with tier 2&3 increasing their share, led by urbanization and improved infrastructure.

Global markets ended mixed. US indices ended in green as President Trump hinted at some flexibility to the global tariffs. On the other hand, Hang Sang ended in red followed by losses in Shanghai Comp. Sensex continued to extend its gains supported by a reversal in buying from FIIs. Oil & gas stocks gained the most. It is trading higher today while other Asian indices are trading mixed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Barring INR and CNY, other global currencies ended lower. DXY rose as continued geopolitical tensions held demand for safe haven. GBP ended lower ahead of the crucial inflation report. INR appreciated despite higher oil prices. It is trading stronger today while other Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: Figures in brackets indicate depreciation against the dollar

Except Germany and India, other 10Y yields inched up. UK’s 10Y yield rose the most as data showed that UK government borrowed more than expected in Feb’25. Hawkish tone of BoE also impacted sentiments. In the US, investors await more information on Trump administration’s reciprocal tariffs. India’s 10Y yield fell by 1bps and is trading flat 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 13 Mar and 17 Mar 2025

Oil prices rose a tad, tracking news of US issuing fresh sanctions on Iran.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Flash global PMIs show that manufacturing activity contracted at a faster pace in Mar’25 in the US (49.8 versus 52.7 in Feb’25) and UK (44.6 versus 46.9) and at a slower pace in Eurozone (48.7 versus 47.6). In contrast, services activity improved in the US (54.3 versus 51.0) and UK (53.2 versus 51.0), but slowed in Eurozone (50.4 versus 50.6), led by Germany. In the US, future optimism level declined, while cost pressures, across both sector increased. Domestically, RBI announced slew of measures to ensure adequate credit flow to priority sectors. Under PSL norms, central bank has increased the limit for housing loans to Rs 50/45/35 lakh, for renewable sector to Rs 35 cr (non-individual)/Rs 10 lakh (individual borrower), and has removed the cap on loans to women by UCBs. Further, the overall PSL target for UCBs has also been revised to 60% versus 65% for this year decided earlier.

Barring FTSE and Nikkei, other indices ended higher. Investors monitored the news of President Trump possibly scaling back on tariff plan to a more targeted approach. Furthermore, dovish commentary by Fed officials on inflation also boosted sentiments. Sensex solidified further gains with rally noted across sectors. It is trading higher today while other Asian indices are trading mixed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Global currencies ended mixed. DXY firmed up supported by robust services PMI and optimism surrounding tariffs plan. JPY weakened amidst contraction noted in PMIs along with fading safe haven demand. INR appreciated, with return of FIIs. It is trading weaker today; Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: Figures in brackets indicate depreciation against the dollar

Global 10Y yields closed mixed. US 10Y yield rose the most (9bps), as fears of all-out trade war eased, thus raising hopes of smaller impact on economic growth. Continued momentum in services activity in the US also boosted investor sentiments. India’s 10Y yield ended flat, but is trading a tad higher today (6.64%), tracking global cues and rise in oil prices.

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 18 Mar and 19 Mar 2025

Oil prices rose as Trump administration targets Venezuelan oil exports.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

US macro data is pointing towards diverging growth trends. New home sales rose by 1.8% (MoM) in Feb’25 to 676k units, supported by lower mortgage rates. The 30Y fixed rate mortgage averaged 6.84% in Feb’25 versus 6.96% in Jan’25 and is further down to 6.65% in Mar’25 so far. In contrast, conference board consumer confidence index fell by 7.2 points to 92.9 in Mar’25 (lowest since Jan’21). More significantly, the future expectations index dropped to 12-year low of 65.2 (-9.6 points), falling much below the threshold level of 80, an indication of expected recession in the economy. Survey participants highlighted rising economic and political uncertainty as the key reason. Elsewhere, in Germany, IFO business climate index rose to 86.7 in Mar’25 from 85.3 in Feb’25, driven by improvement in the expectations index (87.7 versus 85.6). Manufacturing and services sector became less sceptical about the future.

Global indices ended mixed. US indices closed flat as investors tracked weaker consumer confidence data and awaited clarity on a more targeted approach on tariff plans. FTSE advanced lifted by gains in Shell amidst a new strategy update that will be cost effective. Sensex remained steady. It is trading lower today while other Asian indices are trading mixed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

 Global currencies closed mixed. DXY weakened amidst poor macro data and uncertainty prevailing on tariff plans. GBP appreciated awaiting inflation report and an update on budget. JPY strengthened amidst hawkish tone by BoJ. INR depreciated and is trading stronger today; Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research | Note: Figures in brackets indicate depreciation against the dollar

Global 10Y yields closed mixed. US 10Y yield fell by 2bps in the wake of plummeting consumer confidence levels. German bond yields inched up, tracking loose fiscal policy and improvement in business sentiment index. India’s 10Y yield rose by 1bps, but is trading a tad lower today at 6.63%, tracking global cues.

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 20 Mar and 21 Mar 2025

 Oil prices remained steady, tracking news of Russia-Ukraine peace pact.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

US durable goods orders in Feb’25 rose by 0.9% on MoM basis (est.: -1%) following 3.3% increase in Jan’25, as a result of front-loading of orders before tariffs were to be implemented. This was led by orders for electrical equipment, motor vehicles and parts, defence aircrafts, and primary metals. In contrast, core goods orders, fell by (-) 0.3% versus 0.9% in Jan’25. More recently, Trump administration announced 25% import duty on imported cars and light trucks. This is expected to impact inflation in the US and has thus led to hardening of bond yields. Separately, in Australia and UK, inflation surprised on the downside in Feb’25. In UK, CPI was down to 2.8% (est.: 2.9%) from 3% in Jan’25, helped by clothing and housing. In Australia inflation eased to 2.4% (est.: 2.5%) from 2.5%, led by gasoline, electricity and food. Despite this, RBA is unlikely to cut rates next week, as general elections are due in May’25.

Global indices ended mixed. Investors tracked the announcement of 25% tariff on auto imports by US President. As a result, US indices tumbled with auto stocks noting high losses. Fed officials stated amidst policy uncertainty, Fed will stay put. Sensex ended in red, with broad based losses noted across sectors. However, it is trading higher today while Asian indices are trading mixed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

 Barring INR, other global currencies closed lower. DXY rebounded as concerns resurfaced with new tariffs and their overall impact on global trade. GBP weakened amidst softer than expected inflation print. INR edged higher. It is trading weaker today; Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research | Note: Figures in brackets indicate depreciation against the dollar

Global 10Y yields closed mixed. US 10Y yield rose by 4bps, as durable goods orders data showed unexpected improvement and Trump administration announced fresh tariffs on auto imports. UK bond yield reacted to slowing inflation rate. India’s 10Y yield fell by 3bps to 3-year low of 6.60%, amidst hopes of a rate cut by RBI next week. It is trading even lower today at 6.59%.

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 Mar and 24 Mar 2025

▪ Oil prices rose, as EIA data shows decline in US crude inventories.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

US GDP growth for Q4CY24 (3rd estimate) was revised upward to 2.4% from 2.3% earlier (3.1% in Q3). This was led by higher than estimated consumer and government spending. Pending home sales rose by 2% (est.: 1.5%) in Feb’25, following (-) 4.6% decline in Jan’25. Improved weather conditions and lower mortgage rates helped. Initial jobless claims for the week ending 22 Mar’25 fell by 1k to 224k, while continuing claims (4-week average) rose by 2.25k to 1.87mn. Separately in Asia, China’s industrial profits in Jan-Feb’25 fell by (-) 0.3% following 11% increase in Dec’24. Trade war with US impacted profit margins of Chinese firms as importers bargained for price cuts. Domestically, central government announced borrowing calendar of Rs 8 lakh cr for H1FY26 (est.: Rs 8.4 lakh cr), wherein it plans to lower the supply of ultra-long dated papers and increase that of short-term papers.

Global indices closed mixed. Investors turned cautious as they continue to monitor tariff announcements, which are expected to delay rate cuts by Fed. Overall uncertainty weighed on investor sentiments, with auto stocks taking a hit globally. Sensex advanced, reflecting domestic resilience with gains in real estate stocks. However, it is trading lower today in line with Asian indices.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Barring JPY and INR, global currencies closed lower. DXY softened ahead of crucial PCE data. GBP made a quick recovery awaiting GDP and retail sales print. INR depreciated amidst higher dollar demand from importers at month end. It is trading stronger today; Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: Figures in brackets indicate depreciation against the dollar

Global 10Y yields closed mixed. UK’s 10Y yield rose the most, as FM Reeves announced 2nd highest borrowing program on record, with long-dated securities issuance falling to its lowest levels. Yields in US were buoyed by positive macro data. India’s 10Y yield closed flat and is trading steady today as well, even as government announced lower than expected borrowing calendar for H1FY26

Fig 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research

Fig 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research

Fig 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research

Note: Mutual Fund data as of 24 Mar and 25 Mar 2025

Oil prices rose further, over concerns of tighter supplies.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research