Economic Weekly Wrap
28 April 2025 - 02 May 2025

Amidst conflicting statements from US and China on trade negotiations, hopes that an all-out trade war between the two countries might be avoided, provided some relief to investors. Macro data from the US signalled an improvement in consumer sentiment index, along with a moderation in inflation expectations. With a slew of macro data scheduled to be released this week, including the crucial jobs report and GDP data, investors will continue to monitor signs of any weakness in the world’s largest economy. In Japan, focus remains on BoJ’s policy decision, amidst a hotter than expected inflation report in Tokyo. Investors widely expect the BoJ to keep rates on hold this week. In India, markets are likely to tread cautiously monitoring the evolving geo-political situation.

Barring China and India (lower), global indices ended higher. Nikkei firmed up ahead of BoJ’s policy decision. US stocks were supported by US Treasury Secretary’s comments on possible negotiations with its 17 major trading partners. On the other hand, expectations of stimulus in China, kept losses largely capped. Sensex was dragged down by real estate stocks. It is trading higher today while other Asian stocks are trading mixed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Global currencies broadly ended weaker. DXY edged up, even as investors await more clarity on US-China trade negotiations. JPY depreciated led by an improvement in risk sentiments. INR depreciated by 0.2%. However, 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

US 10Y yield fell at the sharpest pace supported by softening inflation expectations (University of Michigan 1Y). Falling consumer confidence in the UK, kept its yields lower. Japan’s 10Y yield inched up following higher CPI print in Tokyo. India’s 10Y yield rose by 4bps, amidst heightened geopolitical tensions. It is trading at 6.37% 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 22 Apr and 23 Apr 2025

Oil prices inched up amidst expectations of trade truce.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Reports indicated that the US government is likely to announce some relief on auto tariffs. Earlier, the US President had announced a 25% tariff on imported auto parts, slated to take effect from 3 May 2025. The move is expected to benefit US car manufacturers and signals growing flexibility from the US on its tariff stance. However, the ambiguity with respect to US-China trade negotiations continued, with investors continuing to await any signs of de-escalation from either side. In India, industrial production growth eased to 4% in FY25 from 5.9% in FY24. Separately, RBI announced fresh OMO purchase of Rs. 1.25 lakh crores in May’25. This is in addition to the Rs. 80,000 crore OMO auction already conducted in Apr’25, and is likely to put further downward pressure on domestic yields.

Barring China, global indices ended higher. Investors monitored developments on tariff front and corporate earnings. US stocks inched up, supported by White House’s softening stance on auto tariffs. Stocks in China moderated tracking comments from its Foreign Minister. Sensex was supported by oil and gas stocks. It is trading higher today, while Asian stocks are trading mixed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Global currencies ended stronger against the dollar. DXY declined by 0.5% awaiting US macro data. JPY posted the maximum gains, ahead of BoJ policy meet. INR appreciated to a 4-month high, led by lower oil prices and positive global cues. However, it is trading marginally weaker today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research | Note: Brackets indicate depreciation against US dollar

US 10Y yield softened ahead of major jobs reports and PCE data release. Germany’s 10Y yield stiffened despite some growing expectations of rate cut by ECB. UK’s 10Y yield inched up albeit softening retail sales volume data. India’s 10Y yield rose by 3bps. It is trading lower at 6.33% today, supported by RBI’s fresh OMO purchase announcement, in consonance with daily VRR.

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 23 Apr and 24 Apr 2025

Oil prices softened as demand outlook remains worrisome amidst tariff turmoil.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Trade concerns eased marginally as the US President announced tweaks to auto tariffs, and US Commerce Chief hinted at the completion of a trade deal with a foreign trading partner. This came on heels of macro data which signalled further economic distress. US trade deficit rose to a record high in Mar’25, while consumer confidence slipped to near 5-year low in Apr’25. JOLTS survey also showed a decline in US job openings in Mar’25. In China as well, the impact of tariffs was pronounced with the official manufacturing PMI slipping to at 49.0 in Apr’25 (lowest since Dec’23). Industrial production in Japan fell by 1.1% in Mar’25 (MoM), amidst tariff related uncertainty. Separately in India, private sector capex is estimated to have increased by 66.3% between FY22-FY25 as per a survey by MoSPI.

Equity indices broadly edged up amidst expectations of upbeat earnings report from major technology companies. US stocks rose the most, followed by FTSE. Shanghai Comp moderated anticipating more stimulus to drive growth. Sensex notched a tad higher. It is also trading higher today, while Asian stocks are trading mixed as China’s PMI data disappointed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research
Note: Markets in Japan were closed on 28 Apr 2025

Except CNY, other global currencies ended weaker against the dollar. DXY rose by 0.2% despite weak macro data from the US. EUR depreciated by 0.3% even as Germany’s GfK consumer confidence index improved. INR also depreciated in line with global cues. However, it is trading stronger today, while other Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research
Note: Brackets indicate depreciation against US dollar

Global yields softened, led by US amidst muted macro prints such as moderating consumer confidence and employment data. In UK, a fall in BRC shop price data led to a fall in its yield. Germany’s 10Y yield also inched down expecting a further moderation in CPI. India’s 10Y yield fell by 5bps, supported by RBI’s liquidity measures. It is trading stable today.

Fig 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research
Note: Markets in Japan were closed on 28 Apr 2025

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

 Oil prices eased as macro indicators in the US showed signs of stress.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

US-China trade tensions eased as both the nations expressed willingness to start trade negotiations. Earlier, US Trade Representative also stated that trade deals with some of US’ major trading partners are likely within weeks, providing comfort to global markets, amidst weak macro data. In the US, signs of cooling labour market (jobless claims rose by 18,000) and weakening manufacturing activity (ISM PMI at 48.7 in Apr’25), raised fresh concerns. This comes on the heels of a dismal GDP report, which showed that US GDP shrank by 0.3% in Q1 2025. Separately, Bank of Japan also revised its growth estimates lower amidst tariff related uncertainty, while keeping its policy rate on hold. However, signalling robust domestic demand, GST collections in India rose to a record high of Rs. 2.4 lakh crores in Apr’25, registering a growth of 12.6% on a YoY basis.

Equity indices broadly closed higher. Investor sentiments were supported by upbeat corporate earnings of major technology companies. Apart from this, anticipation of possible trade negotiations between US and China as hinted by China’s Commerce minister, also remained positive for markets. Sensex is trading higher today, while Asian stocks are trading mixed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research │
Note: Markets in India, China and Hong Kong were closed on 01 May 2025

Global currencies ended mixed. DXY rose by 0.8% recovering some of its losses as investors await the jobs report. JPY depreciated sharply as BoJ trimmed its growth forecast. Despite a stronger than expected GDP report, EUR edged lower. INR is trading stronger today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research │
Note: Brackets indicate depreciation against US$ │ Markets in India and China were closed on 01 May

US 10Y yield rose considerably amidst expectations of possible trade negotiations between US-China and US-Japan. Germany’s 10Y yield also softened as inflation hit a 7-month low, suggesting a softer policy stance from ECB. Japan’s 10Y yield also eased as BoJ hinted at delay in future rate hikes. India’s 10Y yield rose a tad and is trading at 6.35% today

Fig 3 – Bond 10Y yield

Source: Bloomberg, Bank of Baroda Research │
Note: Markets in India and China were closed on 01 May 2025

Fig 4 – Short term rates

Source: Bloomberg, Bank of Baroda Research │
Note: Markets in India were closed on 01 May 2025

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research, *Includes LTRO │
Note: Markets in India were closed on 01 May 2025

Fig 6 – Capital market flows

Source: Bloomberg, Bank of Baroda Research
Note: Mutual Fund data as of 25 Apr and 28 Apr 2025

 Oil prices eased as macro indicators in the US and Asia remained muted.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research