Economic Weekly Wrap
29 April 2024 - 03 May 2024

Macro data prints in the US pointed towards robust spending and stable income growth. Core PCE deflator remained sticky on a sequential basis. The University of Michigan data for 1-year ahead inflation expectations also showed some de- anchoring. The recent speeches of US central bank officials were also tilted towards a hawkish bias amidst the growth-inflation dynamics of the region. Elsewhere in UK, consumer confidence index remained slightly upbeat. In Japan, Yen has slid past the psychological 160 mark for the first time since CY90. A plausible explanation would be considerable policy divergence with the US. However, officials have hinted time and again at intervention to check depreciation. On domestic front, month end releases will be closely watched.

Except India, stocks elsewhere edged up. Stocks in China and Hong Kong rose the most, amidst a revival in foreign inflows in the region. US indices also edged up led by a rally in mega cap stocks after upbeat earnings report from tech On the other hand, in India, Sensex fell by 0.8% dragged by a decline in banking and technology stocks. It is however trading higher today, in line with other Asian stocks.

Global currencies depreciated against a stronger dollar. DXY rose by 0.3% as US inflation (PCE) remained persistently sticky, strengthening the case for higher rates. JPY depreciated by 1.7%, registering its largest single day fall since Oct’23 amidst unfavourable interest rate differential. INR was marginally However, it is trading weaker today, in line with other Asian currencies.

Except China (higher), global yields closed lower. Germany’s 10Y yield fell by 5bps as inflation is expected to flatline in Apr’24 as well. Elsewhere in US and UK, 10Y yield fell by 4bps as investors have already priced in a delayed start to the rate cut cycle by Fed. In UK, timing of rate cut is divided between Jun’24/ India’s 10Y yield fell by 2bps to 7.19%. It is trading at 7.20% today.

Oil prices rose as income data in the US reflected pickup in

Manufacturing activity in China showed revival with Caixin PMI index remaining above the 50-mark for the 2nd consecutive month. buoyed by new orders and export orders. Elsewhere, in Japan, Yen strengthened leading to speculation of official intervention. Macro data of the region showed that jobless rate inched up, retail sales decelerated, and industrial production picked up, thus providing conflicting signals about growth inflation duo. In Germany, inflation remained sticky, thus again raising doubts about the last mile of disinflation. In the US, Treasury ramped up its estimate for Apr-Jun’24 borrowing to US$ 243bn from US$ 202bn earlier. However, the impact on its yield is not yet visible. In a recent report by IMF, it has been pointed out that Asia’s improved growth outlook will be supported by India and China.

Global indices started the data heavy week on a positive note. Stocks in the US rose supported by upbeat earnings reports. The rebound in China’s stock market continued with Shanghai Comp rising by 0.8%, as investors reassessed their view on the state of the economy. Sensex rose sharply by 1.3%, with all sectoral indices (barring real estate) in green. Banking stocks advanced the It is trading further higher today, in line with other Asian stocks.

Barring INR, other global currencies appreciated against the dollar. DXY was 3% lower, as investors await the outcome of Fed policy meeting. JPY appreciated sharply by 1.3% on suspected BoJ intervention. INR depreciated by 0.1% to a fresh record low, led by month-end dollar demand from importers. It is trading weaker today, in line with other Asian currencies.

Global yields closed mixed. US 10Y fell by 5bps despite higher than estimated borrowing by Treasury for Apr-Jun quarter. 10Y yield in UK, Germany also moderated ahead of Fed policy decision. China’s 10Y yield inched up amidst expectation of some degree of momentum in economic activity. India’s 10Y yield rose a tad by It is trading at 7.19% today.

Oil prices moderated amidst expectation of Israel-Gaza truce

US labour market data showed persistent tightening. Jobless claims rose less than expected by 208K (est.: 211K). Unit labour cost has risen the most in a year in Q1CY24. What could be understood from the data is that considerable tightness would pose upward risk to wages and hence inflationary pressure cannot be ruled out in totality. Thus, cautious/wait and watch mode of Fed w.r.t. future policy action would prevail. Elsewhere, ECB official also confirmed that approach should be data dependent and refrained from pre-committing to rate path. As per latest OECD report, India’s buoyant growth rate will be driven by robust government capex. India’s PMI recorded the second fastest improvement. More importantly, inventories rose to near record level to support growing demand, as highlighted in the report.

Global stocks ended broadly higher. Hang Seng rose the most by 2.5% led by gains in technology and property sectors. US indices rose supported by better- than-expected earnings results. Tech stocks led the gains. Investors keenly await the US jobs report due later in the day to assess the Fed’s rate path. Sensex rose by 0.2%, led by gains in power and oil & gas stocks. It is trading further higher today, in line with other Asian

Global currencies ended mixed. All eyes remained on JPY which strengthened by another 0.6%, amidst signs of suspected intervention. DXY was 0.4% lower as investors await the payroll data. INR hovered near its record low amidst a slowdown in FPI However, it is trading stronger today, in line with other Asian currencies.

Except Japan (a tad higher), global yields closed lower. UK’s 10Y fell at the sharpest pace by 8bps as OECD report reflected some concerns on growth of the region. Even US and Germany’s 10Y yield have fallen, as Fed Chair’s commentary reflected some easing of monetary India’s 10Y yield fell by 3bps, taking global cues. It is trading at the same level today.

Oil prices rose marginally amidst a softer

Non-farm payrolls in the US rose by 175k in Apr’24, much lower than estimated 240k and also lower than 315k in Mar’24. Unemployment rate also rose, to 3.9% in Apr’24 from 3.8% in Mar’24. Average hourly earnings also rose at a slower pace, by 0.2% (MoM) in Apr’24 versus 0.3% in the previous month. Separately, ISM services index fell to 49.4 from 51.4 in Mar’24, led by steep decline in new export orders, and employment. All these data points suggest that economic activity in the US is indeed slowing and has solidified hopes of a rate cut by the central bank in Sep’24 (48.8% chance as per CME FedWatch tool). Elsewhere in Asia, China’s Caixin services PMI also suggests slowdown in activity with index moderating to 52.5 in Apr’24 from 52.7 in Mar’24. In Australia too, services activity has slowed with PMI easing to 53.6 from 54.2 in Mar’24. This week, markets await BoE and ECB rate decisions.

Global stocks ended mixed. US indices closed in green after softer than expected jobs report raised bets of Fed cutting rates earlier than anticipated. Hang Sang gained the most, supported by rally in tech stocks. Sensex declined by 1%, dragged down by losses in real estate and capital good stocks. However, it is trading higher today, in line with other Asian

Barring INR (flat) and CNY (lower), other global currencies ended higher. DXY dropped by 0.3% after the data reported lower job addition in Apr’24 and unemployment inched up to 3.9% (3.8% earlier). Amidst reports of possible intervention by government authority, JPY strengthened by 0.4%. INR ended However, it is trading stronger today, in line with other Asian currencies.

Global yields closed sharply lower, led by 7bps decline in US 10Y yield. Less hawkish comments from Fed in their policy and weaker than anticipated employment data, impacted investor sentiments. Weak growth outlook for Europe also played a role. India’s 10Y yield fell by 1bps. Today, following global cues, it is trading even lower at 13%.

Oil prices fell by 8%, driven by fears of weak global demand.