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Prospects of a rate cut by Fed were further lifted given the recent PCE print, Fed’s preferred gauge to monitor inflation. It moderated to 2.5% in Jun’24 (in line with expectation) against a 2.6% increase in May’24. Prices of furnishing, durable household equipment along with gasoline and other energy goods dropped in Jun’24. Core inflation remained steady at 2.6%. This comes ahead of the Fed meeting scheduled later this week, where status quo is expected and easing cycle will possibly start in Sep’24 (90% chance of a cut). Post the inflation data, US treasury yields dropped. In the coming week, investors will closely monitor inflation data from Australia, Europe, China’s PMI and policy decision by Fed, BoJ and BoE. Additionally, US jobs report and GDP report from Eurozone will also be awaited.
Barring Nikkei, other major global indices ended higher. US stocks ended in green supported by stronger than expected GDP print and greater likelihood of rate cuts by Fed. Amongst other indices, Nifty was the biggest gainer, followed by Dow Jones. The gains in domestic market were led by metal, technology and auto stocks. It is trading higher today (scaling to an all-time high), in line with other Asian indices.
Source: Bloomberg, Bank of Baroda Research
Except INR and CNY (flat), other global currencies closed higher against the dollar. DXY ended flat as Fed is expected to lower rates starting Sep’24. GBP was up as investors are split between BoE cutting rates this week or in Sep’24. JPY is being supported by hopes of rate hike by BoJ. INR ended flat, but is trading slightly stronger today, while other Asian currencies are trading lower
Source: Bloomberg, Bank of Baroda
Barring Japan (higher), other global 10Y yields closed lower. Yields in US and UK fell the most, as PCE price index moved in line with expectations and made further case for Fed cutting rates 2-3 times this year. Japan’s 10Y yield inched up, in anticipation of BoJ hiking rates this week. India’s 10Y yield was down by 1bps, as oil prices fell. It is trading even lower today, following global cues.
Source: RBI, Bank of Baroda Research
Source: Bloomberg, Bank of Baroda Research, Note: MF data as of 22nd and 23rd Jul
Oil prices fell, driven by weak demand outlook in China (drop in fuel imports).
In a data jammed week, investors will closely look for signals or a dovish tone from the upcoming policy meet by Fed. Additionally, there is some uncertainty around policy decision by Bank of England with 50% chance of a 25bps rate cut. Inflation in UK has been near the target of 2% for both May’24 and Jun’24 but there some concerns around underlying price pressure including wage growth, labour market and service inflation. In a policy divergence, BoJ is expected to begin with the policy normalisation which is expected to be gradual. Investors are pricing, rate hike of 10 bps in the upcoming meet. This is expected to have an impact on the currency.
Major global indices ended mixed. Investors turned their focus towards the trio of central bank meeting, US jobs report and earnings report. S&P 500 ended in green with the biggest jump noted in the consumer discretionary index, amongst 11-sectoral indices. Nikkei surged by 2.1% amidst the news of alliance between automobile makers and was further supported by a rally in chip-related stocks. Sensex is trading flat today, while other Asian indices are trading lower.
Except INR and GBP (flat), other global currencies closed lower against the dollar. DXY was up by 0.2%, as investors remain on edge regarding rate decisions to be announced by BoJ (expected hike) and BoE (split between rate cut and rate on hold). Fed Chair remarks are also awaited. INR is trading a tad higher today, in line with other Asian currencies.
Global 10Y yields closed lower. Yields in UK, Germany and Japan fell the most. Investors keenly await Central Bank decisions of BoE, BoJ and Fed. More clarity on quantum and timing of Fed rate cuts is awaited. Following global cues and dip in oil prices, India’s 10Y yield was down by 2bps. It is trading even lower today at 7.91%.
Source: Bloomberg, Bank of Baroda Research, Note: MF data as of 23rd and 24th Jul
Oil prices fell again, due to weak Chinese demand and relatively stable supply.
In line with expectations, BoJ raised the policy rates to 0.25% from 0.1% earlier and also shared the plan to taper its bond purchasing programme. In Asia, China’s official manufacturing PMI slipped into contraction to 49.4 in Jul’24 from 49.5 in Jun’24. There was a moderation in production, new order and export index in Jul’24. The non-manufacturing PMI which takes in to account services and construction moderated down to 50.2 in Jul’24 (50.5 in Jun’24). Separately, inflation in Australia eased to 3.8% in Jun’24 from 4% in May’24 in line with expectations and making a stronger case of rate cut by RBA. Key decisions by Global Central Banks are expected to impact the market trajectory. On domestic front, kharif sowing has been satisfactory (2.3% higher than last year) with rainfall 2% above LPA.
Major global indices ended mixed. Investors braced for rate decisions by global central banks. Dow Jones rebounded and ended in green monitoring the earnings report. Amongst other indices, Hang Seng declined the most. Sensex edged up by 0.1% supported by gains in power and consumer durable stocks. It is trading flat today, while other Asian indices are trading higher
Global currencies closed mixed against the dollar. DXY ended flat, as investors monitored incoming macro data from the US (JOLTS and cof board consumer confidence index), Germany (GDP, CPI) and Eurozone (GDP). Central Bank decisions are awaited. INR ended flat, but is trading slightly stronger today, supported by weak oil prices. Other Asian currencies are also trading higher.
Barring India, other major global 10Y yields closed lower. US 10Y yield fell the most by 4bps. Steady decline in job openings in the US, survey results showing consumer concerns about prices and interest rates, and weaker than expected Germany’s Q2 GDP print, impacted investor sentiments. India’s 10Y yield rose by 2bps, even as oil prices fell further. It is trading slightly lower today at 6.92%.
Source: Bloomberg, Bank of Baroda Research, Note: MF data as of 25th and 26th Jul
Oil prices declined, awaiting more clarity on truce talks in Middle East region
US Fed opted to keep the benchmark rate unchanged at 5.25-5% (23-year high) mark for the 8th meeting in a row. The committee unanimously agreed to hold rates and stated that they see the economy moving towards the point wherein ‘it will be appropriate to reduce rate’. US Fed chair was dovish in his commentary. Separately, US private payrolls rose at a much slower pace than anticipated adding 122k jobs (155k in Jun’24). This comes ahead of the jobs report wherein total payrolls are expected to be lower in Jul’24 than last month, and no change is expected in unemployment rate (4.1%). In china, Caixin manufacturing PMI slipped in to contraction to 49.8 in Jul’24 from 51.8 in Jun’24, signalling manufacturing sector deteriorated for first time in 9-months
Global indices ended higher. S&P 500 surged by 1.6% amidst signals of a rate cut by Fed in Sep’24 given a cool-off in inflation. Out of 11 sectors, 7 advanced higher led by a rally in technology and consumer discretionary stocks. Nikkei rose by 1.5% given the rise in retail sales and despite a rate hike by BoJ. Sensex climbed up by 0.4% with power and metal stocks gaining the most. It is trading higher today, in line with other Asian indices.
Except INR (flat), other global currencies ended higher against the dollar. DXY fell by (-) 0.4%, following dovish commentary in the FOMC statement and tracking dip in US sovereign yields. JPY made significant gains (4-month high), supported by BoJ action. INR ended flat, but is trading much stronger today, in line with other Asian currencies.
Barring Japan and China (higher), other major global 10Y yields closed sharply lower. US 10Y yield fell the most by 11bps, as Fed Chair Powell confirmed that there is a possibility of a rate cut in Sep’24. Japan’s 10Y yield reacted to rate hike by BoJ and its more than expected hawkish tone. Following global cues, India’s 10Y yield also fell, by 1bps. It is trading further lower today at 6.91%.
Oil prices inched up, given increased geopolitical tensions in Middle East
Global markets remained on vigil tracking host of macro releases. In the US, growth indicators pointed towards resilience with annualised GDP QoQ rising more than expected by 2.8% (est.: 2%) in Q2. This was supported by buoyant recovery in consumption demand. To supplement, even jobless claims especially the continuing claims moderated. Traders are likely to balance these events against the anticipation of rate cut by Fed. Elsewhere, in Germany, IFO business climate index softened indicating a bleak economic recovery. In Japan, core Tokyo CPI remained sticky, thus rate hike expectations for BoJ still reigned in. On domestic front, short end part of India’s yield curve is showing some downward momentum. Government’s move to pay off its short-term debt has acted as a positive market signal.
Barring FTSE and Dow Jones, other major global indices ended lower. US stocks were mixed as investors assessed varied macro prints such as higher GDP growth, decline in durable goods orders and lower jobless claims. In Asia, Nikkei saw a sharp sell-off, as a rally in Yen weighed on investor sentiments. Sensex declined by 0.1%, led by losses in real estate and banking stocks. It is however trading higher today, in line with other Asian indices.
Except JPY and INR, other global currencies ended weaker against the dollar. DXY strengthened awaiting payrolls report. JPY surged by 0.4% as the interest rate differential between US and Japan is expected to narrow in coming days. INR ended steady and is trading near its historic record-low today, due to strong dollar demand. Other Asian currencies are trading mixed.
Global 10Y yields continued to register steep declines. Yield in UK fell the most (-9bps), as BoE delivered its first rate cut since Mar’20 (-25bps). Yield in Germany also eased on account of continuously weakening economic scenario. Dovish FOMC statement helped cool US 10Y yield. Following global cues, India’s 10Y yield also fell, by 1bps. It is trading flat today at 6.91%.
Oil prices fell on demand concerns, tracking weak global manufacturing data.
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