Economic Weekly Wrap
03 October 2022 - 07 October 2022
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03 Oct 2022
Inflation remains an ongoing concern with US core PCE deflator inching up by 0.6% (est.: 0.5%) in Aug’22 from 0% in Jul’22, and CPI in Eurozone rising to 10% (est.: 9.7%) from 9.1% in Jul’22. However, on the positive side, UK’s Q2CY22 GDP growth was revised upwards to 0.2% from an estimated (-) 0.1% decline earlier, supported by sharp revisions in private consumption and exports. On the domestic front, RBI increased repo rate by 50bps, in line with market expectations. This week, markets will be guided by global PMIs, RBA’s policy decision, OPEC+ meeting and US’ production and payroll data.
Global indices ended mixed amidst concerns over global economic slowdown and aggravated worries over inflationary risk. Amongst other indices, Nikkei (1.8%) dropped the most followed by Dow Jones (1.7%). However, Sensex surprised positively after the repo rate hike by RBI which was in line with expectation. Metal, banking and power stocks pushed the indices higher. It is trading lower today in line with other Asian stocks
Fig 1 – Stock markets
29-09-2022 30-09-2022 % change Dow Jones 29,226 28,726 (1.7) S & P 500 3,640 3,586 (1.5) FTSE 6,882 6,894 0.2 Nikkei 26,422 25,937 (1.8) Hang Seng 17,166 17,223 0.3 Shanghai Comp 3,041 3,024 (0.6) Sensex 56,410 57,427 1.8 Nifty 16,818 17,094 1.6 Source: Bloomberg, Bank of Baroda Research
Barring EUR and JPY, other global currencies gained. GBP rose by 0.5% as BoE intervened to buy gilts amidst concerns around Britain's plan tax cut. DXY retreated and was down by 0.1%. EUR ended lower as inflation soared to a record high at 10% in Sep'22. INR appreciated by 0.6%. It is trading lower today in line with other Asian currencies.
Fig 2 – Currencies
29-09-2022 30-09-2022 % change EUR/USD 0.9815 0.9802 (0.1) GBP/USD 1.1117 1.1170 0.5 USD/JPY 144.46 144.74 (0.2) USD/INR 81.85 81.35 0.6 USD/CNY 7.1249 7.1160 0.1 Source: Bloomberg, Bank of Baroda Research
Global yields closed mixed. While US 10Y yield rose by 4bps, yields in UK (- 5bps) and Germany (-7bps) fell. Rates in US rose as PCE price index inched up more than anticipated inAug’22, indicating that Fed will remain hawkish. Bond market in Europe was impacted by BoE’s intervention to restore investor confidence. India’s 10Y yield closed rose by 6bps, following rate hike announcement by RBI. It is trading higher at 7.43% today.
Fig 3 – Bond 10Y yield
29-09-2022 30-09-2022 change in bps US 3.79 3.83 4 UK 4.14 4.09 (5) Germany 2.18 2.11 (7) Japan 0.26 0.24 (1) China 2.72 2.75 3 India 7.34 7.40 6 Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
29-09-2022 30-09-2022 change in bps Tbill-91 days 6.05 6.04 (1) Tbill-182 days 6.56 6.48 (8) Tbill-364 days 6.77 6.69 (8) G-Sec 2Y 6.98 7.09 11 SONIA int rate benchmark 2.19 2.19 0 US SOFR 2.98 2.96 (2) Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 29-09-2022 30-09-2022 change (Rs tn) Net Liquidity (-Surplus/+deficit) 0.2 (0.3) (0.5) Reverse repo 0.5 0.5 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
28-09-2022 29-09-2022 change (US$ mn/Rs cr) FII (US$ mn) (301.8) (570.6) (268.9) Debt (45.9) (97.5) (51.6) Equity (255.9) (473.2) (217.2) Mutual funds (Rs cr) (1,024.0) (1,495.2) (471.2) Debt (1,620.8) (1,382.6) 238.2 Equity 596.8 (112.6) (709.4) Source: Bloomberg, Bank of Baroda Research; Note-mutual fund data pertains to 16 and 17 May 2022
Global crude prices fell by 0.6% amidst muted economic outlook. Investors await decision on output cut by OPEC+, due this week.
Fig 7 – Commodities
29-09-2022 30-09-2022 % change Brent crude (US$/bbl) 88.5 88.0 (0.6) Gold (US$/ Troy Ounce) 1,660.5 1,660.6 0 Copper (US$/ MT) 7,647.0 7,683.3 0.5 Zinc (US$/MT) 2,957.3 3,014.3 1.9 Aluminium (US$/MT) 2,197.0 2,162.0 (1.6) Source: Bloomberg, Bank of Baroda Research
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04 Oct 2022
Global manufacturing activity weakened further as indicated by muted PMI prints in US, Eurozone, Japan and India. As a result, global yields dropped sharply. Nevertheless, investors received some respite after Britain announced scraping of the tax cut plan which had kept markets on the edge last week. RBA hiked rates much lower than anticipated, though it left room open for more rate hike if required. On the domestic front, UNCTAD has revised India’s growth lower to 5.7% in 2022 on the back of ‘higher financing costs and weaker public expenditures’.
Global indices ended mixed as concerns of global economic slowdown intensified with weakness in global manufacturing PMI. However, European indices were trading in green after Britain reversed the tax cut plan. Amongst other indices, Sensex (1.1%) dropped the most followed by Hang Seng (0.8%). The decline in domestic market was led by losses in auto and banking stocks. It is trading higher today in line with other Asian stocks.
Fig 1 – Stock markets
30-09-2022 3-10-2022 % change Dow Jones 28,726 29,491 2.7 S & P 500 3,586 3,678 2.6 FTSE 6,894 6,909 0.2 Nikkei 25,937 26,216 1.1 Hang Seng 17,223 17,080 (0.8) Shanghai Comp 3,041 3,024 (0.6) Sensex 57,427 56,789 (1.1) Nifty 17,094 16,887 (1.2) Source: Bloomberg, Bank of Baroda Research
Except INR, other global currencies strengthened against the dollar. DXY fell by 0.3% as US ISM manufacturing PMI was lower than expected. GBP rose sharply on news that the UK government is rolling back some tax cuts. JPY gained on the back of comments from Japan’s Finance Minister warning against excessive volatility in yen. INR depreciated by 0.6%. However it has opened stronger today while other Asian currencies are trading lower.
Fig 2 – Currencies
30-09-2022 3-10-2022 % change EUR/USD 0.9802 0.9826 0.2 GBP/USD 1.1170 1.1323 1.4 USD/JPY 144.74 144.55 0.1 USD/INR 81.35 81.88 (0.6) USD/CNY 7.1249 7.1160 0.1 Source: Bloomberg, Bank of Baroda Research
Global yields closed mixed. US 10Y yield fell by 19bps to 3.64% as US ISM manufacturing PMI weakened to its lowest since May’20. Even in Germany, 10Y yield fell by 19bps as manufacturing activity remained muted. In UK, reports that the government is likely to reverse some of the previously announced tax cuts drove 10Y yield lower. India’s 10Y yield rose by 7bps to a 3-month high of 7.47% amidst rising oil prices. It is trading lower at 7.43% today.
Fig 3 – Bond 10Y yield
30-09-2022 3-10-2022 change in bps US 3.83 3.64 (19) UK 4.09 3.96 (13) Germany 2.11 1.92 (19) Japan 0.24 0.25 0 China 2.72 2.75 3 India 7.40 7.47 7 Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
30-09-2022 3-10-2022 change in bps Tbill-91 days 6.04 5.96 (8) Tbill-182 days 6.48 6.46 (2) Tbill-364 days 6.69 6.70 1 G-Sec 2Y 7.09 7.08 (1) SONIA int rate benchmark 2.19 2.19 0 US SOFR 2.96 2.98 2 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 30-09-2022 3-10-2022 change (Rs tn) Net Liquidity (-Surplus/+deficit) (0.3) (1.2) (0.9) Reverse repo 0.5 0.5 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
29-09-2022 30-09-2022 change (US$ mn/Rs cr) FII (US$ mn) (570.6) (497.0) 73.6 Debt (97.5) (310.3) (212.8) Equity (473.2) (186.7) 286.5 Mutual funds (Rs cr) (1,024.0) (1,495.2) (471.2) Debt (1,620.8) (1,382.6) 238.2 Equity 596.8 (112.6) (709.4) Source: Bloomberg, Bank of Baroda Research; Note-mutual fund data pertains to 16 and 17 May 2022
International crude oil prices rose by 1% to US$ 88.9/bbl amidst expectation of output cuts by OPEC+.
Fig 7 – Commodities
30-09-2022 3-10-2022 % change Brent crude (US$/bbl) 88.0 88.9 1.0 Gold (US$/ Troy Ounce) 1,660.6 1,699.9 2.4 Copper (US$/ MT) 7,683.3 7,602.5 (1.1) Zinc (US$/MT) 3,014.3 2,998.3 (0.5) Aluminium (US$/MT) 2,162.0 2,219.5 2.7 Source: Bloomberg, Bank of Baroda Research
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06 Oct 2022
Macro prints for the US indicate that economy is not slowing as much as feared. US ISM services index for Sep’22 slipped only a tad to 56.7 (est.: 56) from 56.9 in Aug’22. ADP employment data showed that 208k jobs were added in Sep’22 (est.: 200k), up from 185k in Aug’22. However, problems in Europe persist. Services activity still remains weak as PMI index for Eurozone fell to a 19-month low of 48.8 in Sep’22, dragged by Germany (45.0; 28-month low). Even in UK, it fell to 50 (lowest since Feb’21). Stress in terms of input prices pressures could increase as oil prices inch up, following production cuts (2mn bbl/day—steepest since the outbreak of Covid-19 pandemic) announced by OPEC+.
Global indices ended mixed after muted global PMI readings added fears of global slowdown. Amongst other indices, FTSE and S&P500 dropped by 0.5% and 0.2% each. US indices ended in red ahead of the non-farm payroll data, scheduled to be released later today. Sensex opened higher today in line with other Asian stocks.
Fig 1 – Stock markets
4-10-2022 5-10-2022 % change Dow Jones 30,316 30,274 (0.1) S & P 500 3,791 3,783 (0.2) FTSE 7,086 7,053 (0.5) Nikkei 26,992 27,121 0.5 Hang Seng 17,223 18,088 5.0 Shanghai Comp 3,041 3,024 (0.6) Sensex 56,789 58,065 2.2 Nifty 16,887 17,274 2.3 Source: Bloomberg, Bank of Baroda Research
Most of the global currencies traded lower against the dollar. DXY continued to climb higher as it gained by 1% with San Francisco Fed's Mary Daly signalling a possibility of no rate cuts in CY23. Investors also monitored OPEC+ decision to slash oil output by 2mn bbl/day (largest reduction since CY20). INR continues to weaken further and is currently trading at 81.64/US$. Asian currencies are trading mixed in the morning session.
Fig 2 – Currencies
4-10-2022 5-10-2022 % change EUR/USD 0.9986 0.9884 (1.0) GBP/USD 1.1476 1.1326 (1.3) USD/JPY 144.13 144.64 (0.4) USD/INR 81.88 81.52 0.4 USD/CNY 7.1249 7.1160 0.1 Source: Bloomberg, Bank of Baroda Research
Most global yields closed higher, with 10Y yields in UK, Germany (16bps each) and US (12bps) rising the most. Better than expected US ISM services index, and ADP employment data, signals that Fed is expected to continue tightening rates aggressively for now. Markets in India were closed for holiday. However, tracking global developments, India’s 10Y is trading higher at 7.49% today.
Fig 3 – Bond 10Y yield
4-10-2022 5-10-2022 change in bps US 3.63 3.75 12 UK 3.88 4.04 16 Germany 1.87 2.03 16 Japan 0.22 0.25 3 China 2.72 2.75 3 India 7.47 7.36 (10) Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
3-10-2022 4-10-2022 change in bps Tbill-91 days 5.96 6.06 10 Tbill-182 days 6.46 6.58 12 Tbill-364 days 6.70 6.78 8 G-Sec 2Y 7.08 7.04 (4) SONIA int rate benchmark 2.19 2.19 0 US SOFR 3.00 3.04 4 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 3-10-2022 4-10-2022 change (Rs tn) Net Liquidity (-Surplus/+deficit) (1.2) (1.0) 0.2 Reverse repo 0.5 0 (0.5) Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
29-09-2022 30-09-2022 change (US$ mn/Rs cr) FII (US$ mn) (570.6) (497.0) 73.6 Debt (97.5) (310.3) (212.8) Equity (473.2) (186.7) 286.5 Mutual funds (Rs cr) (1,024.0) (1,495.2) (471.2) Debt (1,620.8) (1,382.6) 238.2 Equity 596.8 (112.6) (709.4) Source: Bloomberg, Bank of Baroda Research; Note-mutual fund data pertains to 16 and 17 May 2022
International crude oil prices rose further by 1.7% to US$ 93/bbl as OPEC+ announced steep production cuts, most since CY20 (outbreak of Covid-19).
Fig 7 – Commodities
4-10-2022 5-10-2022 % change Brent crude (US$/bbl) 91.8 93.4 1.7 Gold (US$/ Troy Ounce) 1,726.1 1,716.3 (0.6) Copper (US$/ MT) 7,800.0 7,725.3 (1.0) Zinc (US$/MT) 3,076.5 3,082.8 0.2 Aluminium (US$/MT) 2,348.0 2,352.0 0.2 Source: Bloomberg, Bank of Baroda Research
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07 Oct 2022
Initial jobless claims in the US rose by 29k to 219k (est.: 205k) for the week ended 1 Oct 2022. A part of the increase has been attributed to devastation by Hurricane Fiona, and it is expected that Hurricane Ian will also keep the claims high in the coming weeks. Investors thus await US non-farm payroll data for more clarity and to predict Fed’s future course of actions. Growth in Europe continues to disappoint, with Germany’s new manufacturing orders falling by 2.4% (est.: -0.7%). ECB’s minutes also reflect that members are worried that inflation might get stuck at elevated levels. Renewed increase in oil prices has further fuelled concerns.
Barring Nikkei and Sensex, other global indices ended lower. Investors will closely monitor US non-farm payrolls due for release today. This will provide some guidance in term of further rate hike by Fed. Markets have priced in 86% chance of 75bps rate hike in Nov'22 meet. Dow Jones (1.1%) dropped the most amongst major indices, followed closely by FTSE (0.8%). On the other hand, Sensex ended in green led by gains in metal and real estate stocks. However, it is trading lower today in line with other Asian stocks.
Fig 1 – Stock markets
5-10-2022 6-10-2022 % change Dow Jones 30,274 29,927 (1.1) S & P 500 3,783 3,745 (1.0) FTSE 7,053 6,997 (0.8) Nikkei 27,121 27,311 0.7 Hang Seng 18,088 18,012 (0.4) Shanghai Comp 3,041 3,024 (0.6) Sensex 58,065 58,222 0.3 Nifty 17,274 17,332 0.3 Source: Bloomberg, Bank of Baroda Research
Most of the global currencies traded lower. DXY once again continued its ascent (0.9%) on the hopes of solid jobs data, expected later today. This will also reinforce Fed's decision to continue with the hawkish stance as has been signalled by Fed officials lately. Yen dropped and remained closer to its 24-year low. INR depreciated further as oil prices rose. It is trading further lower today as it touched the 82/$ mark. Other Asian currencies are trading mixed.
Fig 2 – Currencies
5-10-2022 6-10-2022 % change EUR/USD 0.9884 0.9791 (0.9) GBP/USD 1.1326 1.1162 (1.4) USD/JPY 144.64 145.14 (0.3) USD/INR 81.52 81.89 (0.5) USD/CNY 7.1249 7.1160 0.1 Source: Bloomberg, Bank of Baroda Research
Barring Japan (flat), other major global yields closed higher. UK (13bps) and US’ (7bps) 10Y yields rose the most. Investors keenly await US non-farm payroll data to estimate future course of rate hikes by Fed, and are also watchful of the impact of end of BoE’s bond buying program (scheduled for end of next week). Tracking global cues and increase in oil prices, India’s 10Y yield too rose by 9bps. It is trading further higher at 7.52% today.
Fig 3 – Bond 10Y yield
5-10-2022 6-10-2022 change in bps US 3.75 3.82 7 UK 4.04 4.17 13 Germany 2.03 2.09 5 Japan 0.25 0.25 0 China 2.72 2.75 3 India 7.36 7.45 9 Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
4-10-2022 6-10-2022 change in bps Tbill-91 days 6.06 5.96 (10) Tbill-182 days 6.58 6.44 (14) Tbill-364 days 6.78 6.71 (7) G-Sec 2Y 7.04 7.11 8 SONIA int rate benchmark 2.19 2.19 0 US SOFR 3.00 3.04 4 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 4-10-2022 6-10-2022 change (Rs tn) Net Liquidity (-Surplus/+deficit) (1.0) (0.7) 0.3 Reverse repo 0 0 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
30-09-2022 3-10-2022 change (US$ mn/Rs cr) FII (US$ mn) (497.0) 155.8 652.8 Debt (310.3) (0.5) 309.8 Equity (186.7) 156.3 343.0 Mutual funds (Rs cr) (1,024.0) (1,495.2) (471.2) Debt (1,620.8) (1,382.6) 238.2 Equity 596.8 (112.6) (709.4) Source: Bloomberg, Bank of Baroda Research; Note-mutual fund data pertains to 16 and 17 May 2022
International crude oil prices inched up by 1.1% to US$ 94/bbl, supported by OPEC+ decision to cut oil production ahead of EU’s embargo on Russian oil.
Fig 7 – Commodities
5-10-2022 6-10-2022 % change Brent crude (US$/bbl) 93.4 94.4 1.1 Gold (US$/ Troy Ounce) 1,716.3 1,712.5 (0.2) Copper (US$/ MT) 7,725.3 7,649.8 (1.0) Zinc (US$/MT) 3,082.8 3,143.3 2.0 Aluminium (US$/MT) 2,352.0 2,347.0 (0.2) Source: Bloomberg, Bank of Baroda Research
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