Economic Weekly Wrap
06 March 2023 - 10 March 2023
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06 Mar 2023
Services activity globally showed revival. Services PMI in India, China, Japan, UK, and Eurozone rose sharply in Feb’23. In US, ISM services remained in the expansionary zone but eased a tad to 55.1 from 55.2 in Jan’23. Officials from both the Fed and ECB reiterated the need for more rate hikes to cool inflation. In further signs of resilience in the Eurozone, Germany’s export growth showed momentum, rising by 2.1% in Jan’23 (est. 1.5%) on a MoM basis. In India, services PMI rose to a 12-year high at 59.4 in Feb’23 from 57.2 in Jan’23 supported by moderation in input prices and increase in new orders. Market focus will be on US jobs reports, Fed Chair’s testimony, BoJ and RBA’s policy meet as well as UK’s GDP print due this week. In India, focus will be on IIP data.
Barring FTSE, other global indices ended higher. Investors’ sentiments were supported by sharp improvement in global composite and Eurozone services PMIs. FTSE was dragged down by energy sector. Sensex too ended in green led by gains in banking, power and metal stocks. It is trading further higher today in line with other Asian stocks, even as China kept its growth projection for the current year at 5% (est.5.5%).
Fig 1 – Stock markets
02-03-2023 03-03-2023 % change Dow Jones 33,004 33,391 1.2 S & P 500 3,981 4,046 1.6 FTSE 7,944 7,947 0 Nikkei 27,499 27,927 1.6 Hang Seng 20,429 20,568 0.7 Shanghai Comp 3,311 3,328 0.5 Sensex 58,909 59,809 1.5 Nifty 17,322 17,594 1.6 Source: Bloomberg, Bank of Baroda Research
Global currencies registered gains against the dollar. DXY fell by 0.5% as investors assessed the Fed’s future rate trajectory. GBP gained 0.8% as UK’s services PMI rose to an 8-month high. INR too appreciated by 0.7% to a 1- month high, supported by gains in domestic equities. It is trading further stronger today, in line with other Asian currencies.
Fig 2 – Currencies
02-03-2023 03-03-2023 % change EUR/USD (1 EUR / USD) 1.0597 1.0635 0.4 GBP/USD (1 GBP / USD) 1.1946 1.2036 0.8 USD/JPY (JPY / 1 USD) 136.77 135.87 0.7 USD/INR (INR / 1 USD) 82.59 81.97 0.8 USD/CNY (CNY / 1 USD) 6.9168 6.9043 0.2 Source: Bloomberg, Bank of Baroda Research
Except Japan (flat), other global 10Y yields closed lower, with yields in US and Germany falling the most. 10Y yield in US fell by 10bps, as Fed’s semi-annual report to Congress signalled that the central bank is likely to continue hiking at the current pace (25bps), instead of opting for more aggressive rate hikes. India’s 10Y yield fell by 2bps, following global cues. It is trading lower at 7.38% today.
Fig 3 – Bond 10Y yield
02-03-2023 03-03-2023 change in bps US 4.06 3.95 (10) UK 3.88 3.85 (3) Germany 2.75 2.72 (4) Japan 0.51 0.51 0 China 2.93 2.92 (1) India 7.42 7.40 (2) Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
02-03-2023 03-03-2023 change in bps Tbill-91 days 6.91 6.90 (1) Tbill-182 days 7.27 7.23 (4) Tbill-364 days 7.36 7.35 (1) G-Sec 2Y 7.32 7.31 (1) SONIA int rate benchmark 3.93 3.93 0 US SOFR 4.55 4.55 0 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 02-03-2023 03-03-2023 change (Rs tn) Net Liquidity (-Surplus/+deficit) (0.8) (0.6) 0.2 Reverse repo 0.1 0.1 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
01-03-2023 02-03-2023 change (US$ mn/Rs cr) FII (US$ mn) 117.2 1,576.3 1,459.1 Debt 15.3 33.0 17.6 Equity 101.9 1,543.3 1,441.5 Mutual funds (Rs cr) 2,812.4 (405.2) (3,217.6) Debt (767.8) (844.0) (76.2) Equity 3,580.2 438.8 (3,141.4) Source: Bloomberg, Bank of Baroda Research │Note: Mutual funds data as of 28 Feb 2023 and 1 Mar 2023
Global oil prices rose by 1.3% amidst hopes of a demand revival as China’s services PMI inched up.
Fig 7 – Commodities
02-03-2023 03-03-2023 % change Brent crude (US$/bbl) 84.8 85.8 1.3 Gold (US$/ Troy Ounce) 1,835.9 1,856.5 1.1 Copper (US$/ MT) 8,928.1 8,954.5 0.3 Zinc (US$/MT) 3,067.0 3,100.5 1.1 Aluminium (US$/MT) 2,399.5 2,405.0 0.2 Source: Bloomberg, Bank of Baroda Research
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08 Mar 2023
Global markets went into a tizzy after Fed Chair in his testimony to the Congress hinted at larger rate hikes amidst continued strength in the economy. He stated that the central bank is ready to increase the pace of rate hike based on incoming data. Markets’ expectations of a 50bps rate hike in Fed’s Mar’23 meeting have increased substantially. Yield curve inversion in the US intensified further to its steepest since 1981 (-105bps). On the other hand, after delivering another 25bps rate hike, RBA spoke of a pause in the monetary policy tightening cycle. In China, impact of slow external and internal demand were visible as both exports and imports contracted in the Jan-Feb’23 period. While exports declined by 6.8% (est. 9.4% drop), imports fell much more sharply by 10.2% (est. 5.5% drop) compared with a 7.5% dip in Dec’22.
Global indices largely ended lower after Fed Chair in his testimony hinted at a more aggressive monetary tightening, than was initially anticipated. Notably, BoE's policymaker dismissed any talks of pivot towards easier monetary policy. Dow Jones (1.7%) dropped the most followed by losses in Shanghai Comp (1.1%) and Hang Seng (0.3%). Sensex opened lower today, led by weak global cues. Asian stocks on the other hand are trading higher in the morning session.
Fig 1 – Stock markets
06-03-2023 07-03-2023 % change Dow Jones 33,431 32,856 (1.7) S & P 500 4,048 3,986 (1.5) FTSE 7,930 7,919 (0.1) Nikkei 28,238 28,309 0.3 Hang Seng 20,603 20,534 (0.3) Shanghai Comp 3,322 3,285 (1.1) Sensex 59,809 60,224 0.7 Nifty 17,594 17,711 0.7 Source: Bloomberg, Bank of Baroda Research
Global currencies depreciated against the dollar. DXY rose by 1.2% to a near 3- month high after Fed Chair hinted at accelerating the pace of rate hikes. GBP depreciated the most by 1.6%. EUR too fell by 1.2% even as Germany’s factory orders noted a surprise jump in Jan’23. INR is trading weaker today, in line with other Asian currencies.
Fig 2 – Currencies
06-03-2023 07-03-2023 % change EUR/USD (1 EUR / USD) 1.0681 1.0549 (1.2) GBP/USD (1 GBP / USD) 1.2025 1.1830 (1.6) USD/JPY (JPY / 1 USD) 135.93 137.16 (0.9) USD/INR (INR / 1 USD) 81.97 81.92 0.1 USD/CNY (CNY / 1 USD) 6.9318 6.9662 (0.5) Source: Bloomberg, Bank of Baroda Research
Global yields ended mixed as investors monitored Fed Chair’s testimony suggesting more rate hikes than was expected, to tame inflation. Investors have priced in a 70% chance (up from 30%) of 50bps rate hike in Mar'23 FOMC meet. US 10Y yield edged up by 1bps. The yield curve inversion (2Y and 10Y) steepened further, signalling a potential recession. India's 10Y yield inched up by 1bps. It is trading at 7.43% today.
Fig 3 – Bond 10Y yield
06-03-2023 07-03-2023 change in bps US 3.96 3.96 1 UK 3.87 3.82 (4) Germany 2.75 2.69 (6) Japan 0.51 0.50 0 China 2.90 2.89 0 India 7.40 7.41 1 Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
06-03-2023 07-03-2023 change in bps Tbill-91 days 6.90 6.95 5 Tbill-182 days 7.23 7.25 2 Tbill-364 days 7.35 7.34 (1) G-Sec 2Y 7.31 7.29 (2) SONIA int rate benchmark 3.93 3.93 0 US SOFR 4.55 4.55 0 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 03-03-2023 06-03-2023 change (Rs tn) Net Liquidity (-Surplus/+deficit) (0.6) (0.5) 0.1 Reverse repo 0.1 0.1 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
02-03-2023 03-03-2023 change (US$ mn/Rs cr) FII (US$ mn) 1,576.3 (93.6) (1,669.9) Debt 33.0 (122.4) (155.3) Equity 1,543.3 28.8 (1,514.5) Mutual funds (Rs cr) 2,812.4 (405.2) (3,217.6) Debt (767.8) (844.0) (76.2) Equity 3,580.2 438.8 (3,141.4) Source: Bloomberg, Bank of Baroda Research │Note: Mutual funds data as of 28 Feb 2023 and 1 Mar 2023
Global oil prices fell sharply by 3.4% amidst hawkish comments from Fed Chair. Dismal import data from China added to the woes.
Fig 7 – Commodities
06-03-2023 07-03-2023 % change Brent crude (US$/bbl) 86.2 83.3 (3.4) Gold (US$/ Troy Ounce) 1,846.9 1,813.5 (1.8) Copper (US$/ MT) 8,893.3 8,737.5 (1.8) Zinc (US$/MT) 3,054.0 2,980.8 (2.4) Aluminium (US$/MT) 2,382.0 2,350.0 (1.3) Source: Bloomberg, Bank of Baroda Research
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09 Mar 2023
Fed Chair once again reiterated that future rate hikes will be data dependent, and a faster pace of tightening cannot be ruled out. Data showed that labour market conditions in the US remained strong with elevated job openings and robust expansion in private payrolls. Elsewhere, Bank of Canada became the first major global central bank to pause its rate hike cycle. In China, CPI inflation eased to 1% in Feb’23 (est. 1.9%). Led by lower commodity prices, deflation in PPI deepened to - 1.4% versus -0.8% in Jan’23. Japan’s GDP growth was revised sharply lower to 0.1% in Q4CY22 versus 0.6% estimated earlier, led by weak consumption. In India, yield curve inverted for the first time in ~8 years amidst worsening liquidity conditions and uncertainty over RBI rate hikes.
Barring Dow Jones and markets in Hong Kong and China, other global indices ended higher. S&P and FTSE made only marginal gains as investors await US non-farm payroll and CPI data to gauge whether Fed will go for a 25bps or 50bps hike. Investor sentiment took a hit following Powell’s testimony to Congress. Sensex ended in green led by gains in power and capital goods stocks. However, it is trading lower today in line with other Asian stocks.
Fig 1 – Stock markets
07-03-2023 08-03-2023 % change Dow Jones 32,856 32,798 (0.2) S & P 500 3,986 3,992 0.1 FTSE 7,919 7,930 0.1 Nikkei 28,309 28,444 0.5 Hang Seng 20,534 20,051 (2.4) Shanghai Comp 3,285 3,283 (0.1) Sensex 60,224 60,348 0.2 Nifty 17,711 17,754 0.2 Source: Bloomberg, Bank of Baroda Research
Global currencies closed mixed. DXY was broadly unchanged ahead of US jobs report due on Friday. EUR closed flat even as Germany’s retail sales fell by 0.3% in Jan’23 against an estimated 2% increase. JPY depreciated by 0.1% as Japan posted a record current account deficit in Jan’23. INR too ended 0.2% lower. However, in line with other Asian currencies, it is trading stronger today.
Fig 2 – Currencies
07-03-2023 08-03-2023 % change EUR/USD (1 EUR / USD) 1.0549 1.0545 0 GBP/USD (1 GBP / USD) 1.1830 1.1845 0.1 USD/JPY (JPY / 1 USD) 137.16 137.36 (0.1) USD/INR (INR / 1 USD) 81.92 82.06 (0.2) USD/CNY (CNY / 1 USD) 6.9662 6.9592 0.1 Source: Bloomberg, Bank of Baroda Research
Global yields closed mixed. 10Y yield in US was up by 6bps, as Fed Chair has signalled possibility of aggressive rate hikes to tame inflation. ADP employment numbers also rose and job openings have not declined as much as anticipated, indicating red hot labour market. Unexpected decline in Germany’s retail sales has resurfaced fears of slowdown. India’s 10Y yield fell by 2bps, following global cues. It is trading a tad higher at 7.45% today
Fig 3 – Bond 10Y yield
07-03-2023 08-03-2023 change in bps US 3.96 3.99 3 UK 3.82 3.77 (6) Germany 2.69 2.65 (5) Japan 0.50 0.51 0 China 2.89 2.90 1 India 7.41 7.43 3 Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
07-03-2023 08-03-2023 change in bps Tbill-91 days 6.95 6.95 0 Tbill-182 days 7.25 7.35 10 Tbill-364 days 7.34 7.46 12 G-Sec 2Y 7.29 7.38 9 SONIA int rate benchmark 3.93 3.93 0 US SOFR 4.55 4.55 0 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 06-03-2023 08-03-2023 change (Rs tn) Net Liquidity (-Surplus/+deficit) (0.5) (0.3) 0.2 Reverse repo 0.1 0.1 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
03-03-2023 06-03-2023 change (US$ mn/Rs cr) FII (US$ mn) (93.6) 113.1 206.7 Debt (122.4) 7.2 129.6 Equity 28.8 105.9 77.2 Mutual funds (Rs cr) 2,812.4 (405.2) (3,217.6) Debt (767.8) (844.0) (76.2) Equity 3,580.2 438.8 (3,141.4) Source: Bloomberg, Bank of Baroda Research │Note: Mutual funds data as of 28 Feb 2023 and 1 Mar 2023
Global oil prices fell by 0.8%, as higher rates by Fed imply that demand will take a hit.
Fig 7 – Commodities
07-03-2023 08-03-2023 % change Brent crude (US$/bbl) 83.3 82.7 (0.8) Gold (US$/ Troy Ounce) 1,813.5 1,813.8 0 Copper (US$/ MT) 8,737.5 8,886.0 1.7 Zinc (US$/MT) 2,980.8 3,004.0 0.8 Aluminium (US$/MT) 2,350.0 2,354.0 0.2 Source: Bloomberg, Bank of Baroda Research
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10 Mar 2023
US jobless claims rose at a faster pace of 21,000 to a 2-month high of 211,000 (est. 195,000) in the week ended 4 Mar 2023. Despite a higher than anticipated increase, the underlying trend still suggests a strong labour market. Investors now await US non-farm payrolls data which is expected to show 225,000 additions, versus 517,000 additions in Jan’23. A higher than expected increase will further strengthen the case for a 50bps rate hike by the Fed in Mar’23 (60% probability as per CME FedWatch Tool). Separately, BoJ maintained its ultra-dovish stance in its latest, and Governor Kuroda’s last policy meet. In India, investors await the IIP data (today) and CPI data due on Monday.
Barring Nikkei, stock markets elsewhere declined. Stocks in the US fell, amidst a sharp sell-off in banking stocks. S&P 500 and Dow Jones declined by 1.8% and 1.7% respectively. Investors also remained jittery ahead of crucial US jobs report due today. Following weak global cues, Sensex too closed lower by 0.9%. Auto and consumer durables stocks declined the most. It is trading further lower today, in line with other Asian stocks.
Fig 1 – Stock markets
08-03-2023 09-03-2023 % change Dow Jones 32,798 32,255 (1.7) S & P 500 3,992 3,918 (1.8) FTSE 7,930 7,880 (0.6) Nikkei 28,444 28,623 0.6 Hang Seng 20,051 19,926 (0.6) Shanghai Comp 3,283 3,276 (0.2) Sensex 60,348 59,806 (0.9) Nifty 17,754 17,590 (0.9) Source: Bloomberg, Bank of Baroda Research
Except CNY (lower), other global currencies appreciated against the dollar. DXY fell by 0.3% after US jobless claims rose more than expected. Fall in US10Y yield also weighed on DXY. JPY appreciated the most by 0.9% despite weaker than anticipated growth data. INR too edged up by 0.1% as oil prices eased. However, in line with other Asian currencies, it is trading weaker today.
Fig 2 – Currencies
08-03-2023 09-03-2023 % change EUR/USD (1 EUR / USD) 1.0545 1.0581 0.3 GBP/USD (1 GBP / USD) 1.1845 1.1925 0.7 USD/JPY (JPY / 1 USD) 137.36 136.15 0.9 USD/INR (INR / 1 USD) 82.06 81.98 0.1 USD/CNY (CNY / 1 USD) 6.9592 6.9651 (0.1) Source: Bloomberg, Bank of Baroda Research
Global yields closed mixed. 10Y yield in US declined by 9bps as investors await US payroll data. An increase in US jobless claims and a sharp sell-off in US banking stocks also impacted sentiments. 10Y yield in UK edged up by 3bps amidst expectations of higher rates. India’s 10Y yield fell by 1bps, led by a decline in oil prices. Markets also await the CPI data due on Monday. It is trading much lower at 7.39% today, following global cues.
Fig 3 – Bond 10Y yield
08-03-2023 09-03-2023 change in bps US 3.99 3.90 (9) UK 3.77 3.80 3 Germany 2.65 2.64 0 Japan 0.51 0.51 0 China 2.90 2.88 (1) India 7.43 7.43 (1) Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
08-03-2023 09-03-2023 change in bps Tbill-91 days 6.95 6.92 (3) Tbill-182 days 7.35 7.35 0 Tbill-364 days 7.46 7.44 (2) G-Sec 2Y 7.38 7.38 0 SONIA int rate benchmark 3.93 3.93 0 US SOFR 4.55 4.55 0 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 08-03-2023 09-03-2023 change (Rs tn) Net Liquidity (-Surplus/+deficit) (0.3) (0.5) (0.2) Reverse repo 0.1 0.1 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
06-03-2023 08-03-2023 change (US$ mn/Rs cr) FII (US$ mn) 113.1 329.2 216.1 Debt 7.2 (152.1) (159.3) Equity 105.9 481.3 375.4 Mutual funds (Rs cr) 2,812.4 (405.2) (3,217.6) Debt (767.8) (844.0) (76.2) Equity 3,580.2 438.8 (3,141.4) Source: Bloomberg, Bank of Baroda Research │Note: Mutual funds data as of 28 Feb 2023 and 1 Mar 2023
Global oil prices fell further by 1.3%, as markets expect that rate hikes by global central banks will hurt demand.
Fig 7 – Commodities
08-03-2023 09-03-2023 % change Brent crude (US$/bbl) 82.7 81.6 (1.3) Gold (US$/ Troy Ounce) 1,813.8 1,831.0 0.9 Copper (US$/ MT) 8,886.0 8,832.3 (0.6) Zinc (US$/MT) 3,004.0 2,994.5 (0.3) Aluminium (US$/MT) 2,354.0 2,328.0 (1.1) Source: Bloomberg, Bank of Baroda Research
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