Economic Weekly Wrap
07 November 2022 - 11 November 2022

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  • 07 Nov 2022

    Global equities, currencies, and bond yields ended higher. US non-farm payroll data showed 261k jobs were added in Oct’22 (est.: 193k), compared with upwardly revised figure of 315k for Sep’22. More than estimated increase in job additions indicates that US economy is not cooling off as much as expected. However on the other hand, increase in unemployment rate signals impact of rate hikes is beginning to show some impact. Elsewhere, services PMI data for Europe, in particular Germany, shows that economic activity remains weak (46.5 in Oct’22 versus 45 in Sep’22). Even in France services PMI has begun to ease (51.7 versus 52.9). 12- month ahead outlook too has slumped, as energy crisis is expected to deepen as EU’s ban on Russian oil imports looms. However, hopes of China loosening Covid- 19 restrictions may boost global demand.


    Except Nikkei, other global stocks edged up as US unemployment rate increased, raising hopes that the Fed may soften its rate hike stance. Investors’ sentiments were also buoyed by reports that China may relax its Covid zero stance. Hang Seng rose sharply by 5.4%, followed by Shanghai Comp (up by 2.4%). Sensex rose by 0.2% supported by gains in metal stocks. It is trading further higher today, in line with other Asian markets.

    Fig 1 – Stock markets

      3-11-2022 4-11-2022 % change
    Dow Jones 32,001 32,403 1.3
    S & P 500 3,720 3,771 1.4
    FTSE 7,189 7,335 2.0
    Nikkei 27,663 27,200 (1.7)
    Hang Seng 15,339 16,161 5.4
    Shanghai Comp 2,998 3,071 2.4
    Sensex 60,836 60,950 0.2
    Nifty 18,053 18,117 0.4

    Source: Bloomberg, Bank of Baroda Research


    Global currencies edged higher against the dollar. DXY fell by 1.8% as US jobs report showed a pickup in unemployment rate. EUR and GBP gained by 2.1% and 2% respectively. INR too appreciated by 0.6%, supported by global cues. It is trading further stronger today, while other Asian currencies are trading mixed.

    Fig 2 – Currencies

      3-11-2022 4-11-2022 % change
    EUR/USD 0.9749 0.9957 2.1
    GBP/USD 1.1160 1.1379 2.0
    USD/JPY 148.26 146.62 1.1
    USD/INR 82.89 82.44 0.6
    USD/CNY 7.3015 7.1851 1.6

    Source: Bloomberg, Bank of Baroda Research


    Except Japan (steady) and India (lower), global yields closed higher. 10Y yield of Germany rose the most by 5bps followed by China (3bps) and UK (2bps). US labour market data and ECB President’s reaffirmation that central bank will tighten faster if inflation remains sticky, impacted investor sentiments. India’s 10Y yield fell by 1bps (7.47%) supported by healthy demand at weekly auction. It is trading slightly lower at 7.45% today.

    Fig 3 – Bond 10Y yield

      3-11-2022 4-11-2022 change in bps
    US 4.15 4.16 1
    UK 3.52 3.54 2
    Germany 2.25 2.30 5
    Japan 0.25 0.26 0
    China 2.68 2.71 3
    India 7.48 7.47 (1)

    Source: Bloomberg, Bank of Baroda Research


    Fig 4 – Short term rates

      3-11-2022 4-11-2022 change in bps
    Tbill-91 days 6.44 6.44 0
    Tbill-182 days 6.77 6.77 0
    Tbill-364 days 6.96 6.97 1
    G-Sec 2Y 7.14 7.18 4
    SONIA int rate benchmark 2.19 2.93 74
    US SOFR 3.05 3.80 75

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 3-11-2022 4-11-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (0.9) (0.7) 0.2
    Reverse repo 0.1 0 (0.1)
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      2-11-2022 3-11-2022 change (US$ mn/Rs cr)
    FII (US$ mn) 120.5 106.5 (14.0)
    Debt (47.6) 12.6 60.2
    Equity 168.1 93.9 (74.2)
    Mutual funds (Rs cr) (872.1) (575.4) 296.7
    Debt (507.2) (74.1) 433.0
    Equity (365.0) (501.3) (136.3)

    Source: Bloomberg, Bank of Baroda Research; Note-mutual fund data pertains to 16 and 17 May 2022


    Crude oil prices rose sharply by 4.1%, owing to supply concerns due to looming EU ban on Russian oil and on hopes of easing Covid-19 restrictions by China.

    Fig 7 – Commodities

      3-11-2022 4-11-2022 % change
    Brent crude (US$/bbl) 94.7 98.6 4.1
    Gold (US$/ Troy Ounce) 1,629.5 1,681.9 3.2
    Copper (US$/ MT) 7,596.0 8,136.0 7.1
    Zinc (US$/MT) 2,737.3 2,893.0 5.7
    Aluminium (US$/MT) 2,264.0 2,355.5 4.0

    Source: Bloomberg, Bank of Baroda Research

  • 09 Nov 2022

    Latest global macro prints further indicate that there might be an impending global growth slowdown. China PPI/factory gate prices fell for the 1st time in 2 years in Oct’22 (-1.3%) compared with 0.9% increase in Sep’22. This will have an impact on profitability of Chinese firms and also shows the impact of China’s slowdown on commodity prices. Further, Taiwan’s exports fell for the second consecutive month in Oct’22 (-0.5%). A depreciating Yen is also taking a toll on Japan’s current account balance, as the surplus fell to 8-year low of ¥4.85 tn in H1FY22. Continued increase in Covid-19 cases in China, possibility of gridlock between US Congress and US Senate have further raised fears of growth slowdown. EIA has also lowered its US energy demand outlook for CY23.


    Barring Hang Seng and Shanghai Comp, other global indices ended higher as investors turned their focus toward the US midterm elections which will decide the course of future spending. Also, key data prints are scheduled to release later this week including US CPI, signalling direction of future rate hike. Amongst other indices, Nikkei (1.3%) rose the most followed by Dow jones (1%). Sensex opened higher today while other Asian stocks are trading mixed.

    Fig 1 – Stock markets

      7-11-2022 8-11-2022 % change
    Dow Jones 32,827 33,161 1.0
    S & P 500 3,807 3,828 0.6
    FTSE 7,300 7,306 0.1
    Nikkei 27,528 27,872 1.3
    Hang Seng 16,596 16,557 (0.2)
    Shanghai Comp 3,078 3,064 (0.4)
    Sensex 60,950 61,185 0.4
    Nifty 18,117 18,203 0.5

    Source: Bloomberg, Bank of Baroda Research


    Except CNY (flat), other global currencies traded higher against the dollar. DXY slid ahead of the US midterm election results and US CPI. Euro strengthened as German bond yields (2Y) edged higher on expectations of further tightening by ECB. INR opened stronger today while other Asian currencies are trading mixed.

    Fig 2 – Currencies

      7-11-2022 8-11-2022 % change
    EUR/USD 1.0020 1.0074 0.5
    GBP/USD 1.1514 1.1544 0.3
    USD/JPY 146.63 145.68 0.7
    USD/INR 82.44 81.91 0.6
    USD/CNY 7.2312 7.2310 0.0

    Source: Bloomberg, Bank of Baroda Research


    Global yields closed lower with 10Y yields of US, UK (9bps each), and Germany (6bps) falling the most. Investors await results of US mid-term elections for Congress and CPI. In US, a split in party controlling the Congress and the Senate could prove difficult for the President to achieve the economic agenda. India’s 10Y yield is trading lower today at 7.39%, following global cues.

    Fig 3 – Bond 10Y yield

      7-11-2022 8-11-2022 change in bps
    US 4.21 4.12 (9)
    UK 3.64 3.55 (9)
    Germany 2.34 2.28 (6)
    Japan 0.26 0.25 (1)
    China 2.71 2.69 (2)
    India 7.47 7.44 (3)

    Source: Bloomberg, Bank of Baroda Research


    Fig 4 – Short term rates

      4-11-2022 7-11-2022 change in bps
    Tbill-91 days 6.44 6.38 (6)
    Tbill-182 days 6.77 6.71 (6)
    Tbill-364 days 6.97 6.91 (6)
    G-Sec 2Y 7.18 7.15 (3)
    SONIA int rate benchmark 2.93 2.93 0
    US SOFR 3.80 3.78 (2)

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 4-11-2022 7-11-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (0.7) (0.7) 0
    Reverse repo 0 0.3 0.3
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      3-11-2022 4-11-2022 change (US$ mn/Rs cr)
    FII (US$ mn) 106.5 184.5 78.1
    Debt 12.6 (9.2) (21.7)
    Equity 93.9 193.7 99.8
    Mutual funds (Rs cr) (872.1) (575.4) 296.7
    Debt (507.2) (74.1) 433.0
    Equity (365.0) (501.3) (136.3)

    Source: Bloomberg, Bank of Baroda Research; Note-mutual fund data pertains to 16 and 17 May 2022


    Crude oil prices fell by 2.6%, as rising Covid-19 cases in China dimmed the hopes of fewer restrictions, which would further dampen demand prospects.

    Fig 7 – Commodities

      7-11-2022 8-11-2022 % change
    Brent crude (US$/bbl) 97.9 95.4 (2.6)
    Gold (US$/ Troy Ounce) 1,675.6 1,712.4 2.2
    Copper (US$/ MT) 7,924.8 8,127.5 2.6
    Zinc (US$/MT) 2,907.5 2,946.5 1.3
    Aluminium (US$/MT) 2,337.0 2,372.0 1.5

    Source: Bloomberg, Bank of Baroda Research

  • 10 Nov 2022

    With rising Covid-19 cases in China, and PPI falling for the 1st time in 2 years, fears of global growth slowdown have increased. In the US, rate hike is showing impact on real estate sector with US mortgage applications down 41% in YoY terms—hovering near 7-year. Average interest rate for 30-year fixed rate mortgage has risen to 7.14% from 7.06% last week. Further, as investors await US midterm election results, there remains a possibility of gridlock in the US Congress, which could potentially stall fiscal programs of the government. US CPI is also due for release later today, and is expected to have cooled down from Sep’22.


    Global indices closed lower ahead of the mixed verdict likely in the US midterm elections resulting in gridlock of key policies. Investors also await US CPI which will direct future trajectory of rate hike. S&P 500 dropped the most followed by Hang Seng (1.5%). Sensex too ended in red and was dragged down by losses in real estate and metal stocks. It is trading further lower today while other Asian stocks are trading mixed.

    Fig 1 – Stock markets

      8-11-2022 9-11-2022 % change
    Dow Jones 33,161 32,514 (2.0)
    S & P 500 3,828 3,749 (2.1)
    FTSE 7,306 7,296 (0.1)
    Nikkei 27,872 27,716 (0.6)
    Hang Seng 16,557 16,359 (1.2)
    Shanghai Comp 3,064 3,048 (0.5)
    Sensex 61,185 61,034 (0.2)
    Nifty 18,203 18,157 (0.3)

    Source: Bloomberg, Bank of Baroda Research


    Except INR, other global currencies traded lower against the dollar. The greenback rebounded and strengthened by 0.8% ahead of the release of US inflation. Fed in its minutes had highlighted smaller rate hike and hence the focus on inflation front will guide the markets further. INR appreciated by 0.6% and opened lower today. Other Asian currencies are trading mixed.

    Fig 2 – Currencies

      8-11-2022 9-11-2022 % change
    EUR/USD 1.0074 1.0011 (0.6)
    GBP/USD 1.1544 1.1358 (1.6)
    USD/JPY 145.68 146.47 (0.5)
    USD/INR 81.91 81.43 0.6
    USD/CNY 7.2310 7.2410 (0.1)

    Source: Bloomberg, Bank of Baroda Research


    Barring Japan and China (flat), other global yields closed lower. 10Y yields of Germany (11bps) and UK (10bps) fell the most. Investors are hoping that Central Banks will moderate the pace of rate hikes as economy is slowing. US 10Yyield fell by 3bps, awaiting CPI data. Also midterm elections results are being closely watched. India’s 10Y yield fell by 5bps to 7.69% and is trading even lower today at 7.37%, following global cues.

    Fig 3 – Bond 10Y yield

      8-11-2022 9-11-2022 change in bps
    US 4.12 4.09 (3)
    UK 3.55 3.46 (10)
    Germany 2.28 2.17 (11)
    Japan 0.25 0.25 0
    China 2.69 2.69 0
    India 7.44 7.39 (5)

    Source: Bloomberg, Bank of Baroda Research


    T-bill rates in RBI’s latest auction have seen marginal inch up (3bps-364 day).

    Fig 4 – Short term rates

      7-11-2022 9-11-2022 change in bps
    Tbill-91 days 6.38 6.46 8
    Tbill-182 days 6.71 6.78 7
    Tbill-364 days 6.91 6.95 4
    G-Sec 2Y 7.15 7.09 (6)
    SONIA int rate benchmark 2.93 2.93 0
    US SOFR 3.78 3.78 0

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 7-11-2022 9-11-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (0.7) (0.3) 0.4
    Reverse repo 0.3 0.3 0
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      4-11-2022 7-11-2022 change (US$ mn/Rs cr)
    FII (US$ mn) 184.5 190.7 6.1
    Debt (9.2) (45.6) (36.4)
    Equity 193.7 236.2 42.5
    Mutual funds (Rs cr) (872.1) (575.4) 296.7
    Debt (507.2) (74.1) 433.0
    Equity (365.0) (501.3) (136.3)

    Source: Bloomberg, Bank of Baroda Research; Note-mutual fund data pertains to 16 and 17 May 2022


    Crude oil prices fell by another 2.8%, as investors monitor rising Covid-19 cases in China and await US midterm election results.

    Fig 7 – Commodities

      8-11-2022 9-11-2022 % change
    Brent crude (US$/bbl) 95.4 92.7 (2.8)
    Gold (US$/ Troy Ounce) 1,712.4 1,706.7 (0.3)
    Copper (US$/ MT) 8,127.5 8,114.3 (0.2)
    Zinc (US$/MT) 2,946.5 2,867.0 (2.7)
    Aluminium (US$/MT) 2,372.0 2,319.0 (2.2)

    Source: Bloomberg, Bank of Baroda Research

  • 11 Nov 2022

    US CPI for Oct’22 fell to a 9-month low of 0.4%, lower than estimated 0.6% and also down from upwardly revised 0.6% in Sep’22. Even in YoY terms, inflation pressure eased and it fell to 7.7% in Oct’22 (est.: 7.9%) from 8.2% in Sep’22. Separately, US jobless claims for the week ending 5 Nov 2022, rose by 7k over the week and reached 225k, running slightly higher than pre-pandemic (2019) weekly average of 218k. Investors now believe that Fed might moderate the pace of rate hikes in the coming months as inflation seems to have peaked. As a result, US and European stock markets rose, DXY fell, oil and gold prices gained.


    Except US and UK indices, other global indices closed lower. Dow Jones surged by 3.7% on the back of softer than expected CPI print (7.7% against an expectation of 7.9%). This also raised hopes of a possible trim down on Fed rate hike. Sensex continued to fall for the second day in a row. Losses in auto and consumer durable stocks pulled the index lower. However, it is trading higher today in line with other Asian stocks.

    Fig 1 – Stock markets

      9-11-2022 10-11-2022 % change
    Dow Jones 32,514 33,715 3.7
    S & P 500 3,749 3,956 5.5
    FTSE 7,296 7,375 1.1
    Nikkei 27,716 27,446 (1.0)
    Hang Seng 16,359 16,081 (1.7)
    Shanghai Comp 3,048 3,036 (0.4)
    Sensex 61,034 60,614 (0.7)
    Nifty 18,157 18,028 (0.7)

    Source: Bloomberg, Bank of Baroda Research


    Except INR, other global currencies ended higher against the dollar. The greenback struggled and declined (2.1%) on the back of softer inflation print, signalling inflation might have peaked. It also added to the possibility of a less aggressive monetary tightening by the US Fed. INR weakened by 0.5% but opened stronger today. Other Asian currencies are trading mixed.

    Fig 2 – Currencies

      9-11-2022 10-11-2022 % change
    EUR/USD 1.0011 1.0209 2.0
    GBP/USD 1.1358 1.1716 3.2
    USD/JPY 146.47 140.98 3.9
    USD/INR 81.43 81.81 (0.5)
    USD/CNY 7.2410 7.1865 0.8

    Source: Bloomberg, Bank of Baroda Research


    Barring Japan and China (flat), other global yields closed sharply lower. 10Y yields of US (-28bps), UK (-17bps), and Germany (-16bps) fell the most. Lower than expected US CPI data and weakness in US labour markets raised hopes that Fed might moderate the pace of rate hikes in its upcoming meetings. India’s 10Y yield too fell by 4bps to 7.35% as investors had estimated dip in US CPI and a similar trend is expected in India’s CPI (due for release on Monday). It is trading much lower today at 7.25%, following global cues.

    Fig 3 – Bond 10Y yield

      9-11-2022 10-11-2022 change in bps
    US 4.09 3.81 (28)
    UK 3.46 3.29 (17)
    Germany 2.17 2.01 (16)
    Japan 0.25 0.25 0
    China 2.69 2.70 0
    India 7.39 7.35 (4)

    Source: Bloomberg, Bank of Baroda Research


    Fig 4 – Short term rates

      9-11-2022 10-11-2022 change in bps
    Tbill-91 days 6.38 6.46 8
    Tbill-182 days 6.71 6.78 7
    Tbill-364 days 6.91 6.95 4
    G-Sec 2Y 7.15 7.09 (6)
    SONIA int rate benchmark 2.93 2.93 0
    US SOFR 3.78 3.78 0

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 9-11-2022 10-11-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (0.3) (0.4) (0.1)
    Reverse repo 0.3 0.3 0
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      7-11-2022 9-11-2022 change (US$ mn/Rs cr)
    FII (US$ mn) 190.7 101.0 (89.7)
    Debt (45.6) 33.9 79.5
    Equity 236.2 67.1 (169.2)
    Mutual funds (Rs cr) (872.1) (575.4) 296.7
    Debt (507.2) (74.1) 433.0
    Equity (365.0) (501.3) (136.3)

    Source: Bloomberg, Bank of Baroda Research; Note-mutual fund data pertains to 16 and 17 May 2022


    Crude oil prices rose by 1.1% as investors digested US CPI inflation data. Weaker US$ also helped support prices. Gold prices also gained by 2.9%.

    Fig 7 – Commodities

      9-11-2022 10-11-2022 % change
    Brent crude (US$/bbl) 92.7 93.7 1.1
    Gold (US$/ Troy Ounce) 1,706.7 1,755.5 2.9
    Copper (US$/ MT) 8,114.3 8,282.5 2.1
    Zinc (US$/MT) 2,867.0 2,899.5 1.1
    Aluminium (US$/MT) 2,319.0 2,327.0 0.3

    Source: Bloomberg, Bank of Baroda Research

@2022 Bank of Baroda. All rights reserved

Important disclosures are provided at the end of this report.

Disclaimer

The views expressed in this research note are personal views of the author(s) and do not necessarily reflect the views of Bank of Baroda. Nothing contained in this publication shall constitute or be deemed to constitute an offer to sell/ purchase or as an invitation or solicitation to do so for any securities of any entity. Bank of Baroda and/ or its Affiliates and its subsidiaries make no representation as to the accuracy; completeness or reliability of any information contained herein or otherwise provided and hereby disclaim any liability with regard to the same. Bank of Baroda Group or its officers, employees, personnel, directors may be associated in a commercial or personal capacity or may have a commercial interest including as proprietary traders in or with the securities and/ or companies or issues or matters as contained in this publication and such commercial capacity or interest whether or not differing with or conflicting with this publication, shall not make or render Bank of Baroda Group liable in any manner whatsoever & Bank of Baroda Group or any of its officers, employees, personnel, directors shall not be liable for any loss, damage, liability whatsoever for any direct or indirect loss arising from the use or access of any information that may be displayed in this publication from time to time

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