Economics Weekly
Wrap 18 July - 21 July 2022

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  • 18 July 2022

    Macro prints in the US remained mixed with retail sales gaining ground and industrial production remaining muted in Jun’22. Market was still in the fix tracking growth- inflation dynamics. CPI print in New Zealand rose to its 32-year high in Q2CY22. Even in Europe, fear of recession aggravated (Bloomberg survey data). The upcoming policy of ECB will give fresh cues on the same. Notably, comments from Fed officials’ made market participants expect for 75bps rate hike in the Jul policy. China’s central bank Governor also spoke of implementation of prudent monetary policy. On the domestic front, INR trajectory will be the main market mover.


    Except Hang Seng and Shanghai Comp (lower), other global indices ended higher. US stocks rose the most led by better than expected retail sales and University of Michigan consumer confidence index data. On the other hand, Shanghai Comp slumped by 1.6% as China’s GDP rose less than expected in Q2CY22. Sensex rose by 0.6%, led by gains in auto and consumer durables stocks. It is trading further higher today, in line with its Asian peers.

    Fig 1 – Stock markets

      14-07-2022 15-07-2022 % change
    Dow Jones 30,630 31,288 2.1
    S & P 500 3,790 3,863 1.9
    FTSE 7,040 7,159 1.7
    Nikkei 26,643 26,788 0.5
    Hang Seng 20,751 20,298 (2.2)
    Shanghai Comp 3,282 3,228 (1.6)
    Sensex 53,416 53,761 0.6
    Nifty 15,939 16,049 0.7

    Source: Bloomberg, Bank of Baroda Research


    Barring INR and CNY (flat), global currencies rose against the dollar. DXY fell by 0.4% as US manufacturing production declined for the 2nd straight month. EUR gained the most by 0.6% amidst expectations of a rate hike by ECB. GBP and JPY gained 0.3% each. INR closed flat at a record low of 79.88/US$. However it is trading higher today, in line with other Asian currencies.

    Fig 2 – Currencies

      14-07-2022 15-07-2022 % change
    EUR/USD 1.0018 1.0080 0.6
    GBP/USD 1.1824 1.1855 0.3
    USD/JPY 138.96 138.57 0.3
    USD/INR 79.88 79.88 0
    USD/CNY 6.7561 6.7572 0

    Source: Bloomberg, Bank of Baroda Research


    Global yields closed mixed. US and Germany’s 10Y yield fell by 4bps each. Market is now pricing for 75bps rate hike as visible in the CME Fed watch tool data and also from the recent comments of two Fed officials. Bloomberg survey also pointed out that the risk to recession in Europe has increased. Japan and China’s 10Y yield closed stable ahead of their respective policy decision scheduled this week. India’s 10Y yield rose by 5bps (7.44%) as oil prices inched up and also due to devolution in the latest auction. However, it is trading lower at 7.42% today.

    Fig 3 – Bond 10Y yield

      14-07-2022 15-07-2022 change in bps
    US 2.96 2.92 (4)
    UK 2.10 2.09 (1)
    Germany 1.18 1.13 (4)
    Japan 0.24 0.24 0
    China 2.79 2.79 0
    India 7.38 7.44 5

    Source: Bloomberg, Bank of Baroda Research


    Fig 4 – Short term rates

      14-07-2022 15-07-2022 change in bps
    Tbill-91 days 5.2 5.2 5
    Tbill-182 days 5.7 5.7 1
    Tbill-364 days 6.2 6.2 1
    G-Sec 2Y 6.4 6.4 (1)
    SONIA int rate benchmark 1.2 1.2 0
    US SOFR 1.5 1.5 0

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 14-07-2022 15-07-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (2.5) (1.8) 0.7
    Reverse repo 2.6 0.3 (1.3)
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      15-07-2022 16-07-2022 change (US$ mn/Rs cr)
    FII (US$ mn) (410.7) (65.9) 344.8
    Debt (69.2) (111.4) (42.2)
    Equity (341.5) 45.5 387.0
    Mutual funds (Rs cr) (1,437.2) (2,733.8) (1,296.7)
    Debt (943.4) (1,011.9) (68.5)
    Equity (493.7) (1,721.9) (1,228.2)

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


    Crude prices rose by 2.1% to US$ 101/bbl amidst concerns of a tighter supply surrounding reports of no immediate output boost from Saudi Arabia.

    Fig 7 – Commodities

      14-07-2022 15-07-2022 % change
    Brent crude (US$/bbl) 99.1 101.2 2.1
    Gold (US$/ Troy Ounce) 1,709.9 1,708.2 (0.1)
    Copper (US$/ MT) 7,160.0 7,178.3 0.3
    Zinc (US$/MT) 2,951.5 2,978.8 0.9
    Aluminium (US$/MT) 2,336.5 2,343.0 0.3

    Source: Bloomberg, Bank of Baroda Research

  • 19 July 2022

    INR continued to hit fresh record low and closed just shy of the 80/$ mark, though it breached the 80/$ mark in intra-day trading. Persistent FII outflows, burgeoning CAD and volatility in oil prices are the major contributors. This is expected to keep domestic markets on edge. Elsewhere on global economy, Australia’s central bank minutes highlighted that policy rate is below neutral rate, hence signalling more rate hikes in future. The current week will be dominated by policy decision of ECB, where rate hike of 25bps is expected and BoJ’s where policy is expected to be ultra- accommodative.


    Barring US, other global stocks ended higher led by improvement in risk- sentiment. Investors monitored earnings results and also awaited policy decisions of ECB (this week) and Fed (next week). Hang Seng rose the most by 2.7%, followed by Shanghai Comp (up by 1.6%). Sensex too gained by 1.4%, supported by global cues. Technology and metal stocks rose the most. However it is trading lower today, in line with other Asian stocks.

    Fig 1 – Stock markets

      15-07-2022 18-07-2022 % change
    Dow Jones 31,288 31,073 (0.7)
    S & P 500 3,863 3,831 (0.8)
    FTSE 7,159 7,223 0.9
    Nikkei 26,643 26,788 0.5
    Hang Seng 20,298 20,846 2.7
    Shanghai Comp 3,228 3,278 1.6
    Sensex 53,761 54,521 1.4
    Nifty 16,049 16,279 1.4

    Source: Bloomberg, Bank of Baroda Research


    Except INR (lower), other global currencies edged higher. DXY fell by 0.6% as investors reassessed the path of Fed rate hikes. GBP gained the most by 0.8%, despite political uncertainty. EUR too rose by 0.6%. INR depreciated to a fresh record-low of 79.98/$, just shy of the 80/$ mark. However it is trading at 79.95/$ today. Asian currencies are also trading higher.

    Fig 2 – Currencies

      15-07-2022 18-07-2022 % change
    EUR/USD 1.0080 1.0143 0.6
    GBP/USD 1.1855 1.1953 0.8
    USD/JPY 138.57 138.14 0.3
    USD/INR 79.88 79.98 (0.1)
    USD/CNY 6.7572 6.7432 0.2

    Source: Bloomberg, Bank of Baroda Research


    Except Japan China and India (stable), global yields closed higher. Market is pricing in 75bps rate hike by Fed in the next policy as visible in Fed official Christopher Waller’s comments. Even the US inflation expectation data of University of Michigan showed some moderation for 5-year ahead. These provided some comfort on the growth front. Hence risk appetite for other asset class increased for the current trading session. India’s 10Y yield is trading at 7.46%, slightly higher than its previous close of 7.44%.

    Fig 3 – Bond 10Y yield

      15-07-2022 18-07-2022 change in bps
    US 2.92 2.99 7
    UK 2.09 2.16 7
    Germany 1.13 1.22 8
    Japan 0.24 0.24 0
    China 2.79 2.79 0
    India 7.44 7.44 0

    Source: Bloomberg, Bank of Baroda Research


    Fig 4 – Short term rates

      15-07-2022 18-07-2022 change in bps
    Tbill-91 days 5.2 5.2 (4)
    Tbill-182 days 5.7 5.8 5
    Tbill-364 days 6.2 6.2 (1)
    G-Sec 2Y 6.4 6.4 0
    SONIA int rate benchmark 1.2 1.2 0
    US SOFR 1.5 1.5 1

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 15-07-2022 18-07-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (1.8) (1.7) 0.1
    Reverse repo 0.3 2.1 1.8
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      14-07-2022 15-07-2022 change (US$ mn/Rs cr)
    FII (US$ mn) (65.9) (206.1) (140.2)
    Debt (111.4) (1.5) 109.9
    Equity 45.5 (204.6) (250.1)
    Mutual funds (Rs cr) (1,437.2) (2,733.8) (1,296.7)
    Debt (943.4) (1,011.9) (68.5)
    Equity (493.7) (1,721.9) (1,228.2)

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


    Crude prices rose by 5.1% to US$ 106/bbl amidst comments from Iraq’s energy minister that higher oil prices are likely to stay. Gold prices rose by 0.1% as DXY fell.

    Fig 7 – Commodities

      15-07-2022 18-07-2022 % change
    Brent crude (US$/bbl) 101.2 106.3 5.1
    Gold (US$/ Troy Ounce) 1,708.2 1,709.2 0.1
    Copper (US$/ MT) 7,178.3 7,411.0 3.2
    Zinc (US$/MT) 2,978.8 3,091.5 3.8
    Aluminium (US$/MT) 2,343.0 2,426.5 3.6

    Source: Bloomberg, Bank of Baroda Research

  • 20 July 2022

    Markets remained cautious awaiting ECB’s policy decision where even a 50bps rate hike cannot be ruled out considering the Jun’22 CPI inflation print is still elevated at 8.6%. Elsewhere, Bank of England (BoE) Governor also hinted at 50bps rate hike in the coming policy. Macro indicators in the US remained weak with muted home sales data. In China as well, Premier Li Keqiang also hinted that focus should be on price stability and employment generation on the back of a flexible growth target. On domestic front, movement of domestic currency is closely tracked and further depreciation cannot be ruled out.


    Except Hang Seng (lower) and Shanghai Comp (flat), other global stocks edged up. US stocks rose the most supported by better than expected earnings report. Investor sentiments were also lifted by reports that Russia is likely to restart gas supply to Europe. Sensex rose by 0.5%, led by gains in real estate and banking stocks. It is trading further higher today, in line with other Asian stocks.

    Fig 1 – Stock markets

      18-07-2022 19-07-2022 % change
    Dow Jones 31,073 31,827 2.4
    S & P 500 3,831 3,937 2.8
    FTSE 7,223 7,296 1.0
    Nikkei 26,788 26,962 0.6
    Hang Seng 20,846 20,661 (0.9)
    Shanghai Comp 3,278 3,279 0
    Sensex 54,521 54,768 0.5
    Nifty 16,279 16,341 0.4

    Source: Bloomberg, Bank of Baroda Research


    DXY fell further by 0.6% as investors pared back expectations of a 100bps rate hike by Fed. Disappointing home sales data also weighed. On the other hand, EUR rose by 0.8% amidst reports that ECB may hike policy rates by 50bps. However, sharp upside were capped by political uncertainty in Italy. INR closed flat. It is trading a tad higher today, in line with other Asian currencies.

    Fig 2 – Currencies

      18-07-2022 19-07-2022 % change
    EUR/USD 1.0143 1.0227 0.8
    GBP/USD 1.1953 1.1995 0.4
    USD/JPY 138.14 138.19 0
    USD/INR 79.98 79.95 0
    USD/CNY 6.7432 6.7442 0

    Source: Bloomberg, Bank of Baroda Research


    Except Japan China and India (stable), global yields closed higher. Market is eyeing ECB’s policy decision where 50bps hike cannot be ruled out as inflation is overheated. In that case global 10Y yields might inch up higher. Germany’s 10Y yield rose the most by 6bps followed by US and UK. Even Governor Bailey of BoE spoke of 50bps hike and scaling back its bond holdings, which might be forthcoming. India’s 10Y yield is trading at the same level today.

    Fig 3 – Bond 10Y yield

      18-07-2022 19-07-2022 change in bps
    US 2.99 3.02 4
    UK 2.16 2.18 2
    Germany 1.22 1.28 6
    Japan 0.24 0.24 0
    China 2.79 2.79 0
    India 7.44 7.44 0

    Source: Bloomberg, Bank of Baroda Research


    Fig 4 – Short term rates

      18-07-2022 19-07-2022 change in bps
    Tbill-91 days 5.2 5.2 6
    Tbill-182 days 5.8 5.7 (11)
    Tbill-364 days 6.2 6.2 0
    G-Sec 2Y 6.4 6.4 1
    SONIA int rate benchmark 1.2 1.2 0
    US SOFR 1.5 1.5 0

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 18-07-2022 19-07-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (1.7) (1.7) 0
    Reverse repo 2.1 2.1 0
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      15-07-2022 18-07-2022 change (US$ mn/Rs cr)
    FII (US$ mn) (206.1) 97.7 303.9
    Debt (1.5) 70.2 71.7
    Equity (204.6) 27.5 232.2
    Mutual funds (Rs cr) (1,437.2) (2,733.8) (1,296.7)
    Debt (943.4) (1,011.9) (68.5)
    Equity (493.7) (1,721.9) (1,228.2)

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


    Crude prices rose by 1% to US$ 107/bbl despite increase in US crude inventories. Gold prices rose by 0.1% as DXY fell.

    Fig 7 – Commodities

      18-07-2022 19-07-2022 % change
    Brent crude (US$/bbl) 106.3 107.4 1.0
    Gold (US$/ Troy Ounce) 1,709.2 1,711.7 0.1
    Copper (US$/ MT) 7,411.0 7,254.5 (2.1)
    Zinc (US$/MT) 3,091.5 3,033.0 (1.9)
    Aluminium (US$/MT) 2,426.5 2,389.0 (1.5)

    Source: Bloomberg, Bank of Baroda Research

  • 21 July 2022

    UK’s CPI print rose to its fresh 40-year high of 9.4% in Jun’22, on YoY basis, against expectation of 9.3% and 9.1% in May’22, led by food and fuel. This raised renewed hopes of faster pace of rate hike by BoE. Elsewhere, BoJ also raised its inflation forecast to 2.3% against earlier estimate of 1.9% for the current fiscal. However, on policy front, it remained ultra-accommodative. Market is looking for cues from ECB’s policy decision on the back of its energy related issues. Further, US is also weighing on options for reducing tariff on imports from China, to check inflation. Gold prices also hit its more than a year low on account of strengthening DXY. On domestic front, INR remained on centre stage and is trading above the 80/$ mark today.


    Barring FTSE (lower), global stocks edged higher. Nikkei rose the most by 2.7%, led by gains in technology stocks. US stocks also ended higher supported by upbeat earning reports. However, FTSE closed lower as UK’s inflation surged further. Sensex rose by 1.2%, supported by technology and metal stocks. It is trading further higher today, in line with other Asian stocks.

    Fig 1 – Stock markets

    19-07-2022 20-07-2022 % change
    Dow Jones 31,827 31,875 0.2
    S & P 500 3,937 3,960 0.6
    FTSE 7,296 7,264 (0.4)
    Nikkei 26,962 27,680 2.7
    Hang Seng 20,661 20,890 1.1
    Shanghai Comp 3,279 3,305 0.8
    Sensex 54,768 55,398 1.2
    Nifty 16,341 16,521 1.1

    Source: Bloomberg, Bank of Baroda Research


    Except JPY (flat), other global currencies depreciated. DXY rose by 0.4% in line with an increase in US10Y yield. EUR fell by 0.5%, ahead of ECB policy decision. GBP too depreciated by 0.2% as UK’s inflation surged to a 40-year high. INR fell to a fresh record low of 79.99/$. It is trading above the 80/$ mark today. Other Asian currencies are also trading weaker.

    Fig 2 – Currencies

    19-07-2022 20-07-2022 % change
    EUR/USD 1.0227 1.0180 (0.5)
    GBP/USD 1.1995 1.1973 (0.2)
    USD/JPY 138.19 138.21 0
    USD/INR 79.95 79.99 0
    USD/CNY 6.7442 6.7558 (0.2)

    Source: Bloomberg, Bank of Baroda Research


    Global yields closed mixed. Political turmoil in Italy and UK, energy related issues in the Eurozone and key central bank policy decisions kept investors cautious. UK’ 10Y yield fell by 4bps despite its elevated inflation print. Elsewhere in US, Japan and India, 10Y yield rose a tad by 1bps. India’s 10Y yield is trading a tad higher at 7.46% today.

    Fig 3 – Bond 10Y yield

      19-07-2022 20-07-2022 change in bps
    US 3.02 3.03 1
    UK 2.18 2.14 (4)
    Germany 1.28 1.26 (2)
    Japan 0.24 0.25 1
    China 2.79 2.77 (2)
    India 7.44 7.45 1

    Source: Bloomberg, Bank of Baroda Research


    In the Rs 210bn TBill auction, cut off yields rose across the board (91-days: +16bps, 182-days:+11bps, 364-days:+7bps).

    Fig 4 – Short term rates

      19-07-2022 20-07-2022 change in bps
    Tbill-91 days 5.2 5.4 14
    Tbill-182 days 5.7 5.8 14
    Tbill-364 days 6.2 6.2 6
    G-Sec 2Y 6.4 6.4 0
    SONIA int rate benchmark 1.2 1.2 0
    US SOFR 1.5 1.5 0

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 19-07-2022 20-07-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (1.7) (1.5) 0.2
    Reverse repo 2.1 2.1 0
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

    18-07-2022 19-07-2022 change (US$ mn/Rs
    FII (US$ mn) 97.7 81.0 cr) (16.8)
    Debt 70.2 (51.6) (121.7)
    Equity 27.5 132.5 105.0
    Mutual funds (Rs cr) 1,142.6 (36.7) (1,179.3)
    Debt 412.3 (446.4) (858.7)
    Equity 730.2 409.6 (320.6)

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


    Crude prices moderated by 0.4% to US$ 107/bbl as US data showed muted gasoline demand. Gold prices hit its lowest since Mar’21, as DXY strengthened..

    Fig 7 – Commodities

      19-07-2022 20-07-2022 % change
    Brent crude (US$/bbl) 107.4 106.9 (0.4)
    Gold (US$/ Troy Ounce) 1,711.7 1,696.6 (0.9)
    Copper (US$/ MT) 7,254.5 7,358.0 1.4
    Zinc (US$/MT) 3,033.0 3,084.0 1.7
    Aluminium (US$/MT) 2,389.0 2,430.0 1.7

    Source: Bloomberg, Bank of Baroda Research

@2022 Bank of Baroda. All rights reserved

Important disclosures are provided at the end of this report.

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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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