Economics Weekly Wrap
23 August - 26 August 2022

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  • 23 Aug 2022

    Global equity and currency indices continued to slide amidst energy woes in Europe. Further, expectation of hawkish signals from upcoming ECB minutes and Fed Chair’s speech at the Jackson Hole symposium, have also indicated tighter financial conditions. Even Bundesbank President signalled more rate hikes from ECB may be forthcoming. On the other hand, inflationary concerns have kept bond yields elevated. China’s support towards property sector continued with the government planning a special developer loans worth US$ 29.3bn. Notably, both flash PMI print of Australia and Japan signalled slowdown in economic activity. Domestically, RBI raised rates by 50bps to 5.4% and hinted at further normalisation&of policy, in line with global central banks.


    Except Shanghai Comp (higher), other global indices closed lower. Stocks in the US fell the most, amidst expectations of further rate hikes by Fed. Technology and consumer durable stocks fell the most. Sensex too declined by 1.5% weighed down by weak global sentiments. All sectoral indices ended in red, with metal and real estate stocks declining the most. It is trading further lower today in line with other Asian stocks.

    Fig 1 – Stock markets

      21-08-2022 22-08-2022 % change
    Dow Jones 33,707 33,064 (1.9)
    S & P 500 4,228 4,138 (2.1)
    FTSE 7,550 7,534 (0.2)
    Nikkei 28,930 28,795 (0.5)
    Hang Seng 19,773 19,657 (0.6)
    Shanghai Comp 3,258 3,278 0.6
    Sensex 59,646 58,774 (1.5)
    Nifty 17,758 17,491 (1.5)

    Source: Bloomberg, Bank of Baroda Research


    Global currencies ended lower. DXY rose by 0.8% to its highest since Jun’02 as investors expect hawkish comments from Fed Chair at the upcoming Jackson Hole symposium. EUR slid by 0.9% to close below the dollar parity level led by growth concerns and a worsening energy crisis. CNY too depreciated by 0.4% to a 2-year low as PBOC cut key rates to support the economy. INR depreciated by 0.1%. It is trading stronger today in line with other Asian currencies.

    Fig 2 – Currencies

      21-08-2022 22-08-2022 % change
    EUR/USD 1.0037 0.9943 (0.9)
    GBP/USD 1.1829 1.1767 (0.5)
    USD/JPY 136.97 137.48 (0.4)
    USD/INR 79.78 79.87 (0.1)
    USD/CNY 6.8176 6.8483 (0.4)

    Source: Bloomberg, Bank of Baroda Research


    Except China and India (stable), global yields closed higher. UK’s 10Y yield rose the most by 10bps. Notably, its 2Y security rose to its highest since CY08 amidst expectations of higher inflation print in the coming months. Germany and US’ 10Y yield rose by 8bps and 4bps respectively. India’s 10Y yield is trading 3bps higher today at 7.3%, as MPC minutes highlighted that more rate hikes may be frontloaded in the coming months.

    Fig 3 – Bond 10Y yield

      21-08-2022 22-08-2022 change in bps
    US 2.97 3.01 4
    UK 2.41 2.51 10
    Germany 1.23 1.31 8
    Japan 0.20 0.22 2
    China 2.63 2.64 0
    India 7.26 7.27 0

    Source: Bloomberg, Bank of Baroda Research


    Fig 4 – Short term rates

      21-08-2022 22-08-2022 change in bps
    Tbill-91 days 5.57 5.52 (5)
    Tbill-182 days 5.84 5.91 7
    Tbill-364 days 6.17 6.16 (1)
    G-Sec 2Y 6.35 6.36 1
    SONIA int rate benchmark 1.69 1.69 0
    US SOFR 2.28 2.28 0

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 19-08-2022 22-08-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (0.6) (0.5) 0.1
    Reverse repo 0.7 0.7 0
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      17-08-2022 18-08-2022 change (US$ mn/Rs cr)
    FII (US$ mn) 445.1 192.8 (252.4)
    Debt 11.2 0.7 (10.5)
    Equity 434.0 192.1 (241.9)
    Mutual funds (Rs cr) 1,407.1 (1,641.0) (3,048.1)
    Debt 1,571.0 (2,206.9) (3,777.9)
    Equity (163.9) 565.9 729.8

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


    Crude oil prices moderated by 0.2% to US$ 97/bbl as concerns of global growth slowdown outweighed fears of a tighter supply by OPEC+.

    Fig 7 – Commodities

      21-08-2022 22-08-2022 % change
    Brent crude (US$/bbl) 96.7 96.5 (0.2)
    Gold (US$/ Troy Ounce) 1,747.1 1,736.3 (0.6)
    Copper (US$/ MT) 8,100.9 8,076.1 (0.3)
    Zinc (US$/MT) 3,548.0 3,559.8 0.3
    Aluminium (US$/MT) 2,386.0 2,390.5 0.2

    Source: Bloomberg, Bank of Baroda Research

  • 24 Aug 2022

    Flash PMI readings reflected muted economic activity in the US (composite reading 27-month low) and Eurozone (18-month low). As a result, global equity indices ended lower. Further, US new home sales data plummeted to its 6.5 years low, amidst reeling inflationary pressure. On MoM basis, it declined by 12.6% against expectation of 2.5% drop and compared to 7.1% decline in Jun’22. Another Fed official (Minneapolis Fed President) spoke of more rate hikes to control inflation. He also said that if supply side bottlenecks can be mitigated, a hard landing can be avoided for the economy. On the domestic front, RBI Governor in a recent interview said that inflation has moderated from its peak and softening of commodity prices might further lend support.


    Barring India, stock indices in other major economies ended in red. Weak PMI readings globally, ongoing property crisis in China and soaring energy prices in Europe, raised fresh fears of a global recession. Nikkei dropped the most by 1.2%, followed by Hang Seng which fell by 0.8%. On the other hand, Sensex rose by 0.4% supported by gains in metal and auto stocks. However, it is trading lower today in line with other Asian stocks.

    Fig 1 – Stock markets

      22-08-2022 23-08-2022 % change
    Dow Jones 33,064 32,910 (0.5)
    S & P 500 4,138 4,129 (0.2)
    FTSE 7,534 7,488 (0.6)
    Nikkei 28,795 28,453 (1.2)
    Hang Seng 19,657 19,503 (0.8)
    Shanghai Comp 3,278 3,276 0
    Sensex 58,774 59,031 0.4
    Nifty 17,491 17,578 0.5

    Source: Bloomberg, Bank of Baroda Research


    Except INR (flat), other global currencies ended higher. After rising for 4-straight sessions, DXY fell by 0.4% amidst weaker than expected US data (services PMI and new home sales). GBP rose the most by 0.6%, followed by JPY which gained 0.5%. INR ended flat even as oil prices increased. It is trading marginally weaker today, in line with other Asian currencies.

    Fig 2 – Currencies

      22-08-2022 23-08-2022 % change
    EUR/USD 0.9943 0.9970 0.3
    GBP/USD 1.1767 1.1836 0.6
    USD/JPY 137.48 136.77 0.5
    USD/INR 79.87 79.86 0
    USD/CNY 6.8483 6.8350 0.2

    Source: Bloomberg, Bank of Baroda Research


    Except Japan and China (stable), global yields closed higher. UK’s 10Y yield rose the most by 6bps as its flash composite PMI reading was above the 50- mark. US 10Y yield rose by 3bps awaiting comments from Fed Chair. India’s 10Y yield rose a tad by 1bps to 7.28%. It is trading at 7.3% today.

    Fig 3 – Bond 10Y yield

      22-08-2022 23-08-2022 change in bps
    US 3.01 3.05 3
    UK 2.51 2.58 6
    Germany 1.31 1.32 1
    Japan 0.22 0.22 0
    China 2.64 2.63 0
    India 7.27 7.28 1

    Source: Bloomberg, Bank of Baroda Research


    Fig 4 – Short term rates

      22-08-2022 23-08-2022 change in bps
    Tbill-91 days 5.52 5.55 3
    Tbill-182 days 5.91 5.80 (11)
    Tbill-364 days 6.16 6.18 2
    G-Sec 2Y 6.35 6.36 1
    SONIA int rate benchmark 1.69 1.69 0
    US SOFR 2.28 2.28 0

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 22-08-2022 23-08-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (0.5) (0.7) (0.2)
    Reverse repo 0.7 0.7 0
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      19-08-2022 22-08-2022 change (US$ mn/Rs cr)
    FII (US$ mn) 192.8 (33.6) (226.3)
    Debt 0.7 9.8 9.2
    Equity 192.1 (43.4) (235.5)
    Mutual funds (Rs cr) 1,407.1 (1,641.0) (3,048.1)
    Debt 1,571.0 (2,206.9) (3,777.9)
    Equity (163.9) 565.9 729.8

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


    Crude oil prices rose by 3.9% to US$ 100/bbl amidst falling US crude stockpiles and also expectation of output cut from OPEC+.

    Fig 7 – Commodities

      22-08-2022 23-08-2022 % change
    Brent crude (US$/bbl) 96.5 100.2 3.9
    Gold (US$/ Troy Ounce) 1,736.3 1,748.2 0.7
    Copper (US$/ MT) 8,076.1 8,170.8 1.2
    Zinc (US$/MT) 3,559.8 3,548.5 (0.3)
    Aluminium (US$/MT) 2,390.5 2,424.0 1.4

    Source: Bloomberg, Bank of Baroda Research

  • 25 Aug 2022

    Growth and inflationary concerns continued to bother global economy. China again stepped up stimulus with US$ 146bn support for infrastructure spending. Central Bank of South Korea raised policy rate by 25bps to 2.5% and also raised its inflation forecast to 5.2% for CY22 (highest since CY98). Traders are also betting faster pace of rate hike from BoE as its 1Y OIS rates rose sharply by 16bps. Markets are also awaiting cues from ECB minutes and Fed Chair’s speech. Notably, CME Fed watch tool is pricing in a 75bps hike in the next policy. On the domestic front, MPC member Prof Varma spoke of geopolitical risk being biggest threat to India’s growth outlook and also said high inflation will not become the ‘norm’.


    Global stocks ended mixed. US stocks edged up awaiting clarity on future rate hikes by the Fed Chair. However, Shanghai Comp and Hang Seng dropped the most amidst ongoing property crisis in China. Sensex rose by 0.1% supported by gains in real estate stocks. Asian stocks are trading higher today, buoyed by announcement of stimulus measures by China. Sensex too is trading in green.

    Fig 1 – Stock markets

      23-08-2022 24-08-2022 % change
    Dow Jones 32,910 32,969 0.2
    S & P 500 4,129 4,141 0.3
    FTSE 7,488 7,472 (0.2)
    Nikkei 28,453 28,313 (0.5)
    Hang Seng 19,503 19,269 (1.2)
    Shanghai Comp 3,276 3,215 (1.9)
    Sensex 59,031 59,085 0.1
    Nifty 17,578 17,605 0.2

    Source: Bloomberg, Bank of Baroda Research


    Global currencies closed broadly weaker. DXY was unchanged ahead of Fed Chair’s speech. GBP and JPY both depreciated by 0.3% each. INR gained 0.1% against the dollar supported by FPI inflows. It is trading weaker today, in line with other Asian currencies.

    Fig 2 – Currencies

      23-08-2022 24-08-2022 % change
    EUR/USD 0.9970 0.9967 (0.0)
    GBP/USD 1.1836 1.1799 (0.3)
    USD/JPY 136.77 137.12 (0.3)
    USD/INR 79.86 79.82 0.1
    USD/CNY 6.8350 6.8595 (0.4)

    Source: Bloomberg, Bank of Baroda Research


    Except China (stable), global yields closed higher. UK’s 10Y yield rose the most by 12bps as OIS rates suggested sharper pace of rate hike by BoE. US 10Y yield also rose by 6bps as capital goods orders data was better than expected. India’s 10Y yield rose a tad by 1bps to 7.29%. It is trading at 7.3%.

    Fig 3 – Bond 10Y yield

      23-08-2022 24-08-2022 change in bps
    US 3.05 3.10 6
    UK 2.58 2.70 12
    Germany 1.32 1.37 5
    Japan 0.22 0.23 1
    China 2.63 2.64 0
    India 7.28 7.29 1

    Source: Bloomberg, Bank of Baroda Research


    In the current Rs 210bn auction of TBill, cut off yield rose across the board (91 days: +4bps, 182 days: +8bps and 364 days: +7bps).

    Fig 4 – Short term rates

      23-08-2022 24-08-2022 change in bps
    Tbill-91 days 5.55 5.59 4
    Tbill-182 days 5.80 5.98 18
    Tbill-364 days 6.18 6.25 7
    G-Sec 2Y 6.35 6.36 1
    SONIA int rate benchmark 1.69 1.69 0
    US SOFR 2.28 2.27 (1)

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 23-08-2022 24-08-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (0.7) (0.7) 0
    Reverse repo 0.7 0.7 0
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      22-08-2022 23-08-2022 change (US$ mn/Rs cr)
    FII (US$ mn) (33.6) 534.1 567.6
    Debt 9.8 401.7 391.9
    Equity (43.4) 132.4 175.8
    Mutual funds (Rs cr) 1,407.1 (1,641.0) (3,048.1)
    Debt 1,571.0 (2,206.9) (3,777.9)
    Equity (163.9) 565.9 729.8

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


    Crude oil prices rose by 1% to US$ 101/bbl amidst fear of output cut from OPEC+.

    Fig 7 – Commodities

      23-08-2022 24-08-2022 % change
    Brent crude (US$/bbl) 100.2 101.2 1.0
    Gold (US$/ Troy Ounce) 1,748.2 1,751.2 0.2
    Copper (US$/ MT) 8,170.8 8,058.3 (1.4)
    Zinc (US$/MT) 3,548.5 3,587.5 1.1
    Aluminium (US$/MT) 2,424.0 2,430.0 0.2

    Source: Bloomberg, Bank of Baroda Research

  • 26 Aug 2022

    Investors are cautious ahead of Fed Chair’s speech at the Jackson Hole Symposium. Other Fed officials also sounded hawkish in their recent interviews. St Louis Fed Chief stressed the need for frontloading rates to put downward pressure on inflation. Even Philadelphia Fed President said that there might be ambiguity between 50 and 75bps rate hike in the coming policy. But according to him, 50bps might not be a substantial move. Elsewhere, growth indicators were reeling under pressure. In Hong Kong, exports fell at a sharper pace of 8.9% against estimated 4.8% decline. Even Germany’s IFO business climate data moderated compared to previous month. In US as well, second estimate of Q2GDP data showed contraction of 0.6%. However, the pace is less than 0.9% contraction shown in the first estimate


    Except India, global stocks edged up. Investors continued to monitor comments from Fed officials, fresh government stimulus in China and ECB minutes. Hang Seng rose the most by 3.6%. US stocks too rose supported by strong macro data (Q2CY22 GDP and jobless claims). Sensex fell by 0.5% led by losses in technology and oil&gas stocks. However, it is trading higher today in line with other Asian stocks.

    Fig 1 – Stock markets

      24-08-2022 25-08-2022 % change
    Dow Jones 32,969 33,292 1.0
    S & P 500 4,141 4,199 1.4
    FTSE 7,472 7,480 0.1
    Nikkei 28,313 28,479 0.6
    Hang Seng 19,269 19,968 3.6
    Shanghai Comp 3,215 3,246 1.0
    Sensex 59,085 58,775 (0.5)
    Nifty 17,605 17,522 (0.5)

    Source: Bloomberg, Bank of Baroda Research


    Barring INR, other global currencies appreciated against the dollar. DXY fell by 0.2% even as US Q2CY232 GDP declined less than initially estimated. EUR gained 0.1% supported by better than expected data (Q2CY23 GDP). INR depreciated by 0.1% amidst FPI outflows. It is trading marginally stronger today, while other Asian currencies are trading mixed.

    Fig 2 – Currencies

      24-08-2022 25-08-2022 % change
    EUR/USD 0.9967 0.9975 0.1
    GBP/USD 1.1799 1.1832 0.3
    USD/JPY 137.12 136.49 0.5
    USD/INR 79.82 79.88 (0.1)
    USD/CNY 6.8595 6.8492 0.2

    Source: Bloomberg, Bank of Baroda Research


    Global yields closed mixed ahead of Fed Chair’s speech for cues on trajectory of Fed fund rate. US and UK’s 10Y yield fell the most by 8bps each. China’s 10Y yield on the other hand rose by 2bps supported by growth related measures of the government. India’s 10Y yield rose a tad by 1bps to 7.29%. It is trading lower at 7.27%.

    Fig 3 – Bond 10Y yield

      24-08-2022 25-08-2022 change in bps
    US 3.10 3.03 (8)
    UK 2.70 2.62 (8)
    Germany 1.37 1.32 (5)
    Japan 0.23 0.23 0
    China 2.64 2.66 2
    India 7.29 7.29 1

    Source: Bloomberg, Bank of Baroda Research


    Crude oil prices fell by 1.9% to US$ 99/bbl amidst falling US gasoline demand and expectation of positive response from the ongoing US-Iran nuclear deal.

    Fig 4 – Short term rates

      24-08-2022 25-08-2022 change in bps
    Tbill-91 days 5.59 5.58 (1)
    Tbill-182 days 5.98 5.95 (3)
    Tbill-364 days 6.25 6.23 (2)
    G-Sec 2Y 6.35 6.36 1
    SONIA int rate benchmark 1.69 1.69 (0)
    US SOFR 2.27 2.27 -

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 24-08-2022 25-08-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (0.7) (0.8) (0.1)
    Reverse repo 0.7 0.7 0
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      23-08-2022 24-08-2022 change (US$ mn/Rs cr)
    FII (US$ mn) 534.1 (18.2) (552.3)
    Debt 401.7 (39.2) (440.9)
    Equity 132.4 21.1 (111.3)
    Mutual funds (Rs cr) 1,407.1 (1,641.0) (3,048.1)
    Debt 1,571.0 (2,206.9) (3,777.9)
    Equity (163.9) 565.9 729.8

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


    Crude oil prices rose by 1% to US$ 101/bbl amidst fear of output cut from OPEC+.

    Fig 7 – Commodities

      24-08-2022 25-08-2022 % change
    Brent crude (US$/bbl) 101.2 99.3 (1.9)
    Gold (US$/ Troy Ounce) 1,751.2 1,758.7 0.4
    Copper (US$/ MT) 8,058.3 8,167.0 1.3
    Zinc (US$/MT) 3,587.5 3,624.8 1.0
    Aluminium (US$/MT) 2,430.0 2,433.5 0.1

    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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