Economic Weekly Wrap
26 June 2023 - 30 June 2023
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26 June 2023
Fresh fears of a global economic downturn emerged after flash composite PMIs of Japan (4-month low), US (3-month low), UK (3-month low) and Eurozone (5-month low) showed a slowdown. While the contraction in manufacturing activity continued, the erstwhile resilient services sector too showed signs of stress, amidst a dip in consumer spending. In this week, developments in Russia will be monitored, even though a crisis seems to have been averted for now. Speeches by heads of major central banks (Fed, ECB, BoJ) are also due, which will determine the trajectory of the markets. Minutes of BoJ’s policy reflected that one MPC member spoke about the need to tweak the yield control curve (YCC).
Global indices closed lower as recession fears mounted amidst elevated policy rates in major economies (US, Eurozone and UK). Even flash PMI readings in US, Germany also reflected some degree of slowdown. Hang Seng fell the most, dragged down by technology stocks, as concerns over slowdown in China reverberated. In India, Sensex fell by 0.4%, led by consumer durables and metal stocks. It is trading higher today, while Asian stocks are trading lower.
Fig 1 – Stock markets
22-06-2023 23-06-2023 % change Dow Jones 33,947 33,727 (0.6) S & P 500 4,382 4,348 (0.8) FTSE 7,502 7,462 (0.5) Nikkei 33,265 32,782 (1.5) Hang Seng 19,218 18,890 (1.7) Shanghai Comp 3,240 3,198 (1.3) Sensex 63,239 62,979 (0.4) Nifty 18,771 18,666 (0.6) Source: Bloomberg, Bank of Baroda Research
Most global currencies ended lower. DXY rose by 0.5% amidst expectations of more rate hikes by Fed. Weaker than expected flash PMIs of major economies also weighed on investor sentiments. EUR and JPY slipped the most by 0.6% and 0.4% respectively. INR depreciated by 0.1% following global cues. However, it is trading stronger today, in line with other Asian currencies.
Fig 2 – Currencies
22-06-2023 23-06-2023 % change EUR/USD (1 EUR / USD) 1.0956 1.0894 (0.6) GBP/USD (1 GBP / USD) 1.2748 1.2714 (0.3) USD/JPY (JPY / 1 USD) 143.11 143.70 (0.4) USD/INR (INR / 1 USD) 81.95 82.03 (0.1) USD/CNY (CNY / 1 USD) 7.1809 7.1794 0 Source: Bloomberg, Bank of Baroda Research
Global yields closed lower amidst risk off sentiment over growth concerns. Germany’s 10Y yield fell the most by 14bps, as both flash manufacturing and services PMI print remained weak. Even hawkish statement by Fed officials (Michelle Bowman and Mary Daly) could not support US 10Y yield which fell by 6bps. India’s 10Y yield fell a tad by 1bps. It is trading at 7.06% today.
Fig 3 – Bond 10Y yield
22-06-2023 23-06-2023 change in bps US 3.79 3.73 (6) UK 4.37 4.32 (5) Germany 2.49 2.35 (14) Japan 0.38 0.37 (1) China 2.68 2.67 0 India 7.09 7.07 (1) Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
22-06-2023 23-06-2023 change in bps Tbill-91 days 6.70 6.71 1 Tbill-182 days 6.87 6.87 0 Tbill-364 days 6.87 6.89 2 G-Sec 2Y 7.00 6.99 (1) India OIS-2M 6.60 6.59 (1) India OIS-9M 6.69 6.69 0 SONIA int rate benchmark 4.43 4.93 50 US SOFR 5.05 5.05 0 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 22-06-2023 23-06-2023 change (Rs tn) Net Liquidity (-Surplus/+deficit) (0.4) (0.5) 0.1 Reverse repo 0.9 0.2 (0.7) Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
21-06-2023 22-06-2023 change (US$ mn/Rs cr) FII (US$ mn) 594.7 (306.3) (901.0) Debt (76.2) (421.8) (345.6) Equity 670.9 115.5 (555.4) Mutual funds (Rs cr) 4,033.2 3,380.6 (652.6) Debt 1,236.1 2,715.2 1,479.1 Equity 2,797.1 665.4 (2,131.7) Source: Bloomberg, Bank of Baroda Research │Mutual funds data as of 12th and 13th Jun 2023
Oil prices fell amidst concerns that higher rates will lead to lower demand.
Fig 7 – Commodities
22-06-2023 23-06-2023 % change Brent crude (US$/bbl) 74.1 73.9 (0.4) Gold (US$/ Troy Ounce) 1,914.0 1,921.2 0.4 Copper (US$/ MT) 8,579.3 8,409.2 (2.0) Zinc (US$/MT) 2,445.0 2,351.3 (3.8) Aluminium (US$/MT) 2,201.0 2,174.5 (1.2) Source: Bloomberg, Bank of Baroda Research
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27 June 2023
Global central bank policies continue to remain the underlying theme driving market movements in the last few sessions. Growth concerns linger, even as inflation continues to remain elevated. Germany’s business climate index worsened further, indicating further weakness in economic activity in the region. Growth also remains on jittery ground in China, with expectations of more stimulus from the government. Chiefs of major central banks meet in Portugal tomorrow, and markets will keenly await any fresh cues on the future course of monetary policy action. Data from US i.e. housing starts, consumer confidence and core PCE, will hence be key. In Japan, the government has strengthened its war on limiting the rapid depreciation in JPY.
Global indices edged lower as recession fears still linger amidst sticky inflation and high interest rate. New York Fed President also highlighted the need to raise policy rate to control inflation. Shanghai Comp fell, despite Chinese Premier Li Qiang’s comments that more stimulus may be forthcoming. Sensex closed flat. It is trading higher today, while Asian stocks are trading mixed.
Fig 1 – Stock markets
23-06-2023 26-06-2023 % change Dow Jones 33,727 33,715 0) S & P 500 4,348 4,329 (0.4) FTSE 7,462 7,454 (0.1) Nikkei 32,782 32,699 (0.3) Hang Seng 18,890 18,794 (0.5) Shanghai Comp 3,198 3,151 (1.5) Sensex 62,979 62,970 0 Nifty 18,666 18,691 0.1 Source: Bloomberg, Bank of Baroda Research
Global currencies closed mixed. DXY fell by 0.2% as investors await a slew of macro data from the US this week. EUR gained 0.1% even as Germany’s business climate index slipped in Jun’23. JPY rose by 0.1% as Japan’s finance chief stated that the government is not ruling out any options to stem the rapid depreciation in JPY. INR closed unchanged. However, it is trading stronger today, in line with other Asian currencies.
Fig 2 – Currencies
23-06-2023 26-06-2023 % change EUR/USD (1 EUR / USD) 1.0894 1.0906 0.1 GBP/USD (1 GBP / USD) 1.2714 1.2713 0 USD/JPY (JPY / 1 USD) 143.70 143.51 0.1 USD/INR (INR / 1 USD) 82.03 82.04 0 USD/CNY (CNY / 1 USD) 7.1794 7.2401 (0.8) Source: Bloomberg, Bank of Baroda Research
Global yields closed lower. Germany’s 10Y yield fell the most by 4bps, as Ifo’s business climate dropped in Jun’23. Further, New York Fed President and ECB Governing Council member’s hawkish comments also cast a shadow on global growth trajectory. 10Y yields in UK and US fell by 2bps and 1bps respectively. India’s 10Y yield fell a tad by 1bps. It is trading flat today.
Fig 3 – Bond 10Y yield
23-06-2023 26-06-2023 change in bps US 3.73 3.72 (1) UK 4.32 4.30 (2) Germany 2.35 2.31 (4) Japan 0.37 0.36 (1) China 2.67 2.67 0 India 7.07 7.07 (1) Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
23-06-2023 26-06-2023 change in bps Tbill-91 days 6.71 6.76 5 Tbill-182 days 6.87 6.87 0 Tbill-364 days 6.89 6.88 (1) G-Sec 2Y 6.99 6.99 0 India OIS-2M 6.59 6.61 2 India OIS-9M 6.69 6.69 0 SONIA int rate benchmark 4.93 4.93 0 US SOFR 5.05 5.05 0 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 23-06-2023 26-06-2023 change (Rs tn) Net Liquidity (-Surplus/+deficit) (0.5) (0.4) 0.1 Reverse repo 0.2 0.2 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
22-06-2023 23-06-2023 change (US$ mn/Rs cr) FII (US$ mn) (306.3) 396.1 702.3 Debt (421.8) 371.8 793.6 Equity 115.5 24.3 (91.2) Mutual funds (Rs cr) 3,380.6 (250.5) (3,631.1) Debt 2,715.2 (688.4) (3,403.6) Equity 665.4 437.9 (227.5) Source: Bloomberg, Bank of Baroda Research │Mutual funds data as of 21 Jun 2023 and 22 Jun 2023
Oil prices rose on supply concerns amidst political instability in Russia.
Fig 7 – Commodities
23-06-2023 26-06-2023 % change Brent crude (US$/bbl) 73.9 74.2 0.4 Gold (US$/ Troy Ounce) 1,921.2 1,923.3 0.1 Copper (US$/ MT) 8,409.2 8,422.0 0.2 Zinc (US$/MT) 2,351.3 2,318.3 (1.4) Aluminium (US$/MT) 2,174.5 2,148.5 (1.2) Source: Bloomberg, Bank of Baroda Research
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28 June 2023
US macro data indicated that the economy remains on strong footing. Conference Board consumer confidence index rose to a 17-month high of 109.7 in Jun’23 (est. 104.0) from 102.5 in May’23. Core capital goods orders too rose unexpectedly by 0.7% in May’23 (est. 0%) versus 0.6% in Apr’23 (MoM). Even US new home sales rose at a solid pace of 12.2% (MoM) to a 16-month high of 763,000 (est. 675,000). This has reinforced views that the Fed will have to raise rates further to cool down the economy and keep prices in check. Separately, ECB Chief also admitted that inflation is proving to be much more persistent than earlier anticipated, hinting at more rate hikes. China’s economic woes continued with industrial profits slumping by 18.8% in Jan-May’23. In India, CAD narrowed to a 6-quarter low of 0.2% of GDP in Q4FY23 (2% in Q2), led by a dip in trade deficit and strong services exports.
Except Nikkei (lower), global indices closed higher. Investor sentiments were buoyed by better than expected macro prints in the US. Hang Seng rose the most, followed by Shanghai Comp. Sensex rose by 0.7% led by real estate and banking stocks. It is trading higher today, while Asian stocks are trading mixed as China’s industrial profit data continued to slump, albeit less than expected.
Fig 1 – Stock markets
26-06-2023 27-06-2023 % change Dow Jones 33,715 33,927 0.6 S & P 500 4,329 4,378 1.1 FTSE 7,454 7,461 0.1 Nikkei 32,699 32,538 (0.5) Hang Seng 18,794 19,148 1.9 Shanghai Comp 3,151 3,189 1.2 Sensex 62,970 63,416 0.7 Nifty 18,691 18,817 0.7 Source: Bloomberg, Bank of Baroda Research
Global currencies closed broadly stronger. DXY fell by 0.2% despite stronger than expected macro data. EUR rose by 0.5% as ECB Chief stated that inflation could remain elevated, bolstering the case for more rate hikes. JPY fell by 0.4%, even as the government vowed to support the currency. INR closed flat. It is trading stronger today, while other Asian currencies are trading mixed.
Fig 2 – Currencies
26-06-2023 27-06-2023 % change EUR/USD (1 EUR / USD) 1.0906 1.0961 0.5 GBP/USD (1 GBP / USD) 1.2713 1.2749 0.3 USD/JPY (JPY / 1 USD) 143.51 144.07 (0.4) USD/INR (INR / 1 USD) 82.04 82.03 0 USD/CNY (CNY / 1 USD) 7.2401 7.2242 0.2 Source: Bloomberg, Bank of Baroda Research
Except China and India (stable), global yields closed higher. Better than expected macro prints in the US raised hopes of higher rate trajectory by Fed. CME Fed watch tool is attaching a 76.9% probability of 25bps rate hike. Even ECB President hinted at elevated rates. UK’s 10Y yield rose by 7bps followed by Germany (+5bps) and US (+4bps). India’s 10Y yield is trading at 7.07%.
Fig 3 – Bond 10Y yield
26-06-2023 27-06-2023 change in bps US 3.72 3.76 4 UK 4.30 4.38 7 Germany 2.31 2.36 5 Japan 0.36 0.37 1 China 2.67 2.67 0 India 7.07 7.06 0 Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
26-06-2023 27-06-2023 change in bps Tbill-91 days 6.76 6.78 2 Tbill-182 days 6.87 6.87 0 Tbill-364 days 6.88 6.86 (2) G-Sec 2Y 6.99 6.99 0 India OIS-2M 6.61 6.62 1 India OIS-9M 6.69 6.69 0 SONIA int rate benchmark 4.93 4.93 0 US SOFR 5.05 5.05 0 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 26-06-2023 27-06-2023 change (Rs tn) Net Liquidity (-Surplus/+deficit) (0.4) (0.3) 0.1 Reverse repo 0.2 0.2 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
23-06-2023 26-06-2023 change (US$ mn/Rs cr) FII (US$ mn) 396.1 (139.6) (535.6) Debt 371.8 (96.9) (468.7) Equity 24.3 (42.6) (66.9) Mutual funds (Rs cr) (250.5) 740.4 990.9 Debt (688.4) 783.6 1,471.9 Equity 437.9 (43.2) (481.1) Source: Bloomberg, Bank of Baroda Research │Mutual funds data as of 21 Jun 2023 and 22 Jun 2023
Oil prices fell by 2.6% led by demand concerns amidst higher rates.
Fig 7 – Commodities
26-06-2023 27-06-2023 % change Brent crude (US$/bbl) 74.2 72.3 (2.6) Gold (US$/ Troy Ounce) 1,923.3 1,913.7 (0.5) Copper (US$/ MT) 8,422.0 8,382.0 (0.5) Zinc (US$/MT) 2,318.3 2,378.3 2.6 Aluminium (US$/MT) 2,148.5 2,195.0 2.2 Source: Bloomberg, Bank of Baroda Research
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30 June 2023
Global central banks are likely to continue raising rates as the fight against inflation seem far from over. Fed officials including the Fed Chair and Atlanta Federal Reserve Chair have reiterated the need for higher rates amidst sticky inflation. Strong macro data (surprise dip in weekly jobless claims) and upward revision to US Q1CY23 GDP (2% versus 1.3% earlier) also supports this view. Probability of a rate hike by Fed in Jul’23 has risen to above 80% as per the CME FedWatch tool. Even in Eurozone, CPI inflation in Germany rose unexpectedly to 6.4% in Jun’23 from 6.1% in May’23, even as the ECB Chief batted for more rate hikes. Similar comments were echoed by BoE Governor. On the other hand, BoJ remains steadfast in its policy stance. Elsewhere, China’s economy continues to struggle with manufacturing PMI staying in the contraction zone (49.0 in Jun’23), and non- manufacturing PMI too dipping to 53.2 from 54.5 in May’23.
Global indices closed mixed. US stocks inched up supported by better than expected 3rd estimate of GDP and strengthening labour market conditions. Asian stocks (except Nikkei) fell, as China’s Beige book data suggested more stimulus. Sensex rose by 0.8% led by capital goods stocks. It is trading higher today, while Asian stocks are trading mixed tracking China’s PMI data.
Fig 1 – Stock markets
28-06-2023 29-06-2023 % change Dow Jones 33,853 34,122 0.8 S & P 500 4,377 4,396 0.4 FTSE 7,500 7,472 (0.4) Nikkei 33,194 33,234 0.1 Hang Seng 19,172 18,934 (1.2) Shanghai Comp 3,189 3,182 (0.2) Sensex 63,416 63,915 0.8 Nifty 18,817 18,972 0.8 Source: Bloomberg, Bank of Baroda Research
Global currencies closed weaker against the dollar. DXY rose by 0.4% supported by strong macro data. EUR fell the most by 0.4% despite an improvement in Eurozone consumer confidence index. JPY too depreciated by 0.2%. INR is trading stronger today, in line with other Asian currencies.
Fig 2 – Currencies
28-06-2023 29-06-2023 % change EUR/USD (1 EUR / USD) 1.0913 1.0865 (0.4) GBP/USD (1 GBP / USD) 1.2636 1.2613 (0.2) USD/JPY (JPY / 1 USD) 144.48 144.76 (0.2) USD/INR (INR / 1 USD) 82.03 82.06 0 USD/CNY (CNY / 1 USD) 7.2393 7.2475 (0.1) Source: Bloomberg, Bank of Baroda Research
Except Japan and India (stable), global yields closed higher. US 10Y yield rose the most by 13bps as Fed Chair signalled two more rate hikes this year. Germany’s 10Y yield also firmed up by 10bps as provisional CPI data inched up. China’s 10Y yield closed lower amidst expectation of more stimulus and muted macro print. India’s 10Y yield is trading higher at 7.09% today.
Fig 3 – Bond 10Y yield
28-06-2023 29-06-2023 change in bps US 3.71 3.84 13 UK 4.32 4.38 7 Germany 2.32 2.42 10 Japan 0.39 0.39 0 China 2.67 2.66 (1) India 7.06 7.06 0 Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
28-06-2023 29-06-2023 change in bps Tbill-91 days 6.78 6.73 (5) Tbill-182 days 6.87 6.86 (1) Tbill-364 days 6.86 6.86 0 G-Sec 2Y 6.99 6.99 0 India OIS-2M 6.62 6.61 (1) India OIS-9M 6.69 6.68 (1) SONIA int rate benchmark 4.93 4.93 0 US SOFR 5.05 5.06 1 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 27-06-2023 28-06-2023 change (Rs tn) Net Liquidity (-Surplus/+deficit) (0.3) (0.3) 0 Reverse repo 0.2 0.2 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
26-06-2023 27-06-2023 change (US$ mn/Rs cr) FII (US$ mn) (139.6) (3.0) 136.5 Debt (96.9) (226.4) (129.4) Equity (42.6) 223.4 266.0 Mutual funds (Rs cr) 596.2 (817.9) (1,414.0) Debt 683.3 (1,359.9) (2,043.3) Equity (87.2) 542.1 629.3 Source: Bloomberg, Bank of Baroda Research │Mutual funds data as of 21 Jun 2023 and 22 Jun 2023
International oil prices inched up by 0.4% led by drawdown in US inventories.
Fig 7 – Commodities
28-06-2023 29-06-2023 % change Brent crude (US$/bbl) 74.0 74.3 0.4 Gold (US$/ Troy Ounce) 1,907.3 1,908.2 0 Copper (US$/ MT) 8,259.5 8,177.0 (1.0) Zinc (US$/MT) 2,340.5 2,336.0 (0.2) Aluminium (US$/MT) 2,173.5 2,160.0 (0.6) Source: Bloomberg, Bank of Baroda Research
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