Economic Weekly Wrap
26 September 2023 - 28 September 2023
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26 Sep 2023
Uncertainty around US government shutdown, slated to begin from 1 Oct 2023, is causing new worries. Higher supply of papers to finance its deficit and subdued demand owing to shutdown risks has pushed US 10Y yield to highest levels since 2007. Moody’s has also warned that shutdown may impact US’ credit rating and outlook. Investors now await home sales and consumer confidence data to gauge Fed’s future rate trajectory. In Europe, Germany’s IFO business sentiment index fell again in Sep’23 to 85.7 from 85.8 in Aug’23, dragged by bleak outlook in services trade and construction sector. Most analyst expect economy to have contracted in Q3 following stagnation in Q2.
Global indices ended mixed as investors expect higher rates for longer period of time. US indices ended in green ahead of the remarks by Fed policy makers which might offer guidance on the interest rate path. Elsewhere, Hang Seng dropped the most followed by FTSE. Sensex ended flat led by global cues. However, it opened higher today while other Asian indices are trading lower.
Fig 1 – Stock markets
22-09-2023 25-09-2023 % change Dow Jones 33,964 34,007 0.1 S & P 500 4,320 4,337 0.4 FTSE 7,684 7,624 (0.8) Nikkei 32,402 32,679 0.9 Hang Seng 18,057 17,729 (1.8) Shanghai Comp 3,132 3,116 (0.5) Sensex 66,009 66,024 0 Nifty 19,674 19,675 0 Source: Bloomberg, Bank of Baroda Research
Global currencies ended lower. DXY edged up by 0.4% (highest since Nov’22) after bond yield surged to 16-year high. Dollar is expected to remain firm on the back of haven demand amidst concerns over weak global growth. Euro and Yuan came under pressure and remain vulnerable. INR depreciated and is trading weaker today, while other currencies are trading mixed.
Fig 2 – Currencies
22-09-2023 25-09-2023 % change EUR/USD (1 EUR / USD) 1.0653 1.0593 (0.6) GBP/USD (1 GBP / USD) 1.2241 1.2211 (0.2) USD/JPY (JPY / 1 USD) 148.37 148.88 (0.3) USD/INR (INR / 1 USD) 82.94 83.15 (0.3) USD/CNY (CNY / 1 USD) 7.2990 7.3120 (0.2) Source: Bloomberg, Bank of Baroda Research
Except Japan and India (lower), other global yields closed higher. US 10Y yield jumped the most, followed by UK and Germany. Excessive supply of paper in the US and no sight of Fed rate cuts, impacted yields. India’s 10Y yield fell by 3bps, awaiting RBI’s decision next week. However, following global cues, it is trading sharply higher at 7.21%.
Fig 3 – Bond 10Y yield
22-09-2023 25-09-2023 change in bps US 4.43 4.53 10 UK 4.25 4.32 7 Germany 2.74 2.80 6 Japan 0.75 0.74 (1) China 2.69 2.70 1 India 7.19 7.15 (3) Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
22-09-2023 25-09-2023 change in bps Tbill-91 days 6.86 6.81 (5) Tbill-182 days 7.06 6.99 (7) Tbill-364 days 7.07 7.05 (2) G-Sec 2Y 7.15 7.16 1 India OIS-2M 6.83 6.83 0 India OIS-9M 7.04 7.04 0 SONIA int rate benchmark 5.18 5.19 0 US SOFR 5.30 5.30 0 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 22-09-2023 25-09-2023 change (Rs tn) Net Liquidity (-Surplus/+deficit) 1.2 1.4 0.2 Reverse repo 0 0.1 0.1 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
21-09-2023 22-09-2023 change (US$ mn/Rs cr) FII (US$ mn) (255.4) (96.2) 159.2 Debt (29.9) 44.3 74.1 Equity (225.5) (140.5) 85.1 Mutual funds (Rs cr) 169.0 1,209.1 1,040.1 Debt (471.2) 556.8 1,028.0 Equity 640.3 652.3 12.0 Source: Bloomberg, Bank of Baroda Research, Mutual fund data as of 11 and 12 Sep
Oil prices remained flat, as Russia made changes to its fuel export ban and stronger dollar impacted demand.
Fig 7 – Commodities
22-09-2023 25-09-2023 % change Brent crude (US$/bbl) 93.3 93.3 0 Gold (US$/ Troy Ounce) 1,925.2 1,915.9 (0.5) Copper (US$/ MT) 8,161.7 8,075.4 (1.1) Zinc (US$/MT) 2,541.3 2,509.0 (1.3) Aluminium (US$/MT) 2,240.5 2,233.5 (0.3) Source: Bloomberg, Bank of Baroda Research
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27 Sep 2023
Chances of soft landing of the US economy have increased with new home sales and consumer confidence taking a hit. New home sales in Aug’23 fell by (-) 8.7% (MoM) to 675k units versus est.: 700k units and from 714k units in Jul’23. Jump in 30Y mortgage rate to above 7% has curtailed demand. Conference board consumer sentiment index also declined to 4-month low in Sep’23 to 103 from est.: 105.5 and 106.1 in Aug’23. In addition, possibility of US government shutdown also kept investors on edge. China’s latest macro data also shows that industrial profits continued to decline in Aug’23 (YTD basis), albeit at a slower pace as they fell by (-) 11.7% from (-) 15.5% as of Jul’23. GoI also released its H2 issuance calendar. While the borrowing plan remains unchanged, a key change is introduction of 50Y bond. Borrowing is skewed toward longer tenured bonds in H2.
Barring FTSE (flat), other global indices ended lower as concerns around economic slowdown and higher-for-longer interest rates adversely impacted investor sentiments. Additionally, risk of partial US government shutdown added to the fears. Sensex too ended in red led by subdued global cues and losses in banking and IT stocks. It opened lower today in line with other Asian indices.
Fig 1 – Stock markets
25-09-2023 26-09-2023 % change Dow Jones 34,007 33,619 (1.1) S & P 500 4,337 4,274 (1.5) FTSE 7,624 7,626 0 Nikkei 32,679 32,315 (1.1) Hang Seng 17,729 17,467 (1.5) Shanghai Comp 3,116 3,102 (0.4) Sensex 66,024 65,945 (0.1) Nifty 19,675 19,665 (0.1) Source: Bloomberg, Bank of Baroda Research
Except Yuan (flat), other global currencies ended lower. DXY continued to advance (0.2%) as bond yields remained elevated over hawkish commentary by US Fed. INR depreciated as oil process inched up. It is trading stronger today, while other currencies are trading mixed.
Fig 2 – Currencies
25-09-2023 26-09-2023 % change EUR/USD (1 EUR / USD) 1.0593 1.0572 (0.2) GBP/USD (1 GBP / USD) 1.2211 1.2158 (0.4) USD/JPY (JPY / 1 USD) 148.88 149.07 (0.1) USD/INR (INR / 1 USD) 83.15 83.24 (0.1) USD/CNY (CNY / 1 USD) 7.3120 7.3112 0 Source: Bloomberg, Bank of Baroda Research
Global yields closed broadly stable. 10Y yields in US, UK, and China remained unchanged, while they inched up a tad in Germany and Japan. Slowdown in new home sales in the US, drop in consumer confidence, and possibility of government shutdown, kept investors on edge. India’s 10Y yield fell by 1bps, following global cues. It is trading broadly steady at 7.15% today.
Fig 3 – Bond 10Y yield
25-09-2023 26-09-2023 change in bps US 4.53 4.54 0 UK 4.32 4.33 0 Germany 2.80 2.81 1 Japan 0.74 0.74 1 China 2.70 2.71 0 India 7.15 7.14 (1) Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
25-09-2023 26-09-2023 change in bps Tbill-91 days 6.81 6.84 3 Tbill-182 days 6.99 7.02 3 Tbill-364 days 7.05 7.05 0 G-Sec 2Y 7.16 7.16 1 India OIS-2M 6.83 6.83 0 India OIS-9M 7.04 7.02 (2) SONIA int rate benchmark 5.19 5.18 0 US SOFR 5.30 5.31 1 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 25-09-2023 26-09-2023 change (Rs tn) Net Liquidity (-Surplus/+deficit) 1.4 1.3 (0.1) Reverse repo 0.1 0.1 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
22-09-2023 25-09-2023 change (US$ mn/Rs cr) FII (US$ mn) (96.2) (159.3) (63.1) Debt 44.3 7.6 (36.7) Equity (140.5) (166.9) (26.4) Mutual funds (Rs cr) (153.2) (879.8) (726.7) Debt (1,020.6) (2,298.5) (1,277.9) Equity 867.5 1,418.7 551.3 Source: Bloomberg, Bank of Baroda Research, Mutual fund data as of 11 and 12 Sep
Oil prices inched up, over concerns of tighter supplies (US crude stockpiles).
Fig 7 – Commodities
25-09-2023 26-09-2023 % change Brent crude (US$/bbl) 93.3 94.0 0.7 Gold (US$/ Troy Ounce) 1,915.9 1,900.7 (0.8) Copper (US$/ MT) 8,075.4 8,034.2 (0.5) Zinc (US$/MT) 2,509.0 2,486.5 (0.9) Aluminium (US$/MT) 2,233.5 2,243.5 0.4 Source: Bloomberg, Bank of Baroda Research
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28 Sep2023
US durable goods orders bounced back in Aug’23, posting 0.2% increase versus est.: -0.5% decline and reviving from fall of -5.6% in Jul’23. This was led by orders for machinery, electrical equipment/appliances, computers, and fabricated & metal products. Even core orders (non-defence capital goods ex aircrafts) rose by 0.9%, versus a decline of -0.4% in Jul’23. This is expected to give Q3 GDP print a boost and has revived concerns of Fed keeping rates elevated for a longer period of time. On the other hand, in Australia, slowdown in economy is visible as retails sales growth moderated more than expected in Aug’23 to 0.2% (est.: 0.3%) from 0.5% in Jul’23. Higher inflation and elevated rates are leading to cutbacks in spending. In Europe, Germany’s Gfk consumer sentiment index for Oct’23 fell further to -26.5 from -25.6 in Sep’23, mainly owing to higher food and energy prices.
Global indices ended mixed as investors continue to monitor interest rate outlook and higher oil prices. European indices ended in red on concerns of slowdown (Germany’s GFK expect consumer sentiment taking a hit). However, Sensex ended in green led by gains capital good and real estate stocks. It opened higher today while other Asian indices are trading mixed.
Fig 1 – Stock markets
26-09-2023 27-09-2023 % change Dow Jones 33,619 33,550 (0.2) S & P 500 4,274 4,275 0 FTSE 7,626 7,593 (0.4) Nikkei 32,315 32,372 0.2 Hang Seng 17,467 17,612 0.8 Shanghai Comp 3,102 3,107 0.2 Sensex 65,945 66,119 0.3 Nifty 19,665 19,716 0.3 Source: Bloomberg, Bank of Baroda Research
Barring INR and Yuan (flat), other global currencies ended lower. DXY peaked to a 10-month high (0.4%) while Euro slid to 6-month low over concerns of slowdown. Yen continued to weaken as investors awaited government intervention. BoJ highlighted in the minutes to continue with ultra-low rates. INR ended flat. It is trading stronger today, while other currencies are trading mixed.
Fig 2 – Currencies
26-09-2023 27-09-2023 % change EUR/USD (1 EUR / USD) 1.0572 1.0503 (0.7) GBP/USD (1 GBP / USD) 1.2158 1.2135 (0.2) USD/JPY (JPY / 1 USD) 149.07 149.63 (0.4) USD/INR (INR / 1 USD) 83.24 83.23 0 USD/CNY (CNY / 1 USD) 7.3112 7.3118 0 Source: Bloomberg, Bank of Baroda Research
Except Japan and India (lower), other global yields closed higher. US 10Y yield jumped the most, followed by UK and Germany. Excessive supply of paper in Except Japan (flat) and China (lower), other global yields closed higher. 10Y yields in US and Germany rose the most. Unexpected rebound in US durable goods orders has revived concerns over ‘higher-for-longer’ rates by Fed. India’s 10Y yield rose by 3bps, as oil prices inched up. Following global cues, it trading sharply higher at 7.25% today.
Fig 3 – Bond 10Y yield
26-09-2023 27-09-2023 change in bps US 4.54 4.61 7 UK 4.33 4.36 3 Germany 2.81 2.84 4 Japan 0.74 0.74 0 China 2.71 2.69 (1) India 7.14 7.17 3 Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
26-09-2023 27-09-2023 change in bps Tbill-91 days 6.84 6.85 1 Tbill-182 days 7.02 7.06 4 Tbill-364 days 7.05 7.07 2 G-Sec 2Y 7.16 7.16 0 India OIS-2M 6.83 6.83 0 India OIS-9M 7.02 7.02 0 SONIA int rate benchmark 5.18 5.19 0 US SOFR 5.31 5.31 0 Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn 26-09-2023 27-09-2023 change (Rs tn) Net Liquidity (-Surplus/+deficit) 1.3 1.2 (0.1) Reverse repo 0.1 0.1 0 Repo 0 0 0 Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
25-09-2023 26-09-2023 change (US$ mn/Rs cr) FII (US$ mn) (159.3) 70.5 229.8 Debt 7.6 53.9 46.4 Equity (166.9) 16.6 183.4 Mutual funds (Rs cr) (153.2) (879.8) (726.7) Debt (1,020.6) (2,298.5) (1,277.9) Equity 867.5 1,418.7 551.3 Source: Bloomberg, Bank of Baroda Research, Mutual fund data as of 11 and 12 Sep
Oil prices rose by 2.8%, following news of steep decline in US crude stockpiles.
Fig 7 – Commodities
26-09-2023 27-09-2023 % change Brent crude (US$/bbl) 94.0 96.6 2.8 Gold (US$/ Troy Ounce) 1,900.7 1,875.1 (1.3) Copper (US$/ MT) 8,034.2 8,056.5 0.3 Zinc (US$/MT) 2,486.5 2,451.0 (1.4) Aluminium (US$/MT) 2,243.5 2,238.0 (0.2) Source: Bloomberg, Bank of Baroda Research
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