Weekly Wrap
7th June - 10th June, 2022

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  • 7 June 2022

    Global stocks were mostly higher as China relaxed Covid-19 curbs in Beijing, thus easing supply-chain concerns. US 10Y yield rose further to 3.04%, as investors await CPI print. US CPI is expected to have inched up to 0.7% in May’22 versus 0.3% in Apr’22,on a MoM basis. This along with tight labour market conditions in the US, is likely to prompt US Fed to continue with its aggressive rate hike cycle. In the UK, Prime Minister Boris Johnson won the confidence vote. As a result, FTSE and GBP gained and 10Y yield edged up. In India, investors await RBI policy decision.


    Global equity indices ended mixed. Investors monitored relaxation in Covid-19 related curbs in China, weakness in yen (20-year low), key central bank decisions (RBA, ECB, RBI) and movement in US 10Y yield. Hang Seng rose the most, followed by Shanghai Comp and FTSE. Sensex ended lower by 0.2% led by losses in consumer durables and capital goods stocks. It is trading further lower today; while other Asian stocks are trading higher.

    Fig 1 – Stock markets

      03-06-2022 06-06-2022 % change
    Dow Jones 32,900 32,916 0
    S & P 500 4,109 4,121 0.3
    FTSE 7,533 7,608 1.0
    Nikkei 27,762 27,916 0.6
    Hang Seng 21,082 21,654 2.7
    Shanghai Comp 3,195 3,236 1.3
    Sensex 55,769 55,675 (0.2)
    Nifty 16,584 16,570 (0.1)

    Source: Bloomberg, Bank of Baroda Research


    Major global currencies closed mixed. DXY rose by 0.3% as US 10Y yield shot up to above 3% mark for the first time in two-weeks. On the other hand, JPY fell sharply by 0.8% as BoJ Governor reaffirmed the bank’s ultra-dovish stance. GBP rose by 0.4% as UK’s PM won the confidence vote. INR closed flat. However it is trading lower today; in line with other Asian currencies.

    Fig 2 – Currencies

      03-06-2022 06-06-2022 % change
    EUR/USD 1.0719 1.0696 (0.2)
    GBP/USD 1.2488 1.2532 0.4
    USD/JPY 130.88 131.88 (0.8)
    USD/INR 77.63 77.63 0
    USD/CNY 6.6603 6.6539 0.1

    Source: Bloomberg, Bank of Baroda Research


    Global yields closed higher. US 10Y yield rose the most by 11bps crossing the 3% mark, seen during mid of May’22. Tighter labour market data supported the view of a faster pace of rate hike by US Fed. Even UK and Germany’s 10Y yield rose by 9bps and 5bps respectively. Investors are awaiting major central banks policy decisions in terms of rate hike and ending of bond support program. India’s 10Y yield rose by 4bps (7.5%) ahead of RBI policy. It is trading further higher at 7.52% today.

    Fig 3 – Bond 10Y yield

      03-06-2022 06-06-2022 change in bps
    US 2.93 3.04 11
    UK 2.16 2.25 9
    Germany 1.27 1.32 5
    Japan 0.23 0.25 1
    China 2.81 2.82 1
    India 7.46 7.50 4

    Source: Bloomberg, Bank of Baroda Research


    Fig 4 – Short term rates

      03-06-2022 06-06-2022 % change
    Tbill-91 days 4.94 4.97 3
    Tbill-192 days 5.50 5.54 4
    Tbill-364 days 6.08 6.09 1
    G-Sec 2Y 6.48 6.56 8
    SONIA int rate benchmark 0.94 0.94 0
    US SOFR 0.79 0.80 1

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 03-06-2022 06-06-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (3.4) (3.2) 0.2
    Reverse repo 0.3 1.0 0.7
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

        02-06-2022     03-06-2022   change (US$ mn/Rs
      FII (US$ mn)   0.8   (468.7) cr) (469.5)
    Debt 74.5 7.5 (67.0)
    Equity (73.7) (476.2) (402.5)
    Mutual funds (Rs cr) 2,662.0 151.3 (2,510.8)
    Debt 586.9 123.3 (463.6)
    Equity 2,075.1 27.9 (2,047.2)

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


    Crude prices moderated slightly by 0.2% to US$ 120/bbl as gasoline and distillate stockpiles in the US are likely to increase, according to the Reuters poll report. However, it is likely to inch up as Saudi Arabia raised the Jul’22 official selling price (OSP). Gold prices fell by 0.5% as dollar strengthened.

    Fig 7 – Commodities

      03-06-2022 06-06-2022 % change
    Brent crude (US$/bbl) 119.7 119.5 (0.2)
    Gold (US$/ Troy Ounce) 1,851.2 1,841.4 (0.5)
    Copper (US$/ MT) 9,498.5 9,743.0 2.6
    Zinc (US$/MT) 3,884.5 3,877.5 (0.2)
    Aluminium (US$/MT) 2,726.0 2,782.5 2.1

    Source: Bloomberg, Bank of Baroda Research

  • 8 June 2022

    World Bank sharply downgraded global growth forecast to 2.9% in CY22 (5.7% in CY21) versus 4.1% estimated earlier. This is on the back of Russia-Ukraine war, Covid-19 curbs in China, soaring inflation and higher interest rates which will be detrimental for growth. The report further noted that there are considerable risks of stagflation-last seen during the 1970s. Even India’s growth forecast was lowered to 7.5% in FY22 from 8.7% estimated in Jan’22. Investors await US CPI data and ECB policy decision.


    Global indices ended mixed ahead of key data releases scheduled later this week, including US CPI print and ECB policy decision. Sensex (1%) ended in deep red led by sharp losses in consumer durable and real estate stocks. On the other hand, US stocks traded higher led by stronger data print (narrowing trade deficit on the back of record exports). Sensex is trading lower today; Asian indices are trading higher.

    Fig 1 – Stock markets

      06-06-2022 07-06-2022 % change
    Dow Jones 32,916 33,180 0.8
    S & P 500 4,121 4,161 1.0
    FTSE 7,608 7,599 (0.1)
    Nikkei 27,916 27,944 0.1
    Hang Seng 21,654 21,532 (0.6)
    Shanghai Comp 3,236 3,242 0.2
    Sensex 55,675 55,107 (1.0)
    Nifty 16,570 16,416 (0.9)

    Source: Bloomberg, Bank of Baroda Research


    Global currencies were mixed. DXY eased by 0.1% tracking fall in US 10Y yield. EUR rose by 0.1% even as Germany’s factory orders fell for the 3rd straight month. GBP gained by 0.5% supported by positive outcome of the no- confidence vote. JPY fell to a 20-year low as BoJ Governor opined that a weaker yen is likely to support the economy. INR fell by 0.1% amidst FPI outflows. However it is trading higher today; while other Asian currencies are trading mixed.

    Fig 2 – Currencies

      06-06-2022 07-06-2022 % change
    EUR/USD 1.0696 1.0703 0.1
    GBP/USD 1.2532 1.2592 0.5
    USD/JPY 131.88 132.59 (0.5)
    USD/INR 77.63 77.71 (0.1)
    USD/CNY 6.6539 6.6705 (0.2)

    Source: Bloomberg, Bank of Baroda Research


    Except Japan (flat) and India (higher), other global yields ended lower. After breaching the 3% mark, US 10Y yield fell by 7bps as investors await CPI print for May’22. Germany’s 10Y yield fell by 3bps as factory orders fell unexpectedly in Apr’22 (-2.7% versus est. +0.2% MoM). India’s 10Y yield rose by 2bps (7.52%) ahead of RBI policy meet. It is trading further higher at 7.53% today.

    Fig 3 – Bond 10Y yield

      06-06-2022 07-06-2022 change in bps
    US 3.04 2.97 (7)
    UK 2.25 2.21 (3)
    Germany 1.32 1.29 (3)
    Japan 0.25 0.25 0
    China 2.82 2.81 (1)
    India 7.50 7.52 2

    Source: Bloomberg, Bank of Baroda Research


    Fig 4 – Short term rates

      06-06-2022 07-06-2022 % change
    Tbill-91 days 5.0 5.0 (1)
    Tbill-192 days 5.5 5.5 (4)
    Tbill-364 days 6.1 6.1 2
    G-Sec 2Y 6.6 6.6 4
    SONIA int rate benchmark 0.9 0.9 0
    US SOFR 0.8 0.8 0

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 06-06-2022 07-06-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (3.2) (3.2) 0
    Reverse repo 1.0 1.0 0
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

      03-06-2022 06-06-2022 change (US$ mn/Rs cr)
    FII (US$ mn) (468.7) (437.6) 31.1
    Debt 7.5 (198.9) (206.4)
    Equity (476.2) (238.7) 237.4
    Mutual funds (Rs cr) 324.7 1,961.2 1,636.6
    Debt 825.6 (127.0) (952.6)
    Equity (500.9) 2,088.2 2,589.2

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


    Global crude oil prices dipped by 0.2% to US$ 119.5/bbl ahead of US inventories data. Gold prices fell by 0.5% as investors closely monitored US inflation print due for release, later in the week.

    Fig 7 – Commodities

      06-06-2022 07-06-2022 % change
    Brent crude (US$/bbl) 119.7 119.5 (0.2)
    Gold (US$/ Troy Ounce) 1,851.2 1,841.4 (0.5)
    Copper (US$/ MT) 9,498.5 9,743.0 2.6
    Zinc (US$/MT) 3,884.5 3,877.5 (0.2)
    Aluminium (US$/MT) 2,726.0 2,782.5 2.1

    Source: Bloomberg, Bank of Baroda Research

  • 9 June 2022

    After World Bank, OECD too cut global growth forecast for CY22 to 3% from 4.5%. However, it ruled out “stagflation” risks. On the brighter side, China’s export growth bounced back to 16.9% in May’22 from 3.9% in Apr’22. Later today, ECB is expected to provide some guidance on the future rate path. In India, RBI raised repo rate by 50bps and revised inflation forecast upwards (6.7% for FY23). However, it kept growth forecast unchanged at 7.2%, while OECD trimmed India’s growth forecast to 6.9% in FY23.


    Barring China and Japan, other global stocks ended in red. Markets in US and India fell the most, followed by FTSE. Investors in US and Europe await ECB’s rate decision and US CPI print. Sensex fell by 0.4%, following global cues and RBI’s alarm bells on inflation. Oil & gas and power stocks fell the most. It is trading further lower today, while other Asian stocks are trading mixed.

    Fig 1 – Stock markets

      07-06-2022 08-06-2022 % change
    Dow Jones 33,180 32,911 (0.8)
    S & P 500 4,161 4,116 (1.1)
    FTSE 7,599 7,593 (0.1)
    Nikkei 27,944 28,234 1.0
    Hang Seng 21,532 22,015 2.2
    Shanghai Comp 3,242 3,264 0.7
    Sensex 55,107 54,892 (0.4)
    Nifty 16,416 16,356 (0.4)

    Source: Bloomberg, Bank of Baroda Research


    Except EUR (higher) and INR (flat), other global currencies closed lower against the dollar. DXY rose by 0.2% tracking higher US 10Y yield. EUR rose by 0.1% ahead of ECB policy decision. JPY fell further by 1.2% amidst widening policy divergence. INR closed broadly unchanged despite higher oil prices. However it is trading lower today; while other Asian currencies are trading higher.

    Fig 2 – Currencies

      07-06-2022 08-06-2022 % change
    EUR/USD 1.0703 1.0716 0.1
    GBP/USD 1.2592 1.2537 (0.4)
    USD/JPY 132.59 134.25 (1.2)
    USD/INR 77.71 77.74 0
    USD/CNY 6.6705 6.6838 (0.2)

    Source: Bloomberg, Bank of Baroda Research


    Global yields closed mixed, with 10Y yields in Germany (6bps) and US (5bps) rising the most. Investors are expecting a more hawkish stance from ECB today. US CPI print is also due for release later in the week. India’s 10Y yield fell by 2bps (7.49%), as RBI reassured that it has tools (G-SAP/OMO) to manage government’s borrowing program if liquidity conditions tighten.

    Fig 3 – Bond 10Y yield

      07-06-2022 08-06-2022 change in bps
    US 2.97 3.02 5
    UK 2.21 2.25 3
    Germany 1.29 1.35 6
    Japan 0.25 0.25 0
    China 2.81 2.81 0
    India 7.52 7.49 (2)

    Source: Bloomberg, Bank of Baroda Research


    T-bill rates at RBI’s weekly auction of Rs 330bn rose across the board. Cut-off yield for 182-day paper (+11bps to 5.63%) rose the most.

    Fig 4 – Short term rates

      07-06-2022 08-06-2022 % change
    Tbill-91 days 5.0 5.0 2
    Tbill-192 days 5.5 5.6 8
    Tbill-364 days 6.1 6.1 (4)
    G-Sec 2Y 6.6 6.5 (11)
    SONIA int rate benchmark 0.9 0.9 0
    US SOFR 0.8 0.8 (1)

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 07-06-2022 08-06-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (3.2) (3.3) (0.1)
    Reverse repo 1.0 1.0 0
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

        06-06-2022     07-06-2022   change (US$ mn/Rs
      FII (US$ mn)   (437.6)   (297.6) cr) 140.1
    Debt (198.9) (9.1) 189.8
    Equity (238.7) (288.5) (49.7)
    Mutual funds (Rs cr) 1,961.2 2,600.6 639.4
    Debt (127.0) 1,343.2 1,470.2
    Equity 2,088.2 1,257.4 (830.8)

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


    Brent crude prices surged by 2.5% to a 3-month high, as demand from US remains robust. Demand is also expected to pick up in China as Covid-19 restrictions are eased.

    Fig 7 – Commodities

      07-06-2022 08-06-2022 % change
    Brent crude (US$/bbl) 120.6 123.6 2.5
    Gold (US$/ Troy Ounce) 1,852.4 1,853.4 0.1
    Copper (US$/ MT) 9,699.3 9,736.3 0.4
    Zinc (US$/MT) 3,803.0 3,845.8 1.1
    Aluminium (US$/MT) 2,778.5 2,819.0 1.5

    Source: Bloomberg, Bank of Baroda Research

  • 10 June 2022

    ECB announced ending its asset purchase programme from 1 Jul 2022 and also signalled a 25bps rate hike in Jul’22. Inflation forecast for CY22 was revised up to 6.8%, while growth estimate was lowered to 2.8%. Notably, inflation is expected to be above ECB’s target of 2%, till CY24. In US, jobless claims rose more than expected to 229,000-highest since Jan’22. PPI inflation in China eased to a 14- month low of 6.4% in May’22 from 8.4% in Apr’22 on a YoY basis, as strict Covid-19 restrictions curbed demand. CPI inflation remained steady at 2.1% in May’22. In India, IIP data is scheduled to be released later in the day.


    Except Nikkei (flat), global equity indices ended lower. Investors monitored ECB policy decision, developments surrounding China’s “Covid zero” policy and jobless claims data in the US. S&P 500 fell the most (2.4%) followed by Dow Jones (1.9%) and FTSE (1.5%). However, Sensex, rose by 0.8%, led by oil and gas and technology stocks. It is trading lower today; while other Asian stocks are trading mixed.

    Fig 1 – Stock markets

      08-06-2022 09-06-2022 % change
    Dow Jones 32,911 32,273 (1.9)
    S & P 500 4,116 4,018 (2.4)
    FTSE 7,593 7,476 (1.5)
    Nikkei 28,234 28,247 0
    Hang Seng 22,015 21,869 (0.7)
    Shanghai Comp 3,264 3,239 (0.8)
    Sensex 54,892 55,320 0.8
    Nifty 16,356 16,478 0.7

    Source: Bloomberg, Bank of Baroda Research


    Global currencies closed lower. DXY rose by 0.7% tracking higher US 10Y yield. EUR depreciated the most by 0.9% as ECB revised the growth forecast for CY22 sharply lower to 2.8% versus 3.7% earlier. INR weakened marginally to a fresh record-low of 77.77/$ amidst persistent FPI outflows. It is trading further lower today; while other Asian currencies are trading mixed.

    Fig 2 – Currencies

      08-06-2022 09-06-2022 % change
    EUR/USD 1.0716 1.0617 (0.9)
    GBP/USD 1.2537 1.2493 (0.4)
    USD/JPY 134.25 134.36 (0.1)
    USD/INR 77.74 77.77 0
    USD/CNY 6.6838 6.6925 (0.1)

    Source: Bloomberg, Bank of Baroda Research


    Global yields closed mixed. While China’s 10Y yield fell a tad by 1bps on expectation of more stimulus from PBOC, Japan’s 10Y yield closed stable as PPI data (MoM) remained flat against est.: 0.6% increase in May’22. On the other hand, Germany’s 10Y yield rose sharply by 8bps following ECB’s signalling of 25bps rate hike in Jul’22. It also revised its inflation projection upwards to 6.8% in CY22 (5.1% earlier). India’s 10Y yield closed flat at 7.5%. It is trading at 7.52% ahead of auction results.

    Fig 3 – Bond 10Y yield

      08-06-2022 09-06-2022 change in bps
    US 3.02 3.04 2
    UK 2.25 2.32 8
    Germany 1.35 1.43 8
    Japan 0.25 0.25 0
    China 2.81 2.80 (1)
    India 7.49 7.50 0

    Source: Bloomberg, Bank of Baroda Research


    T-bill rates at RBI’s weekly auction of Rs 330bn rose across the board. Cut-off yield for 182-day paper (+11bps to 5.63%) rose the most.

    Fig 4 – Short term rates

      08-06-2022 09-06-2022 % change
    Tbill-91 days 4.98 4.97 (1)
    Tbill-192 days 5.58 5.54 (4)
    Tbill-364 days 6.07 6.07 0
    G-Sec 2Y 6.50 6.49 0
    SONIA int rate benchmark 0.94 0.94 0
    US SOFR 0.77 0.76 (1)

    Source: Bloomberg, Bank of Baroda Research


    Fig 5 – Liquidity

    Rs tn 08-06-2022 09-06-2022 change (Rs tn)
    Net Liquidity (-Surplus/+deficit) (3.2) (3.2) 0
    Reverse repo 1.0 1.0 0
    Repo 0 0 0

    Source: RBI, Bank of Baroda Research


    Fig 6 – Capital market flows

    07-06-2022 08-06-2022 change (US$ mn/Rs
    FII (US$ mn) 297.6) (296.1) 1.5
    Debt 9.1) 13.7 22.8
    Equity 288.5) (309.8) (21.3)
    Mutual funds (Rs cr) 1,011.0) 495.3 1,506.4
    Debt 297.6) (296.1) 1.5
    Equity 497.0 953.2 456.2

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


    Brent crude prices fell a tad by 0.4% to US$ 123.1/bbl, as China imposed fresh lockdown restriction in Shanghai, thus raising demand concerns. Gold prices fell by 0.3% as dollar strengthened.

    Fig 7 – Commodities

      08-06-2022 09-06-2022 % change
    Brent crude (US$/bbl) 123.6 123.1 (0.4)
    Gold (US$/ Troy Ounce) 1,853.4 1,848.0 (0.3)
    Copper (US$/ MT) 9,736.3 9,620.1 (1.2)
    Zinc (US$/MT) 3,845.8 3,777.3 (1.8)
    Aluminium (US$/MT) 2,819.0 2,761.0 (2.1)

    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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