Economic Weekly Wrap
14 October 2024 - 18 October 2024

US PPI remained unchanged in Sep’24, (est. +0.1%) following a 0.2% increase in Aug’24 (MoM), suggesting that price pressures remain broadly contained. On the other hand, University of Michigan’s consumer sentiment index moderated to 68.9 in Oct’24 from 70.1 in Sep’24. In China, government announced plans to “significantly increase” debt as part of its fiscal stimulus to boost growth. However, details of the fresh package, including the amount of debt which the government plans to raise were omitted from the announcement. Analysts had expected a package worth CNY 2-10 tn. Separate data showed that CPI inflation in China eased to 0.4% in Sep’24 (est. 0.6%) from 0.6% in Aug’24, due to weak domestic demand. Deflation in PPI also aggravated to 2.8% from 1.8% last month. Separately in UK, GDP growth bounced back to 0.2% after remaining stagnant in last two months. In India, IIP

Global indices ended mixed. US indices advanced with focus shifting towards earnings report and retail sales data. Shanghai Comp ended lower ahead of key economic releases and announcement of more stimulus measures. Sensex ended in the red and was dragged down by losses in real estate and banking stocks. However, it is trading higher today while Asian stocks are trading mixed.

Fig 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Global currencies ended mixed. DXY declined tracking PPI data. GBP rose supported by uptick in GDP growth in Aug’24. INR depreciated to a record low amidst FPI equity outflows and concerns over higher oil prices. It is however trading a tad stronger today, while other currencies are trading broadly lower.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda

Global yields closed mixed. 10Y yields in US, Germany and India inched up, while they fell in Japan and China. US 10Y yield rose above the 4.1% mark for the first time since Jul’24 as investors monitored jobs report and higher than expected CPI data. India’s 10Y yield rose by 1bps. It is trading lower at 6.77%, today ahead of inflation data.

Fig 3 – Bond 10Y Yield

Source: Bloomberg, Bank of Baroda Research

Fig 4 – Short Term Rates

Source: Bloomberg, Bank of Baroda Research

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research

Fig 6 – Capital Market Flows

Source: Bloomberg, Bank of Baroda Research

Note: Data for Mutual Funds as of 3 Oct and 4 Oct 2024

Oil prices fell amidst concerns of subdued demand from China.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global currency market lost its breather amidst a firming dollar as expectations got build up over a cautious neutral stance by Fed. To support this, comments of Fed officials (Christopher Waller and Neel Kashkari), also hinted at staggered policy easing. Equity market got support from an expectation of upside surprise from Q3 results. Markets trajectory is guided by an interplay of both macro and financial factors. Reports suggested that China may resort to raising 6tn yuan from ultra long special government bonds over three years. Separately, the dollar-offshore yuan volatility also soared up as traders are pricing in risks ahead of US elections. Asset prices have remained broadly contained as fault lines to China’s growth remained with recent export data in dollar terms recording the lowest growth since May’24. In India, inflation concerns reignited over unfavourable base and risks to food inflation.

 Barring Hang Seng, global indices closed higher. Stocks in the US rose to a record high led by a rally in tech stocks, with focus shifting to upcoming earnings reports and macro data. Stocks in China ended higher after a volatile session, as investors assessed the government’s new fiscal measures. Sensex rose by 0.7% supported by real estate and banking stocks. It is trading further higher today, in line with Asian peers

Fig 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Note: Markets in Japan were closed on 14 Oct 2024

Except INR, other global currencies depreciated. DXY rose by 0.4% amid expectations of modest rate cuts from the Fed going forward. CNY fell as macro data remained dismal. EUR depreciated as the ECB is expected to cut rates this week. INR is trading flat today, while other Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda

Global yields closed mixed. Some firmness was witnessed in yields of major AEs as macro data built up case for a staggered monetary easing globally. Japan’s 10Y yield fell a tad while China’s closed stable amidst expectation of more stimulus. India’s 10Y yield fell marginally and is trading at 6.77% today.

Fig 3 – Bond 10Y Yield

Source: Bloomberg, Bank of Baroda Research

Note: Markets in US and Japan were closed on 14 Oct 2024

Fig 4 – Short Term Rates

Source: Bloomberg, Bank of Baroda Research

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research

Fig 6 – Capital Market Flows

Source: Bloomberg, Bank of Baroda Research

Note: Data for Mutual Funds as of 9th and 10th Oct

Oil prices fell on demand woes amid continued economic weakness in China.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global equity indices were impacted by a downward rally in tech stocks driven by weakness in semiconductor sector. Investors also remained abreast ahead of John Lee’s policy address, to get cues about trajectory of Hong Kong’s growth. Global currencies market took breather eyeing steady dollar. Similar risk off sentiment got mirrored in demand for sovereign debt class. Among major macro releases have been UK’s labour market data which showed pay growth pace was the slowest in two years, fuelling some response from BoE. Germany’s Zew survey data firmed up brimming hope of recovery. Japan’s core machinery orders witnessed loss of momentum. Apart from ECB (easing of 25bps expected), three of Southeast Asia’s central banks’ policies are due for announcement. Among them, only for Philippines easing is expected (25bps). On domestic front, RBI Deputy Governor highlighted that inflation is expected to get durably aligned to the target by FY26.

Except Nikkei, other global indices ended in red led by a weakness in tech stocks globally. Weak macro data from China also weighed on investor sentiments, with Shanghai Comp and Hang Seng falling sharply. In India, Sensex fell by 0.2% as metal and auto stocks slipped. It is trading further lower today, in line with other Asian stocks.

Fig 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Global currencies ended mixed. DXY took a breather and ended flat as investors weighed geo-political risks, Fed rate path, and the outcome of the US elections. EUR fell ahead of ECB policy. INR appreciated a tad as oil prices eased. It is trading weaker today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda

 US 10Y yield moderated as Fed official (Raphael Bostic) hinted at some slowdown in the US economy. UK’s 10Y yield witnessed downward momentum on account of weaker pay growth numbers. Japan’s 10Y yield rose marginally eyeing movement of yen amidst expectation of delay in normalisation. India’s 10Y yield moderated and is trading at 6.76% today.

Fig 3 – Bond 10Y Yield

Source: Bloomberg, Bank of Baroda Research

Fig 4 – Short Term Rates

Source: Bloomberg, Bank of Baroda Research

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research

Fig 6 – Capital Market Flows

Source: Bloomberg, Bank of Baroda Research │Note: Data for Mutual Funds as of 9th and 10th Oct

Oil prices fell as Israel is said to be refraining from targeting Iran’s oil refineries.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global macro indicators showed signs of weakness. Japan’s exports contracted by 1.7% in Sep’24, on YoY basis (5.5% in Aug’24), imports softened by 2.1% (2.3% in Aug’24). In UK, CPI moderated, and retail price index inched down hinting consumption demand is losing steam. ECB Chief highlighted in her recent speech about growing concerns of geopolitical conflict on domestic growth. Indonesia and Philippines in its recent policy kept rates unchanged and signalled a cautious move, while Central Bank of Thailand against expectation went in for a 25bps cut, to revive growth. Elsewhere, China’s growth concerns continued to dominate. Housing Minister came up with new set of measures to revive the property sector. Market is closely eyeing the growth numbers of the region. On domestic front, government increased MSP of Rabi crops, which might have an inflationary impact of 18-20bps spread out throughout the year and contingent on how it is passed on.

Global indices ended mixed. US stocks rose led by a rally in banking stocks after buoyant earnings report. FTSE rose as investors raised expectations of policy easing by BoE after the CPI report. Asian equities were mostly lower, barring China. Sensex fell by 0.4% dragged by auto and tech stocks. It is however trading higher today, in line with other Asian stocks.

Fig 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Except INR, global currencies ended broadly weaker. GBP fell sharply as the UK’s inflation slipped below BoE’s target, paving the way for more rate cuts. JPY declined as BoJ’s Board member supported moderate rate hikes. INR is trading flat today, while Asian currencies are trading mostly stronger.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda

Global yields softened as heightened geopolitical risk increased risk appetite for sovereign debt. UK’s 10Y yield has fallen the most as investors remain watchful of moderation in inflation reading. Even Germany’s 10Y yield moderated tracking comments of ECB Chief. US 10Y yield’s downward arrest was largely capped. India’s 10Y yield closed flat and is trading at 6.78% today.

Fig 3 – Bond 10Y Yield

Source: Bloomberg, Bank of Baroda Research

Fig 4 – Short Term Rates

Source: Bloomberg, Bank of Baroda Research

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research

Fig 6 – Capital Market Flows

Source: Bloomberg, Bank of Baroda Research │Note: Data for Mutual Funds as of 11th and 14th Oct

Oil prices ended broadly steady as investors weighed supply demand dynamics.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets monitored slew of macro releases. In the US, both retail and core retail sales remained sticky in Sep’24, on a MoM basis. Initial jobless claims moderated for the week, however, continued claims remained elevated. Industrial production softened. ECB went in for easing for the 3rd time this year, amidst weaker growth prospects and downside risks to inflation. Elsewhere, in China, some impact of stimulus was visible in Q3 growth which remained upbeat (4.6%, YoY, est.: 4.5%). Industrial production also remained higher (5.4%, YoY, est.: 4.6%). Retail sales provided desired comfort (3.2%, YoY, est.: 2.5%). In Japan, CPI softened for the first time since Apr’24, led by government utility subsidies. However, BoJ will be watchful that whether moderation is a one off event or not before taking any call on rates. On domestic front, World Bank President remained bullish on India’s growth

Global indices ended mixed. Dow Jones rose to a fresh record high boosted by positive retail sales data in the US. Asian stocks were lower monitoring data releases in China. Shanghai Comp and Hang Seng declined by 1% each. Sensex fell for the 3rd straight session, led by real estate and consumer durable stocks. It is trading further lower today, while Asian stocks are trading mixed.

Fig 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Except GBP, other global currencies ended weaker. DXY rose by 0.2% after US retail sales data reinforced views of modest rate cuts. EUR depreciated as the ECB cut its policy rate and warned against risks to growth. INR depreciated to a fresh record low amidst persistent outflows from domestic equities. It is trading marginally stronger today, while Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda

Except China (lower-amidst stimulus measures), global yields inched up. Better retail sales data in the US led to firming up of US 10Y yield. Yields of other AEs such as UK and Germany also followed suit. However, a dovish ECB policy capped increase in Germany’s 10Y yield. India’s 10Y yield inched a tad and is trading higher at 6.8% today, ahead of auction.

Fig 3 – Bond 10Y Yield

Source: Bloomberg, Bank of Baroda Research

Fig 4 – Short Term Rates

Source: Bloomberg, Bank of Baroda Research

Fig 5 – Liquidity

Source: RBI, Bank of Baroda Research

Fig 6 – Capital Market Flows

Source: Bloomberg, Bank of Baroda Research │Note: Data for Mutual Funds as of 14th and 15th Oct

Oil prices edged up tracking a decline in US crude inventories.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research