Weekly Wrap
17th - 20th May, 2022
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17 May 2022
Investors remained concerned about global economic recovery which remains fragile as inflationary pressure continue to build on globally. Subdued data print form China further added to the concerns. Global crude prices surged once again. DXY declined from its 20-year high. Investors will closely monitor earnings report and Fed Chair’s speech scheduled later today.
Barring S&P500 and Shanghai Comp (lower), other global indices started the week on a positive note. FTSE (0.6%) rose the most followed by Nikkei (0.5%). On the other hand, Shanghai Comp dropped by 0.3% led by disappointing data print (retail sales and industrial output). Sensex (0.3%) ended in green led by advancement in banking and auto stocks. It is trading higher today in line with other Asian
Fig 1 – Stock markets
13-05-2022 16-05-2022 % change Dow Jones 32,197 32,223 0.1 S & P 500 4,024 4,008 (0.4) FTSE 7,418 7,465 0.6 Nikkei 26,428 26,547 0.5 Hang Seng 19,899 19,950 0.3 Shanghai Comp 3,084 3,074 (0.3) Sensex 52,794 52,974 0.3 Nifty 15,782 15,842 0.4
Global currencies ended mixed. DXY retreated by 0.4% from a 20-year high, tracking US 10Y yield. GBP gained the most by 0.5%, followed by EUR which rose by 0.2%. Other major currencies closed flat. INR is trading lower at a record-low of 77.75/$ today amidst a renewed surge in oil prices. Other Asian currencies are trading mixed.
Fig 2 – Currencies
13-05-2022 16-05-2022 % change EUR/USD 1.0412 1.0434 0.2 GBP/USD 1.2262 1.2319 0.5 USD/JPY 129.22 129.16 0 USD/INR 77.43 77.45 0 USD/CNY 6.7892 6.7861 0
Global yields closed mixed. US 10Y yield fell by 4bps as investors await US retail sales data scheduled to be released later in the day. UK”s 10Y yield slipped by 4bps after comments from BoE Governor. Germany’s 10Y yield fell by 1bps as ECB official cautioned against the impact of a weaker currency on inflation. India’s 10Y yield rose by 7bps to 7.24% amidst inflationary concerns. It is trading further higher at 7.37% today.
Fig 3 – Bond 10Y yield
13-05-2022 16-05-2022 change in bps US 2.92 2.88 (4) UK 1.74 1.73 (1) Germany 0.95 0.94 (1) Japan 0.25 0.25 0 China 2.82 2.82 0 India 7.24 7.32 7
Fig 4 – Short term rates
12-05-2022 13-05-2022 % change Tbill-91 days 4.9 4.9 2 Tbill-182 days 5.4 5.4 (1) Tbill-364 days 5.9 5.8 (2) G-Sec 2Y 6.2 6.3 6 SONIA int rate benchmark 0.9 0.9 0 US SOFR 0.8 0.8 0
Fig 5 – Liquidity
Rs tn 13-05-2022 16-05-2022 change (Rs tn) Net Liquidity (-Surplus/+deficit) (4.9) (4.9) 0 Reverse repo 3.9 3.9 0 Repo 0 0 0
Fig 6 – Capital market flows
11-05-2022 12-05-2022 change (US$ mn/Rs cr) FII (US$ mn) (385.7) (663.8) (278.1) Debt 3.0 (43.9) (46.9) Equity (388.7) (619.9) (231.2) Mutual funds (Rs cr) 1,428.4 2,442.1 1,013.8 Debt (1,398.7) (659.2) 739.6 Equity 2,827.1 3,101.3 274.2
Global commodity prices rose further. Crude oil prices rose by 2.4% to US$ 114.2/bbl amidst improved demand outlook on reports that China is likely to end the lockdown in Shanghai soon. Gold prices also rose as dollar
Fig 7 – Commodities
13-05-2022 16-05-2022 % change Brent crude (US$/bbl) 111.6 114.2 2.4 Gold (US$/ Troy Ounce) 1,811.8 1,824.1 0.7 Copper (US$/ MT) 9,184.6 9,255.5 0.8 Zinc (US$/MT) 3,493.3 3,564.5 2.0 Aluminium (US$/MT) 2,788.0 2,832.0 1.6
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18 May 2022
Global markets reacted to macro prints (US retail sales and industrial production) and US Fed Chair Powell’s speech. Analysts are expecting Fed to hike rates aggressively as consumer demand remains buoyant (retails sales up by 0.9% in Apr’22). Manufacturing output too rose by 0.8% in Apr’22 (est.: 0.4%) showing robust economic activity. Separately, fears of tight oil supply eased as EU’s decision to ban Russian oil imports has reached an impasse with Hungary exercising its veto.
Global indices ended higher, led by strong data from US (higher than expected improvement in retail sales, industrial output), thereby mitigating fears of recession. Amongst other indices, Hang Seng (3.3%) surged the most. Sensex (2.5%) too climbed higher led by strong gains in metal and oil and gas stocks. It is trading further higher today; while other Asian stocks are trading mixed.
Fig 1 – Stock markets
16-05-2022 17-05-2022 % change Dow Jones 32,223 32,655 1.3 S & P 500 4,008 4,089 2.0 FTSE 7,465 7,518 0.7 Nikkei 26,547 26,660 0.4 Hang Seng 19,950 20,603 3.3 Shanghai Comp 3,074 3,094 0.6 Sensex 52,974 54,318 2.5 Nifty 15,842 16,259 2.6
Barring JPY and INR, other global currencies ended higher. DXY continues to crack against its major peer, falling by 0.8% as demand for safe-haven diminished. Improvement in US retail sales and easing of Covid-19 restrictions in China, boosted investor sentiments. INR depreciated by 0.2%. It is trading higher today, while other Asian currencies are trading mixed.
Fig 2 – Currencies
16-05-2022 17-05-2022 % change EUR/USD 1.0434 1.0550 1.1 GBP/USD 1.2319 1.2493 1.4 USD/JPY 129.16 129.38 (0.2) USD/INR 77.45 77.56 (0.2) USD/CNY 6.7861 6.7377 0.7
Except Japan and China (stable), global yields closed sharply higher, as US retail sales print indicated that consumer demand remains strong despite inflationary pressures. US Fed is thus likely to adopt a more aggressive rate hike path. US 10Y yield rose by 10bps to 2.99%, while UK and Germany‘s yields rose by 15bps and 11bps, respectively. India’s 10Y yield too increased by 5bps to 7.37%
Fig 3 – Bond 10Y yield
16-05-2022 17-05-2022 change in bps US 2.88 2.99 10 UK 1.73 1.88 15 Germany 0.94 1.05 11 Japan 0.25 0.25 0 China 2.82 2.82 0 India 7.32 7.37 5
Fig 4 – Short term rates
13-05-2022 17-05-2022 % change Tbill-91 days 4.9 4.9 (1) Tbill-182 days 5.4 5.4 6 Tbill-364 days 5.8 5.8 (4) G-Sec 2Y 6.3 6.3 7 SONIA int rate benchmark 0.9 0.9 0 US SOFR 0.8 0.8 0
Fig 5 – Liquidity
Rs tn 16-05-2022 17-05-2022 change (Rs tn) Net Liquidity (-Surplus/+deficit) (4.9) (5.3) (0.4) Reverse repo 3.9 3.4 (0.5) Repo 0 0 0
Fig 6 – Capital market flows
12-05-2022 13-05-2022 change (US$ mn/Rs cr) FII (US$ mn) (663.8) (727.2) (63.4) Debt (43.9) (272.8) (228.9) Equity (619.9) (454.4) 165.5 Mutual funds (Rs cr) 2,442.1 (77.6) (2,519.7) Debt (659.2) (614.4) 44.8 Equity 3,101.3 536.8 (2,564.5)
Crude prices eased by 2% to US$ 112/bbl as disagreements emerged within EU on the decision to ban Russian oil imports. Gold too fell by 0.5%, as strong US retail sales data fuelled expectation of aggressive rate hike.
Fig 7 – Commodities
16-05-2022 17-05-2022 % change Brent crude (US$/bbl) 114.2 111.9 (2.0) Gold (US$/ Troy Ounce) 1,824.1 1,815.2 (0.5) Copper (US$/ MT) 9,255.5 9,386.3 1.4 Zinc (US$/MT) 3,564.5 3,665.3 2.8 Aluminium (US$/MT) 2,832.0 2,890.5 2.1
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19 May 2022
Global markets tumbled as elevated global inflation prints (most recently UK) raised fears that it will impact consumer demand and growth (US housing starts fell in Apr’22). It is also expected that Central Banks will opt for faster than anticipated rate hikes. Inflation in UK surged to 9% in Apr’22, while core CPI rose to 6.2%. On the domestic front, RBI’s minutes indicate that an immediate rate hike (instead of waiting till Jun’22) was required to avoid any larger rate hikes and to anchor inflation expectation. Future course of rates will depend upon inflation trajectory.
Except Nikkei and Hang Seng (higher), global equities ended lower. Investors were concerned about the 40-year high inflation print in UK in Apr’22. Also, Fed Chair’s comments on rate hike and keeping it above neutral rate, impacted market sentiments. S&P 500 fell the most by 4% followed by Dow Jones (- 3.6%). Sensex fell by 0.2% led by losses in real estate and oil and gas stocks. It is trading further lower today, in line with other Asian stocks.
Fig 1 – Stock markets
17-05-2022
18-05-2022
% change
Dow Jones
32,655
31,490
(3.6)
S & P 500
4,089
3,924
(4.0)
FTSE
7,518
7,438
(1.1)
Nikkei
26,660
26,911
0.9
Hang Seng
20,603
20,644
0.2
Shanghai Comp
3,094
3,086
(0.2)
Sensex
54,318
54,209
(0.2)
Nifty
16,259
16,240
(0.1)
Barring JPY and INR, other global currencies ended lower. DXY rose by 0.4% as Fed Chair hinted at aggressive rate hikes to tame inflation. In addition, continued Covid-19 restrictions in China and fresh cases emerging in port cities near Beijing, also contributed to safe-haven demand. INR closed flat.
Fig 2 – Currencies
17-05-2022
18-05-2022
% change
EUR/USD
1.0550
1.0464
(0.8)
GBP/USD
1.2493
1.2341
(1.2)
USD/JPY
129.38
128.23
0.9
USD/INR
77.56
77.58
0
USD/CNY
6.7377
6.7542
(0.2)
Except Japan (stable), global yields closed lower as growth concerns remained elevated. US 10Y yield fell the most by 10bps, as housing starts data fell in Apr’22. UK, Germany and China’s 10Y yield fell by 2bps each. India’s 10Y yield closed a tad lower by 1bps (7.35%) awaiting cues from analysing RBI’s minutes for the off cycle May policy. It is trading lower at 7.33% today, supported by government’s switch announcement of Rs 160bn.
Fig 3 – Bond 10Y yield
17-05-2022
18-05-2022
change in bps
US
2.99
2.88
(10)
UK
1.88
1.87
(2)
Germany
1.05
1.03
(2)
Japan
0.25
0.25
0
China
2.82
2.80
(2)
India
7.37
7.35
(1)
India’s short term yields rose across the board with 182-days T-Bill rising the most by 7bps. However, yesterday’s auction results showed that cut off yield moderated slightly (91-days:-4bps, 182-days: -3bps and 364-days: flat).
Fig 4 – Short term rates
16-05-2022
18-05-2022
% change
Tbill-91 days
4.9
4.9
1
Tbill-182 days
5.4
5.4
7
Tbill-364 days
5.8
5.9
6
G-Sec 2Y
6.3
6.4
8
SONIA int rate benchmark
0.9
0.9
0
US SOFR
0.8
0.8
0
Fig 5 – Liquidity
Rs tn
17-05-2022
18-05-2022
change (Rs tn)
Net Liquidity (-Surplus/+deficit)
(5.3)
(5.0)
0.3
Reverse repo
3.4
3.7
0.3
Repo
0
0
0
Fig 6 – Capital market flows
13-05-2022
17-05-2022
change (US$ mn/Rs
cr)
FII (US$ mn)
(727.2)
(202.8)
524.5
Debt
(272.8)
11.3
284.1
Equity
(454.4)
(214.1)
240.3
Mutual funds (Rs cr)
2,442.1
(77.6)
(2,519.7)
Debt
(659.2)
(614.4)
44.8
Equity
3,101.3
536.8
(2,564.5)
Crude prices fell by 2.5% to US$ 109/bbl as government data showed that US has ramped up output. Gold rose marginally by 0.1%, despite strong US$.
Fig 7 – Commodities
17-05-2022
18-05-2022
% change
Brent crude (US$/bbl)
111.9
109.1
(2.5)
Gold (US$/ Troy Ounce)
1,815.2
1,816.6
0.1
Copper (US$/ MT)
9,386.3
9,250.1
(1.5)
Zinc (US$/MT)
3,665.3
3,629.0
(1.0)
Aluminium (US$/MT)
2,890.5
2,857.5
(1.1)
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20 May 2022
Global markets continue to react to news indicating increased risks of global economic slowdown amidst elevated prices. To the get the economy back on track, it is expected that China will soon begin lifting Covid-19 restrictions. China has also announced lowering of its 5Y LPR to 4.45% from 4.6% (biggest cut on record; est.: 5bps cut), while maintaining its 1Y LPR unchanged (est.: 5bps cut). 5Y LPR rate is used for benchmarking mortgage loans hence the move it aimed to revive the housing sector. Oil prices have thus increased, over hopes of revival in demand.
Barring Shanghai Comp, other global indices tumbled led by concerns over global economic slowdown and fears of surge in inflation. Dow Jones dropped sharply by 0.8% registering worst day since CY20 as fears of recession loomed. Sensex (2.6%) too ended in deep red led by subdued global cues along with FII selling and likelihood of more rate hikes by RBI (evident through RBI minutes). Technology and metal stocks declined the most. However, it is trading higher today in line with other Asian stocks.
Fig 1 – Stock markets
18-05-2022
19-05-2022
% change
Dow Jones
31,490
31,253
(0.8)
S & P 500
3,924
3,901
(0.6)
FTSE
7,438
7,303
(1.8)
Nikkei
26,911
26,403
(1.9)
Hang Seng
20,644
20,121
(2.5)
Shanghai Comp
3,086
3,097
0.4
Sensex
54,209
52,792
(2.6)
Nifty
16,240
15,809
(2.7)
Except INR (lower), other global currencies ended higher. DXY dropped by 1% (10 day-low) tracking US 10Y yields, amidst volatility in global financial markets. Greater likelihood of aggressive monetary tightening by ECB, pushed EUR higher as it rose by 1.2%. INR depreciated by 0.2%, led by surge in oil prices. It is trading higher today while other Asian currencies are trading mixed.
Fig 2 – Currencies
18-05-2022
19-05-2022
% change
EUR/USD
1.0464
1.0588
1.2
GBP/USD
1.2341
1.2467
1.0
USD/JPY
128.23
127.79
0.3
USD/INR
77.58
77.73
(0.2)
USD/CNY
6.7542
6.7125
0.6
Global yields closed mixed, with 10Y yield of Germany falling the most (8bps), followed by US (5bps) and India (3bps). UK’s yield closed flat while China’s yield went up by 1bps. Fears of slowdown in global economic growth have impacted investor sentiments. India’s 10Y yield closed lower at 7.32%, following global cues and as investors opted for the safe-haven asset in the wake of equity sell-off.
Fig 3 – Bond 10Y yield
18-05-2022
19-05-2022
change in bps
US
2.88
2.84
(5)
UK
1.87
1.87
0
Germany
1.03
0.95
(8)
Japan
0.25
0.24
0
China
2.80
2.81
1
India
7.35
7.32
(3)
Fig 4 – Short term rates
18-05-2022
19-05-2022
% change
Tbill-91 days
4.9
4.9
0
Tbill-182 days
5.4
5.4
(2)
Tbill-364 days
5.9
5.9
(3)
G-Sec 2Y
6.4
6.3
(3)
SONIA int rate benchmark
0.9
0.9
0
US SOFR
0.8
0.8
(1)
Fig 5 – Liquidity
Rs tn
18-05-2022
19-05-2022
change (Rs tn)
Net Liquidity (-Surplus/+deficit)
(5.0)
(4.8)
(0.2)
Reverse repo
3.7
3.7
0
Repo
0
0
0
Fig 6 – Capital market flows
17-05-2022
18-05-2022
change (US$ mn/Rs
cr)
FII (US$ mn)
(202.8)
(108.0)
94.8
Debt
11.3
8.1
(3.2)
Equity
(214.1)
(116.1)
98.0
Mutual funds (Rs cr)
1,168.2
1,396.1
227.9
Debt
2.1
8.5
6.4
Equity
1,166.1
1,387.6
221.5
Crude prices rose by 2.7% to US$ 112/bbl as China is expected to gradually begin lifting Covid-19 restrictions, thereby providing support to oil demand. Gold too rose by 1.4% as US$ retreated.
Fig 7 – Commodities
18-05-2022
19-05-2022
% change
Brent crude (US$/bbl)
109.1
112.0
2.7
Gold (US$/ Troy Ounce)
1,816.6
1,841.9
1.4
Copper (US$/ MT)
9,250.1
9,460.5
2.3
Zinc (US$/MT)
3,629.0
3,732.6
2.9
Aluminium (US$/MT)
2,857.5
2,906.5
1.7
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