Economic Weekly Wrap
20 January 2025 - 24 January 2025

IMF in its World Economic Outlook has revised global growth projection upwards to 3.3% in CY25, from 3.2% earlier. This is a result of 50bps upgrade in US growth forecast to 2.7%, led by buoyant consumption demand. China’s growth projection has been revised upward slightly by 10bps to 4.6% in 2025. Despite its positive outlook, the report has outlined policy generated disruption as major risks to financial stability. India’s growth projection has been retained at 6.5% in FY26. In the US, macro prints (industrial production and housing starts) have been better than expected. US Treasury Secretary’s affirmation of taking steps to avoid breaching debt ceiling limit, also provided global markets the desired comfort. On domestic front, RBI’s latest bulletin pointed out that it had sold record high amount of US$ 20.2 bn in the spot market in Nov’24, to contain volatility of INR

Barring Nikkei, global stocks ended higher. FTSE has risen the most as UK delayed implementation of international bank capital rules. Other stocks got support from IMF’s upgrade of global growth forecast. Nikkei’s moderation was led by uncertainty over BoJ’s future move. Sensex moderated led by banking stocks. However, it is trading higher today in line with Asian stocks.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except CNY, other global currencies ended weaker. DXY rose by 0.4%, supported by positive macro data (housing and industrial production). JPY depreciated the most, followed by GBP. On the other hand, CNY appreciated by 0.1% as Q4 GDP growth surpassed expectations. INR was 0.1% lower led by FPI outflows. It is trading stronger today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Global yields ended mixed. Upbeat macro data in the US strengthened the case for fewer rate cuts in 2025. Thus, US 10Y yield rose by 1bps. On the other hand, UK’s 10Y yield fell by 2bps as a surprise drop in UK’s retail sales raised fresh concerns. China’s 10Y yield rose by 2bps amidst improvement in growth outlook. India’s 10Y yield rose by 2bps. It is trading flat 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: Mutual Fund data as of 14 and 15 Jan 2025

Oil prices softened as China’s fine print of growth showed some weakness.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets awaited clarity on US President Donald Trump’s future policies. No official measures have been adopted on tariff front, albeit anticipation over higher tariffs on Mexico and Canada, starting from 1 Feb 2025. Elsewhere, no major macro releases were scheduled except UK’s house price data which showed some uptick. On monetary policy, BoJ’s policy is scheduled where another 25bps hike is anticipated. The key watchable will be the interest rate differential between US and Japan, which might impinge on yen. On domestic front, Rabi sowing showed momentum, acreage under wheat and pulses remained comfortable while coarse cereals are lagging. Daily VRR auction revealed that bid received remained lower than notified amount albeit tighter liquidity.

Global markets ended higher as focus remained on the policy announcements from the new President. Traders await more clarity on possible US tariffs and tax policies. FTSE rose further by 0.2% to another record high. Markets in Asia remained buoyant with Nikkei and Hang Seng rising by over 1%. Sensex also rose by 0.6% led by gains in banking and power stocks. However, in line with other Asian markets, it is trading lower today.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Note: US markets were closed on 20 Jan

Global currencies ended stronger against the dollar as investors looked for cues from US President’s inaugural speech. EUR and GBP rose by 1.4% and 1.3% respectively. CNY also appreciated by 0.7% as the new President refrained from announcing new tariffs on China. INR appreciated by 0.1%. It is trading further stronger today, in line with other Asian currencies.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Note: US markets were closed on 20 Jan

Global yields traded in a narrow range. Germany’s 10Y yield softened as PPI data edged down. US 10Y yield rose a tad as sentiments remained jittery surrounding new US President’s future course of action. China’s 10Y yield rose by 2bps, monitoring moves of PBOC on liquidity. India’s 10Y yield closed flat and is trading lower at 6.74%, 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: Mutual Fund data as of 14 and 15 Jan 2025

Oil prices fell on US President’s plan of declaring a national energy emergency.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets kept a hawk eye on future developments in US polices under the new administration. US President spoke of a 10% tariff on China. Thus, market is slowly pricing in expectation of concrete tariff moves, going ahead. Gold rose to its highest since 31 Oct 2024. Yields of major economies softened amidst risk off sentiment. Equity markets got support as optimism surrounding higher AI spending under President Donald Trump outweighed tariff fears. Elsewhere, on the sidelines of World Economic Forum, ECB official remained dovish and spoke of nearing its inflation target. Amidst major macro releases were Germany’s ZEW Survey expectation data which showed some moderation. In UK, unemployment rate firmed up albeit some stickiness in average weekly earnings. On domestic front, the trifecta of liquidity, currency and bonds remain closely watchable.

Except India and China, global markets elsewhere found respite from hopes of higher AI spending. Markets in US rose the most, followed by Hang Seng. Sensex fell sharply by 1.6%, with real estate and consumer durables stocks declining by over 4%. However, in line with other Asian markets, it is trading higher today

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except INR, other global currencies gained. Investors focussed on US President’s tariff policies. GBP rose even as unemployment rate in UK edged up. EUR also rose despite a decline in Germany’s economic sentiment index. INR is trading flat today, while other Asian currencies are trading mixed

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Global yields closed lower. UK’s 10Y yield has fallen the most as payroll data strengthened the case for a rate cut by BoE. US 10Y yield also softened by 5bps amidst risk off sentiments surrounding US President’s future policies. India’s 10Y yield fell by 2bps, in line with global yields and is trading at the same level 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: Mutual Fund data as of 16 and 17 Jan 2025

Oil prices declined amidst expectations of higher US supply.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets continued to digest the uncertainty over US President’s policies. To give a breather, today China’s securities regular communicated for an increased investment in stocks by MFs and insurance companies. Elsewhere, on monetary policy front, BoJ’s 25bps rate hike is fully priced in, as reflected in the overnight indexed swaps. ECB policy officials remained broadly dovish and hinted at further monetary easing. On macro front, South Kora’s GDP showed considerable moderation amidst downbeat sentiments over political woes. In fact, there are reports of issuing special bonds, to support currency, a route that is expected to be explored after 21 years. On domestic front, 434 projects have been identified under PM Gati Shakti which is expected to give a holistic push to infrastructure sector.

Global stocks ended mixed as investors assessed the barrage of policy decisions by the US President. Markets in US and Japan rose, led by tech stocks amidst an AI driven optimism. However, threat of looming tariffs pushed stocks in Hong Kong and China lower. Sensex rose by 0.7%, as gains in technology stocks offset decline in other sub-indices. However, it is trading lower today while other Asian markets are trading mixed.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Except INR, other global currencies ended weaker. EUR declined as ECB officials backed further rate cuts. GBP also depreciated amidst mounting fiscal woes. INR appreciated by 0.3% as oil prices declined. However, it is trading weaker today, while other Asian currencies are trading mixed.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Except China and India, global yields closed higher. UK’s 10Y yield has risen as public sector borrowing data showed stickiness. US 10Y yield inched up awaiting the jobless claims data. China’s 10Y yield closed stable awaiting fresh cues. India’s 10Y yield fell a tad albeit tighter liquidity. It is trading flat 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: Mutual Fund data as of 16 and 17 Jan 2025

Oil prices fell further as investors assessed the impact of US policies

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets monitored US President’s comments at Davos which hinted at softer policy on tariffs, going ahead. This supported equity indices and gave a breather to currency market. In fact, some comments were also hinted towards a softer monetary regime. Elsewhere in Japan, BoJ hiked rates by another 25bps, in line with expectations. The current core CPI forecast has been revised upward to 2.7% (2.5% earlier) and GDP forecast has been marginally toned down to 0.5%. Remaining in sync, even the Dec’24 national CPI and core CPI (excl. fresh food & energy) remained sticky at 3.6% and 2.4% respectively. In Singapore, central bank for the first time in past 5 years eased monetary policy setting, amidst expectation of growth slowdown and retreating price pressure. Amongst other macro releases have been US jobless claims which showed some momentum. On domestic front, Union Budget holds the key, as focus will be on quality spending with adherence to fiscal discipline.

Except Hong Kong, global stocks elsewhere closed higher. US stocks led the increase, with the S&P 500 closing at a record high after the US President batted for lower rates and indicated a softer stance on tariffs. Sensex rose by 0.2%, led by gains in consumer durables and real estate stocks. It is trading further higher today, in line with other Asian stocks.

Fig 1 – Stock markets

Source: Bloomberg, Bank of Baroda Research

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda Research

Global yields closed broadly higher. US 10Y yield has risen albeit rising jobless claims data. Germany’s 10Y yield inched up on account of flagging of uncertain inflation trajectory by some ECB officials. India’s 10Y yield closed a tad higher monitoring VRR auctions and buyback results. It is trading at 6.71%, 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: Mutual Fund data as of 20 and 21 Jan 2025

Oil prices fell further as the US President maintained his stance on lower prices.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research