Economic Weekly Wrap
23 October 2023 - 27 October 2023
-
23 Oct 2023
Fed survey on financial stability highlighted the following concerns amongst the respondents: likelihood of higher rates for a longer period on account of inflation and probability of losses in commercial real estate market. Additionally, there were also concerns around economic weakness in China. Separately, US budget deficit widened to US$ 1.7tn for the fiscal year (ending on 30 Sep 2023), up from 23.2% compared with last year. The shortfall will add to the growing US debt. On the domestic front, RBI’s minutes noted that MPC members remain vigilant on maintaining price stability and focussing on the mandate of medium-term goal of 4% inflation mark.
- Global stocks ended lower as investors continue to monitor geo-political developments and comments by Fed Chair which signalled a possible hold, even as rate hike remains on the table. Amongst other indices, S&P 500 and FTSE declined the most followed by losses in Dow Sensex too followed suit, led by sharp fall in consumer durable and oil & gas stocks. It is trading further lower today, in line with other Asian markets.
Fig 1 – Stock markets
19-10-2023
20-10-2023
% change
Dow Jones
33,414
33,127
(0.9)
S & P 500
4,278
4,224
(1.3)
FTSE
7,500
7,402
(1.3)
Nikkei
31,431
31,259
(0.5)
Hang Seng
17,296
17,172
(0.7)
Shanghai Comp
3,005
2,983
(0.7)
Sensex
65,629
65,398
(0.4)
Nifty
19,625
19,543
(0.4)
Source: Bloomberg, Bank of Baroda Research
- Global currencies ended mixed against the dollar. DXY fell by 0.1% as investors assessed comments from Fed Chair. GBP appreciated by 0.2% even as UK’s retail sales fell more than expected. JPY inched closer to the key 150/$ mark. INR appreciated supported by RBI intervention. It is weaker today, while other Asian currencies are trading
Fig 2 – Currencies
19-10-2023
20-10-2023
% change
EUR/USD (1 EUR / USD)
1.0582
1.0594
0.1
GBP/USD (1 GBP / USD)
1.2144
1.2164
0.2
USD/JPY (JPY / 1 USD)
149.80
149.86
0
USD/INR (INR / 1 USD)
83.24
83.12
0.1
USD/CNY (CNY / 1 USD)
7.3104
7.3151
(0.1)
Source: Bloomberg, Bank of Baroda Research
- Except Japan (flat), other major global bond yields edged lower. Investors monitored comments from Fed Chair on future rate path and developments in the Middle-East. US 10Y yield fell the most by 8bps but was still ~30bps higher than last India’s 10Y yield fell by 1bps supported by better than expected prices in the weekly auction. It is trading a tad higher at 7.37% today.
Fig 3 – Bond 10Y yield
19-10-2023
20-10-2023
change in bps
US
4.99
4.91
(8)
UK
4.67
4.65
(2)
Germany
2.93
2.89
(4)
Japan
0.84
0.84
0
China
2.72
2.71
(1)
India
7.37
7.36
(1)
Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
19-10-2023
20-10-2023
change in bps
Tbill-91 days
6.90
6.92
2
Tbill-182 days
7.10
7.11
1
Tbill-364 days
7.12
7.12
0
G-Sec 2Y
7.29
7.30
0
India OIS-2M
6.81
6.83
2
India OIS-9M
6.97
6.95
(2)
SONIA int rate benchmark
5.19
5.19
0
US SOFR
5.30
5.30
0
Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn
19-10-2023
20-10-2023
change (Rs tn)
Net Liquidity (-Surplus/+deficit)
0.2
0.8
0.6
Reverse repo
0.1
0
(0.1)
Repo
0
0
0
Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
18-10-2023
19-10-2023
change (US$ mn/Rs
cr)
FII (US$ mn)
(192.2)
(116.2)
76.0
Debt
46.8
(1.9)
(48.7)
Equity
(239.0)
(114.3)
124.7
Mutual funds (Rs cr)
(1,406.4)
(1,448.9)
(42.5)
Debt
(1,754.9)
(2,405.3)
(650.5)
Equity
348.4
956.4
608.0
Source: Bloomberg, Bank of Baroda Research │ Note: Mutual fund data as of 17 Oct 2023 and 18 Oct 2023
- Oil prices eased amidst hopes of de-escalation of tension in Middle-East.
Fig 7 – Commodities
19-10-2023
20-10-2023
% change
Brent crude (US$/bbl)
92.4
92.2
(0.2)
Gold (US$/ Troy Ounce)
1,974.5
1,981.4
0.4
Copper (US$/ MT)
7,928.0
7,879.8
(0.6)
Zinc (US$/MT)
2,410.5
2,433.5
1.0
Aluminium (US$/MT)
2,185.0
2,181.5
(0.2)
Source: Bloomberg, Bank of Baroda Research
-
26 Oct 2023
US yield soared sharply inching closer once gain to the 16-year peak of 5%. This comes in the wake of better than expected US home sales, climbing to 19-month high (12.3% in Sep’23) as median house prices have fallen. The focus will now shift towards the release of US GDP and PCE which might offer further guidance on Fed’s next move. Separately, South Korea’s economy expanded at a much faster pace than expected (est:0.5%) at 0.6% for Q3CY23. With this, the attention will turn towards BoK’s rate decision. On the other hand, Bank of Canada kept the interest rate (5%) on hold with the possibility of two more rate hikes given the risk of price rise and inflation remaining above the target level in the coming 2-years.
- Global indices ended mixed. US indices ended lower as investors monitored disappointing earnings report. Sensex too ended in red and was dragged down by losses in IT and capital good stocks. It opened lower today in line with other Asian stocks. A broad based sell-off was seen in Asian indices with South Korea, Japan and Australia, all trading in red. The ASX index (Australia) has hit the lowest level since last Oct’22 amidst the news of inflation rising more than anticipated and likelihood of interest rate hike in the next
Fig 1 – Stock markets
24-10-2023
25-10-2023
% change
Dow Jones
33,141
33,036
(0.3)
S & P 500
4,248
4,187
(1.4)
FTSE
7,390
7,414
0.3
Nikkei
31,062
31,270
0.7
Hang Seng
16,992
17,085
0.6
Shanghai Comp
2,962
2,974
0.4
Sensex
64,572
64,049
(0.8)
Nifty
19,282
19,122
(0.8)
Source: Bloomberg, Bank of Baroda Research│ Note: Indian markets were closed on 24.10.23
- Except INR (flat), other global currencies depreciated. DXY rose by 0.2% amidst a spike in US 10Y yield. Despite a sharp pickup in Germany’s business climate index, EUR fell by 0.2%. JPY breached the 150/$ mark. INR is trading weaker today, in line with other Asian
Fig 2 – Currencies
24-10-2023
25-10-2023
% change
EUR/USD (1 EUR / USD)
1.0590
1.0566
(0.2)
GBP/USD (1 GBP / USD)
1.2160
1.2112
(0.4)
USD/JPY (JPY / 1 USD)
149.91
150.23
(0.2)
USD/INR (INR / 1 USD)
83.19
83.19
0
USD/CNY (CNY / 1 USD)
7.3111
7.3172
(0.1)
Source: Bloomberg, Bank of Baroda Research│ Note: Indian markets were closed on 24.10.23
- Except India and China (lower), other bond yields ended higher. US 10Y yield increased by 13bps, inching closer to the 5% mark after US new home sales rose solidly in Sep’23. This reinforces view of higher for longer rates in the US. 10Y yields in UK and Germany inched up by 7bps and 6bps India’s 10Y yield fell by 4bps. However, it is trading higher at 7.36% today.
Fig 3 – Bond 10Y yield
24-10-2023
25-10-2023
change in bps
US
4.82
4.95
13
UK
4.54
4.61
7
Germany
2.83
2.89
6
Japan
0.85
0.86
1
China
2.72
2.71
(1)
India
7.38
7.34
(4)
Source: Bloomberg, Bank of Baroda Research │ Note: Indian markets were closed on 24.10.23
Fig 4 – Short term rates
24-10-2023
25-10-2023
change in bps
Tbill-91 days
6.94
6.93
(1)
Tbill-182 days
7.05
7.13
8
Tbill-364 days
7.12
7.15
3
G-Sec 2Y
7.30
7.28
(2)
India OIS-2M
6.83
6.78
(5)
India OIS-9M
6.97
6.96
(1)
SONIA int rate benchmark
5.19
5.19
0
US SOFR
5.30
5.30
0
Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn
23-10-2023
25-10-2023
change (Rs tn)
Net Liquidity (-Surplus/+deficit)
1.0
1.1
0.1
Reverse repo
0.1
0.1
0.1
Repo
0
0
0
Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
20-10-2023
23-10-2023
change (US$ mn/Rs
cr)
FII (US$ mn)
296.2
33.7
(262.5)
Debt
79.7
(15.6)
(95.3)
Equity
216.5
49.3
(167.3)
Mutual funds (Rs cr)
(1,406.4)
(1,448.9)
(42.5)
Debt
(1,754.9)
(2,405.3)
(650.5)
Equity
348.4
956.4
608.0
Source: Bloomberg, Bank of Baroda Research │ Note: Mutual fund data as of 17 Oct 2023 and 18 Oct 2023
- Oil prices rose by 2% amidst possibility of escalation in the Middle-East
Fig 7 – Commodities
24-10-2023
25-10-2023
% change
Brent crude (US$/bbl)
88.1
90.1
2.3
Gold (US$/ Troy Ounce)
1,971.0
1,979.7
0.4
Copper (US$/ MT)
7,985.0
7,958.5
(0.3)
Zinc (US$/MT)
2,435.2
2,471.9
1.5
Aluminium (US$/MT)
2,191.0
2,219.0
1.3
Source: Bloomberg, Bank of Baroda Research
-
27 Oct 2013
ECB kept interest rate on hold, breaking the streak of rate hikes that began in Jul’22. It noted that current level is enough to cool down inflation if the rates are maintained for ‘sufficiently long time’. It also stated the past rate hikes continue to be ‘transmitted forcefully into financial conditions’. ECB reiterated that they will continue with PEPP till the end of next year and will add another US$ 1.79tn and warned that the economy remains weak. On the other hand, US economy accelerated as its fastest pace in over 2-years to grow at 4.9% in Q3 with personal spending being the main growth driver. Separately, China’s industrial profits dropped by 9% for the period between Jan-Sep’23 compared with 11.7% in Jan-Aug’23 period. Tokyo’s core consumer inflation (ex food) rose more than anticipated to 2.7% (ext: 2.5%) in Oct’23 ahead of BoJ’s rate decision scheduled next week.
- Barring Shanghai Comp, other global indices ended in red as investors monitored mixed economic data from US and ECB kept rates on hold for the first time. In US, technology and related stocks declined the most on the back of the disappointing results. Sensex too ended in red led by losses in oil & gas and metal However, it is trading higher today in line with other Asian stocks.
Fig 1 – Stock markets
25-10-2023
26-10-2023
% change
Dow Jones
33,036
32,784
(0.8)
S & P 500
4,187
4,137
(1.2)
FTSE
7,414
7,355
(0.8)
Nikkei
31,270
30,602
(2.1)
Hang Seng
17,085
17,045
(0.2)
Shanghai Comp
2,974
2,988
0.5
Sensex
64,049
63,148
(1.4)
Nifty
19,122
18,857
(1.4)
Source: Bloomberg, Bank of Baroda Research
- Global currencies closed mixed. DXY rose by 0.1% after better than expected GDP print. EUR closed flat after ECB’s decision. JPY fell further even as the government kept a close eye on the forex market. INR depreciated by 0.1% amidst losses in domestic equities. It is trading further weaker today, while other Asian currencies are trading
Fig 2 – Currencies
25-10-2023
26-10-2023
% change
EUR/USD (1 EUR / USD)
1.0566
1.0563
0
GBP/USD (1 GBP / USD)
1.2112
1.2129
0.1
USD/JPY (JPY / 1 USD)
150.23
150.40
(0.1)
USD/INR (INR / 1 USD)
83.19
83.23
(0.1)
USD/CNY (CNY / 1 USD)
7.3172
7.3168
0
Source: Bloomberg, Bank of Baroda Research
- Global yields ended mixed. US 10Y yield fell by 11bps tracking macro data. While GDP growth accelerated, inflation as measured by PCE eased. Jobless claims too rose more than expected. Japan’s 10Y yield rose by 2bps to a ~10- year high, inching closer to BoJ’s recently revised 1% cap. India’s 10Y yield rose by 3bps, but is trading at 35% today ahead of weekly auction.
Fig 3 – Bond 10Y yield
25-10-2023
26-10-2023
change in bps
US
4.95
4.84
(11)
UK
4.61
4.60
(1)
Germany
2.89
2.86
(3)
Japan
0.86
0.88
2
China
2.71
2.72
0
India
7.34
7.37
3
Source: Bloomberg, Bank of Baroda Research
Fig 4 – Short term rates
25-10-2023
26-10-2023
change in bps
Tbill-91 days
6.93
6.91
(2)
Tbill-182 days
7.13
7.12
(1)
Tbill-364 days
7.15
7.15
0
G-Sec 2Y
7.28
7.32
4
India OIS-2M
6.78
6.81
3
India OIS-9M
6.96
6.95
0
SONIA int rate benchmark
5.19
5.19
0
US SOFR
5.30
5.30
0
Source: Bloomberg, Bank of Baroda Research
Fig 5 – Liquidity
Rs tn
25-10-2023
26-10-2023
change (Rs tn)
Net Liquidity (-Surplus/+deficit)
1.1
0.9
(0.3)
Reverse repo
0.1
0.1
0
Repo
0
0
0
Source: RBI, Bank of Baroda Research
Fig 6 – Capital market flows
23-10-2023
25-10-2023
change (US$ mn/Rs
cr)
FII (US$ mn)
33.7
(487.0)
(520.7)
Debt
(15.6)
(2.9)
12.6
Equity
49.3
(484.1)
(533.4)
Mutual funds (Rs cr)
(1,406.4)
(1,448.9)
(42.5)
Debt
(1,754.9)
(2,405.3)
(650.5)
Equity
348.4
956.4
608.0
Source: Bloomberg, Bank of Baroda Research │ Note: Mutual fund data as of 17 Oct 2023 and 18 Oct 2023
- Oil prices fell by 4% amidst an increase in US crude inventories.
Fig 7 – Commodities
25-10-2023
26-10-2023
% change
Brent crude (US$/bbl)
90.1
87.9
(2.4)
Gold (US$/ Troy Ounce)
1,979.7
1,984.7
0.3
Copper (US$/ MT)
7,958.5
7,911.0
(0.6)
Zinc (US$/MT)
2,471.9
2,426.3
(1.8)
Aluminium (US$/MT)
2,219.0
2,197.5
(1.0)
Source: Bloomberg, Bank of Baroda Research
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