Economic Weekly Wrap
28 October 2024 - 31 October 2024

US economy continued to show signs of resilience. US core durable goods orders rose by 0.5% in Sep’24 (est. 0.1%) from 0.3% in Aug’24, indicating a pickup in consumer spending. University of Michigan’s consumer sentiment index also picked up to 70.5 in Oct’24 from 70.1, while consumer’s 1Y inflation expectations declined. Separately, Ifo’s business climate index for Germany picked up to 86.5 in Oct’24 (est. 85.6) from 85.4 in Sep’24. On the other hand, China’s economic despair continued with industrial profits falling sharply by 27.1% in Sep’24, following a 17.8% decline in Aug’24. In Japan, political uncertainty loomed as no single party was able to secure a majority in the general elections. This comes on heels of data showing that core inflation in Tokyo rose by 1.8% in Oct’24, falling below BoJ’s target, thus complicating the path of monetary policy.

Global indices ended mixed. Markets remained cautious in the run up to Japan’s election results and tracing macro releases in the US, UK and Germany. Stocks in Hong Kong and China inched up tracking financial results and stimulus measures by PBOC to support liquidity. Sensex moderated dragged down by oil and gas stocks. It is trading higher today while Asian stocks are trading mixed.

Fig 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda

Global yields closed mixed. US 10Y yield inched up albeit a well anchored inflation expectations data. Election driven sentiments are weighing on yields heavily. Japan’s 10Y yield fell a tad tracking weakness in yen. India’s 10Y yield inched up as RBI Governor remained cautious on inflation outlook in his recent commentary. It is trading at 6.86% 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

Oil prices inched up amid continuing conflict in Middle East.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets were largely upbeat as investors monitored corporate earnings. Reports that Israel is not targeting Iran’s oil and nuclear supplies helped to ease fears of a possible escalation in the Middle East conflict. Political developments in US and Japan also remained in focus. In Japan, a political impasse is likely after the snap elections, which is likely to weigh on the country’s growth as well as the course of monetary policy. In the US, markets are widely pricing in the likelihood of a win by Republican nominee Donald Trump. This has contributed to the strength in dollar as his policies are widely construed to be inflationary. In India, Ministry of Finance noted that despite a slowdown in urban demand, domestic growth is likely to be in the range of 6.5%-7%. This will be supported by festive demand, pickup in government capex, favourable agri output and a stable external sector.

Global indices ended higher. Major event including US elections, BoJ’s upcoming decision amidst tight labour market, corporate earnings and key macro releases weighed on global stocks. Nikkei rose the most as market priced in election driven uncertainty. Sensex inched up led by metal and auto stocks. It is trading higher today while Asian stocks are trading mixed

Fig 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda

Except Germany and China (stable), global yields closed higher. US 10Y yield inched up ahead of key labour market data. Some unwinding of positions is expected to persist ahead of US elections. UK’s 10Y yield also edged up despite softening CBI sales data. A depreciating yen weighed on Japan’s 10Y yield. India’s 10Y yield inched up and is trading at 6.85% 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

Oil prices declined sharply as Israel refrained from targeting Iran’s oil supplies

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets monitored slew of corporate earnings which remained upbeat. Macro data releases remained mixed giving conflicting signals on call for rates by Fed. US consumer confidence rose to its highest since Mar’21. However, job openings showed some softening with JOLTS data moderating to 7.44mn in Sep’24 from 7.86mn in Aug’24. Elsewhere in UK, BRC shop price index softened while consumer credit remained buoyant. FM of the region has pitched for measures regarding fiscal consolidation. In Australia, CPI dipped to its 3.5 year low, albeit core remaining sticky. This is likely to keep RBA abreast. In China, reports suggested that US$ 1.4tn stimulus measures are underway in the run up to US elections. On domestic front, GST Council panel has proposed to increase the threshold for affordable housing to boost the real estate sector.

Global indices ended mixed. Dow Jones, FTSE and Shanghai Comp closed lower, while other indices ended the day higher. Nikkei rose the most, benefiting from weaker Yen. S&P gained, following better than expected earnings report from Alphabet. Sensex also inched up, led by banking, realty and capital good stocks. However, it is trading lower today while Asian stocks are trading mixed.

Fig 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda

Global yields closed mixed. UK’s 10Y yield sharpened as worries over fiscal slippage persist. Germany’s 10Y yield also firmed up, buoyed by an improved consumer confidence data. US 10Y yield softened as job openings moderated signalling loosening labour market conditions. India’s 10Y yield fell a tad and is trading lower at 6.83% 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 24 and 25 Oct 2024

Oil prices fell, as oil supplies are unlikely to be effected due Iran-Israel tensions.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research

Global markets remained on edge monitoring host of macro data releases. In the US, Q3 advance estimates (2.9%, QoQ) remained upbeat buoyed by personal consumption expenditure (3.3%). ADP employment change data also showed tightness. Thus, some paring back of expectations regarding loser financial conditions led to realignment of portfolio. US 10Y yield firmed up. Gold prices rose to its record high level as a safe haven demand. Elsewhere, in UK, significant fiscal stimulus was delivered in the budget raising concerns of a fiscal slippage. In China, official PMI went for an expansionary mode. In Japan, BoJ kept policy rates stable trimming down inflation (core at 1.9% from 2.1% earlier) while raising growth forecast (GDP 1.1% from 1% earlier). On domestic front, 8 core recorded muted growth in H1 at 4.2% compared to 8.2%, last year. Fiscal deficit in H1 as % of Budgeted remained lower at 29.4% compared to 39.3%, last year

Global indices ended broadly lower. Investors weighed on mixed corporate earnings and better data in the US which trimmed down expectations of loser financial conditions. Hang Seng fell the most followed by FTSE. Sensex moderated led by consumer durables and banking stocks. However, it is trading lower today while Asian stocks are trading mixed.

Fig 1 – Stock Markets

Source: Bloomberg, Bank of Baroda Research

Global currencies ended mixed. DXY softened albeit better macro prints of the region. GBP depreciated the most tracking budgetary announcements. EUR firmed up as inflation in Germany remained sticky. INR traded at its record low level as oil prices edged up.

Fig 2 – Currencies

Source: Bloomberg, Bank of Baroda

Global yields closed mixed. Better macro prints in the US led to its upward rally. In UK, loosening fiscal policy kept its 10Y yield firm. Japan’s 10Y yield softened amidst expectation of some monetary stimulus. India’s 10Y yield fell by 3bps supported by a better fiscal print in H1. It is trading at 6.84% 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 25 and 28th Oct 2024

Oil prices rose amidst expectation of delay in output increase by OPEC+.

Fig 7 – Commodities

Source: Bloomberg, Bank of Baroda Research