Key economic developments
- U.S. Federal Reserve Governor, Christopher Waller, said that he does “not support stopping rate hikes” unless there is “clear evidence that inflation is moving down towards our 2% objective”. He added “prudent risk management would suggest skipping a hike at the June meeting but leaning toward hiking in July based on the incoming inflation data.”
- U.S. budget deficit swelled to USD 240 bn in May-23, marginally above market expectation (Refinitiv: USD 236 bn), from USD 66 bn in Apr-23.
- Bank of England policymaker, Catherine Mann, remarked that central banks will find it hard to communicate the end of their rate-tightening cycle and should not “sweat over this” at the expense of taking steps to bring down inflation.
- India’s CPI inflation moderated further to 4.25% YoY in May-23, the lowest level in nearly 25-months and broadly in line with market expectations (Refinitiv: 4.42%), from 4.70% in Apr-23. This marked the third consecutive print remaining within RBI’s inflation target band.
- India’s industrial production growth improved to 4.2% YoY in Apr-23, well above market expectation (Refinitiv: 1.8%), from 1.7% (revised up from 1.1% reported earlier) in Mar-23.
- Market participants will follow a series of central bank meetings this week, starting with the U.S. Federal Reserve on 14th Jun-23 and the European Central Bank on 15th Jun-23.
Equity Market
Barring UK’s FTSE and China’s Shanghai Comp, most global indices ended higher on Monday. U.S. S&P 500 and Germany DAX 30 led gains to advance by 0.9% ahead of the FOMC meeting on 14th Jun-23, followed by India’s Nifty 50 (+0.2%) propelled by real estate, IT, and technology sectors. UK’s FTSE led losses t0 decline by 0.3%, followed by China’s Shanghai Comp (-0.1%).
Currencies
Global currencies ended lower against the U.S. dollar on Monday, with the DXY rising marginally by 0.1% to 103.6 ahead of the FOMC meeting on 14th Jun-23. GBP led losses to decline by 0.6%, followed by JPY and CNY (-0.2% each). Emerging market currencies, including INR, continue to trade range-bound with a negative bias as oil prices inched down.
Bond Yields
Major sovereign 10Y yields ended lower on Monday. 10-year yields for India and Japan led losses to decline by 2 bps each, followed by U.S. 10-year yield as the Fed is expected to pause its tightening cycle. UK’s 10-year yield rose by 11bps as BoE officials hint at further rate hikes, followed by China’s 10-year yield (+3 bps).
Commodities
Brent crude prices fell on Monday by 3.6% to USD 74.79 pb to record a second straight weekly decline, extending losses from the previous session, due to demand concerns and increase in oil supply from Iran and Russia. Gold prices dipped marginally on Monday by 0.1% as a strengthening U.S. dollar countered wider economic risks.
