Markets next week ( 24-28 Oct 2022)

The global macroeconomic concerns have just been ratcheted up one notch.

Based on the current trajectory of events, there appears to be a prolonged period of uncertainty in the UK. After Liz Truss, who served as Prime Minister for just six weeks in 10 Downing Street, resigned from the position, political turmoil intensified.

She resigned after her policy of unfunded tax cuts sent shockwaves through the markets, causing the pound to nosedive against the dollar and bond yields to increase. As a result of the financial market chaos, the Bank of England took some desperate emergency measures as pension funds were reportedly on the verge of collapse.

Truss was eventually removed from office due to the fiasco, which led to the rollback of the controversial fiscal program and the unceremonious resignation of the finance minister.

In India, the rupee has diminished considerably from its former glory. As a result of a growing demand for dollars from fuel companies and a widening Canadian dollar, the local currency has breached the 83 per dollar mark for the very first time. Weakness in the market was primarily caused by a rising dollar and an increase in US bond yields.

Since the beginning of the year, the Indian rupee has declined by as much as 12% against the dollar. In response, the Reserve Bank of India (RBI) has drawn on its foreign exchange reserves to defend the rupee from further declines. According to investors, more rate hikes by the US Federal Reserve will once again boost US Treasury yields, which could further erode the rupee.

On November 2, all eyes will be focused on the next meeting of the US Federal Reserve.

The commentary on festive demand will be closely watched, as it will tell us how robust the domestic market is in India.

I would like to take this opportunity to review what will be happening in the coming week.

Monday (October 24)

China Trade Balance

There was a drop of USD 79.39 billion in China's trade surplus in August, 2022, a three-month low. The figures are significantly lower than the market forecast of USD 92.7 billion. As a result of fresh COVID curbs and historic heatwaves, China was faced with disruptions in factory output. It is yet to be determined what the figures for September will be.

US PMIs:?

In September, the US Manufacturing PMI was revised higher to 52 from 51.8 in August. The reading was higher than the 51.5 recorded in August. There has been an improvement in the manufacturing sector, although it has been relatively subdued. It is anticipated that the flash reading for October will be released soon.

When the PMI reading is above 50, it indicates expansion, while when it is below 50, it indicates contraction.

In September, the Services PMI was revised higher to 49.3 from 49.2 in the preliminary estimate, but it indicates that the services sector has lost momentum for a third consecutive month. There will be an announcement of the flash estimate for October.

There was a slight increase in the US Composite PMI for September from a preliminary reading of 49.3 to 49.9. Compared with August, the figure was 44.6. Private sector activity decreased much less than had been expected. On Monday, we will receive the flash reading for October.

Tuesday (October 25)

As of July, the US House Price Index stood at 395.22, a decrease of 0.6 percent from the previous month. A consistent decline in existing home sales has been reported as a result of rising interest rates. Numbers for August are expected to be released shortly.

Wednesday (October 26)

Dabur India's earnings.

A decrease in the US goods trade balance was recorded in August for the fifth consecutive month, dropping from $90.1 billion the previous month to $87.3 billion in August. It is anticipated that the September numbers will be announced shortly.

Until August, China's industrial firms earned profits of 55.25 trillion yuan, down 2.1% year-over-year. As a result of the latest results, China's industrial profit growth rate has also been at its lowest level in two years. September's numbers are expected to be similar.

Thursday (October 27)

Earnings: Indus Towers.

Markets expect an increase of 75 basis points in October after the European Central Bank decides on policy rates. There has been a 75 basis point hike in rates by the ECB in September, and more hikes are expected in the near future.

Friday (October 28)?

Earning: Dr Reddy’s, Maruti Suzuki India, Vedanta.

A rise in India's foreign exchange reserves: India's foreign exchange reserves rose to $532.87 billion in the week to October 7 from $532.66 billion the week before. Friday will provide the numbers for the week ending October 21.

Three times in a row, the Bank of Japan has held its key short-term interest rate at -0.1% and the 10-year bond yield at around 0%. We are approaching the deadline for the policy meeting in October.

Saturday (October 29)

Earnings: Indian Oil Corporation.