Macro & Markets Review - July 12, 2023

Key economic developments

• U.S. Fed policymaker, Mary Daly, said that the central bank is “likely to raise interest rates over the course of this year to really bring inflation sustainably back to the 2% goal”.
• Federal Reserve Bank of Cleveland President, Loretta Mester, said that still-elevated levels of underlying inflation pressures are pointing the central bank toward more rate rises.
• UK finance minister, Jeremy Hunt, remarked that the government and the Bank of England "will do what is necessary, for as long as necessary" to return inflation to its 2% target.
• Japan's wholesale inflation moderated for a sixth consecutive month to 4.1%YoY in Jun-23, marginally below market expectation (Refinitiv: 4.3%), from 5.2% in May-23.
• Domestic investors will closely monitor India’s Jun-23 consumer price inflation and May’s Industrial production data due later today.

Equity Market

Most global indices ended higher ahead of stimulus measures announced by the Government of China. Germany’s DAX 30 and U.S. S&P 500 led gains to rise by 0.8% and 0.7% respectively. India’s Nifty 50 rose by 0.4% on account of gains in the Metals and Healthcare sectors.

Currencies

Most global currencies ended higher against the U.S. dollar on Tuesday, with the DXY declining by 0.2% to close at 101.7 on expectations that inflation will ease. JPY led gains to rise by 0.7%, followed by GBP (0.6%).

Bond Yields

Most sovereign 10Y yields ended lower on Tuesday. U.S. 10-year yield declined by 2 bps ahead of expectations that inflation will moderate, while that of India’s declined marginally by 1 bp as traders await the fresh sale of debt from states forQ2 FY24 . Japan’s 10-year bond yield rose by 3bps, while that of UK and China remained flat.

Commodities

Brent crude price rose on Tuesday by 2.2% to USD 79.4 pb, reversing losses from the previous session, due to output cuts announced by top exporters Saudi Arabia and Russia for Aug-23. Gold prices rose marginally by 0.3%.