Macro & Markets Review - June 19, 2023

Key economic developments

• Richmond Federal Reserve president, Thomas Barkin, said that the Fed ?is comfortable with further interest rate increases if “stubbornly persistent" inflation remains well above the 2% target.
• University of Michigan survey's reading of one-year inflation expectations dropped to 3.3% in Jun-23, the lowest since Mar-21, from 4.2% in May-23.
• ECB Policymaker, Pierre Wunsch, said that the central bank would need to see a "substantial" drop in underlying inflation before it pauses its rate tightening cycle.
• Bank of Japan maintained its ultra-easy monetary policy stance by retaining its?-0.1% short-term interest rate target and a 0% cap on the 10-year bond yield set under its yield curve control (YCC) policy. However, BOJ?Governor Kazuo Ueda remarked that the central bank may be forced?“to act if the yen weakens further and drives up import costs”.
• Government of India’s net direct tax receipts rose by 11% YoY to INR 3.80 tn between April 1-June 17 2023.
• ONGC chief, Arun Kumar Singh, said that the share of Russian crude oil imports has increased to around 20% in India’s crude oil basket.
• U.S. financial markets will remain closed today for a public holiday.

Equity Market

Most global indices ended higher on Friday. India’s Nifty 50 led gains to advance higher for the fourth week in a row by 0.7% propelled by Green Energy, Banking and Capital Goods sectors. U.S. S&P 500 led losses to decline by 0.4% ?after hawkish comments by senior Federal Reserve officials.

Currencies

Global currencies ended higher against the U.S. dollar on Friday, even as DXY rose marginally by 0.1% to 102.2 on account of growing expectations of a rate hike in the FOMC meeting on 26th Jul-23. GBP and INR led gains to rise by 0.3% each, while JPY was the worst performer to decline by 1.1% as the BOJ maintained its ultra-easy monetary policy stance.

Bond Yields

Barring India, most sovereign 10Y yields ended higher on Friday. US 10-year yield led gains to rise by 5 bps on account of expectations that the Fed may resume its rate tightening cycle as early as from 26th Jul-23 FOMC meeting, followed by China (+1 bp). India’s 10-year yield declined marginally by 1 bp, while 10-year yield for UK and Japan remained flat (0 bp).

Commodities

Brent crude prices rose on Friday by 1.2% to USD 76.61 pb, extending gains from the previous session, as the International Energy Agency expects global oil demand to rise. Gold prices remained flat.