Macro & Markets Review - June 27, 2023

Key economic developments

• Federal Reserve Bank of New York President, John Williams, said that restoring price stability is of “paramount importance because it is the foundation of sustained economic and financial stability”.
• Dallas Fed manufacturing activity index improved to -23.2 in Jun-23, but remained?the lowest reading in three years, from -29.1 in May-23.
• UK composite PMI expanded for the fifth consecutive month to 52.8 in Jun-23, ?but moderated to a 3-month low, down from 54.0 in May-23.
• Germany’s business climate index moderated for the second consecutive month to 88.5 in Jun-23, below market expectation (Refinitiv: 90.7), from 91.5 in May.
• IMF’s?Deputy Managing Director, Gita Gopinath, remarked that while headline inflation has eased significantly, “inflation in services has stayed high, and the date by when it is expected to return to target could slip further”.?She added that central banks need to “keep policy tight, despite an obvious cost to growth.”
• According to S&P Global Ratings, ?the RBI will likely start cutting the policy repo rate in early 2024 once headline inflation eases toward the 4% target.

Equity Market

Barring India, most global indices ended lower on Monday as recession fears mounted amidst expectations of further rate tightening. China’s Shanghai Comp and U.S. S&P 500 led losses to decline by 1.5% and 0.5% each. India’s Nifty 50 rose marginally by 0.1% due to gains in the Healthcare, Auto and Consumer Durables sectors.

Currencies

Most global currencies ended lower against the U.S. dollar on Monday, despite the DXY declining marginally by 0.1% ?as weaker than expected flash PMIs of major economies weighed on investor sentiment. CNY led losses to decline by 0.9%, followed by INR which continued to trade range-bound with a negative bias (0.1%).

Bond Yields

Most sovereign 10Y yields ended mixed on Monday. UK’s and U.S. 10-year yields declined by 1 bp and 2 bps each. India’s and Japan’s 10-year yield remained unchanged.

Commodities

Brent crude prices rose marginally on Monday by 0.4% to USD 71.2 pb, reversing losses from the previous session, as market participants monitored further developments of the attempted insurrection in Russia that could disrupt oil supplies from the country. Gold prices rose marginally on Monday ?by 0.2%.