Macro Pulse - August 31, 2023
PL Capital Group (Prabhudas Lilladher)
We are one of India's leading research based financial services organisation.
KEY MACRO HIGHLIGHTS:
US private payrolls growth slows sharply in August:
U.S. private payrolls rose by 177,000 in August, less than market expectation (Refinitiv: 195,000), in August, from 371,000 in July. The latest indication shows that the labor market is losing steam, though it remains tight.
US GDP growth revised down:?
US economy grew at 2.1% YoY in Q2 2022, slower than the preliminary reading of 2.5% due to moderation in inventory and non-residential fixed investment. Personal consumption was revised higher to 1.7% from 1.6%.
German inflation eases in August: ?
German inflation fell only slightly in August, with CPI slowing to 6.4% YoY in August, marginally below market estimates (Refinitiv: 6.3%), after a reading of 6.5% in July. Germany's core inflation rate, which excludes volatile items such as food and energy, was 5.5% in August, unchanged from July.
US pending home sales increase at fastest pace since January:
U.S. Pending Home Sales Index, based on signed contracts that become sales after a month or two, rose 0.9% to 77.6 in July versus a revised 0.4% increase in June. The uptick in pending home sales topped the forecast for a 0.6% decrease in a Reuters poll of economists.
China's factory activity shrinks for 5th month:
China's manufacturing activity contracted for the fifth consecutive month in August, maintaining pressure on officials to provide support to shore up economic growth amid soft demand both at home and abroad. While the official manufacturing rose to 49.7 in August from 49.3, it continued to remain in the contractionary zone. On the positive side, new orders picked up. Non-manufacturing PMI slipped to 51.0 from 51.5 in July amidst a decline in services activity.
India's Finance Minister says inflation to keep steady, growth on track:
Finance Minister, Nirmala Sitharaman, said?Indian inflation will remain steady in coming months, despite short-term rises in the prices of certain food items. She added that economic growth was likely to be robust at least until the end of the year as India heads into the festive season, when spending typically picks up.
Key indicators/events to monitor:
Today is a major macro data day for Asia, whereby several key economic data are on tap. India’s 2Q GDP is due, whereby markets estimate a rebound to 6.8% YoY in 2Q, vs 6.1% y/y in 1Q. In addition, South Korea’s industrial production for July is also due today.
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Equities
Domestic Equity
Indian equity indices?remained unchanged as a rise in IT stocks on easing interest rate concerns in the United States was offset by a late slide in financials, dragged by private lender HDFC Bank on block deals. The best performers of the session on the?Nifty 50?were?Tata Steel, Maruti Suzuki India and?Eicher Motors. The laggards of the session were Power Grid Corporation of India, Bharat Petroleum?Corp., and Hero MotoCorp. The?India VIX, which measures the implied volatility of Nifty 50 options, was down 3.48% to 11.80.
Global Equity
Global stocks remained largely unchanged tracking softening GDP print in the US. This has prompted speculation that the Fed may be wrapping up its tightening cycle soon. Hence, US S&P 500 inched up marginally by 0.4%. Asian stocks such as Hang Seng and Shanghai Comp looked for cues amidst some worries in China’s property sector.
Currencies
Global currencies ended mixed. DXY fell by 0.4%, after weaker than expected macro data from US. Both EUR and GBP rose. On the other hand, CNY slipped amidst lingering growth concerns. JPY too was under pressure. INR closed broadly stable.?
Bonds
Global yields closed mixed. Germany’s 10Y yield rose the most by 4bps monitoring CPI data. US 10Y yield fell a tad by 1bps tracking moderation in GDP data. India’s 10Y yield closed flat.
Commodities
?Brent crude price rose marginally by 0.4% on Wednesday to settle at USD 85.9 pb, extending gains from the previous session, amidst considerable drawdown in US inventories. Gold prices and copper prices rose by 0.9% and 0.4% respectively.
Source: PL Research, CEIC, CMIE Economic Outlook, Refinitiv, Bloomberg, Investing.com.