Macro Pulse - September 1, 2023

KEY MACRO HIGHLIGHTS:

US consumption expenditure accelerates marginally:

U.S. inflation as measured by the personal consumption expenditures price index rose 3.3% YoY in July, in line with market expectations, after advancing 3.0% in June. Excluding the volatile food and energy components, the PCE price index gained 4.2% YoY, after climbing by 4.1% in June.

US labour market remains tight:

?Initial jobless claims for state unemployment benefits fell 4,000 to a seasonally adjusted 228,000 for the week ended August 26th, below market expectations (Refinitiv: 235,000), from 232,000 in the previous week.

ECB officials leaning towards September rate hike: ?

Austrian central bank chief, Robert Holzmann, said the European Central Bank may need to raise interest rates further, as fresh figures showed euro zone inflation steadied in August, defying expectations for a drop. Holzmann added that he has not yet seen enough evidence for a pause and he's leaning towards a hike, even if he has not yet made up his mind.

Read the interview here:

Euro zone inflation proves to be unexpectedly stubborn:

Overall inflation in the Eurozone was unchanged at 5.3% in August, defying expectations for a drop to 5.1% as energy costs rose sharply over the month. But a key underlying measure that filters out volatile food and energy prices eased as expected to 5.3% from July's 5.5%, even as services inflation barely moved.

India's economy grows at fastest pace in a year in Q2 2023: ?

India's economy grew at its quickest pace in a year in Q2 2023 by 7.8%, performing better than market expectations (Refinitiv: 7.7%), accelerating from 6.1% growth recorded in Q1 2023. India remains one of the fastest growing major economies due to strong services activity and robust demand, but a drier than normal monsoon season could restrain future growth.

Japan's July factory output slumps: ?

Japan's Industrial output fell 2.0% in July, worse than a median market forecast for a 1.4% drop and followed 2.4% growth in June, signaling a rocky start to the second half of the year for manufacturers as worries mount over growth in?China?and the global economy.

Equities

Domestic Equity

Indian equity indices?ended lower on Thursday and snapped a five-month winning streak, weighed down by the continued drop in financials and consumer stocks and as foreign investments moderated. The Nifty 50?closed down 0.48% at 19,253.80, while the S&P BSE Sensex?finished 0.39% lower at 64,831.41. The domestically focused small-caps?and mid-caps?continued to outperform the blue-chips, driven by strong retail inflows. The best performers of the session on the?Nifty 50?were?Maruti Suzuki India, Cipla and HDFC Life Insurance Company. The laggards of the session were?Adani Enterprises?Ltd and Adani Ports and Special Economic Zone after a report said?the Adani family's partners used "opaque" funds to invest in the group stocks.

Global Equity

Barring Japan’s Nikkei, other major global stock indices declined, as investors continue to monitor incoming data from the US (jobless claims, PCE index) and await non-farm payroll data.

Currencies

Barring CNY and JPY, other global currencies ended lower. DXY rose by 0.4%, as weakness in global growth revived demand for safe heaven assets. EUR and GBP fell the most. INR was down by 0.1%, as oil prices inch up.?

Bonds

Apart from Japan and China, other global yields closed lower. Germany’s 10-year yield fell the most by 8bps. US 10Y yield was down by 1bps as PCE price index came in line with expectations, thus raising the likelihood of the Fed remaining on a pause. India’s 10Y yield also declined by 2bps, following global cues.

Commodities

?Brent crude price rose by 1.2% on Thursday to settle at USD 86.9 pb, extending gains from the previous session, amidst considerable drawdown in US inventories. Gold prices and copper prices fell by 0.1% and 0.5% respectively.

Source: PL Research, CEIC, CMIE Economic Outlook, Refinitiv, Bloomberg, Investing.com.

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