Macro Pulse - September 22, 2023

KEY MACRO HIGHLIGHTS:

US Fed keeps rates steady:

The U.S. Federal left its benchmark interest rate unchanged while signaling borrowing costs will likely stay higher for longer after one more hike this year. The Fed's benchmark overnight interest rate may still be lifted one more time this year to a peak 5.50%-5.75% range, according to updated quarterly projections released by the U.S. central bank, and rates kept significantly tighter through 2024 than previously expected. Federal Reserve Chair Jerome Powell declined to say he expects a "soft landing" for the U.S. economy, but that sure was the picture painted by policymakers in their newest economic forecasts.

US Treasury Secretary says US growth rate needs to slow amid full employment:

Treasury Secretary, Janet Yellen, said that U.S. growth needed to slow to a pace more in line with its potential rate to bring inflation back to target levels since the economy was operating at full employment. But demand-supply imbalances in the labor market have abated, she said, which was a healthy sign for the economy.

China keeps benchmark rates unchanged:

China kept benchmark lending rates unchanged, in line with expectations, as fresh signs of economic stabilisation and a weakening yuan reduced the need for immediate monetary easing. The one-year loan prime rate (LPR) was kept at 3.45%, while the five-year LPR was unchanged at 4.20%

China's property crisis weighs on developing Asia's 2023 growth outlook:

Economic growth in developing Asia this year will be slightly lower than previously expected as the weakness in China's property sector and El Ni?o-related risks cloud regional prospects, according to a report by the Asian Development Bank.Updating its regional economic outlook, the ADB trimmed its 2023 growth forecast for developing Asia to 4.7%, from 4.8% projected in July.

Japan to release economic package early next week:

Japan's Prime Minister Fumio Kishida said he will instruct his government to pull together the pillars of an economic package early next week under his new cabinet to counter issues such as inflation and depopulation.

India plans over $2 billion in incentives for new manufacturing sectors:

India is planning to offer incentives of up to 180 billion rupees ($2.2 billion) to spur local manufacturing in six new sectors including chemicals, shipping containers and inputs for vaccines. The proposal is part of the country's 1.97-trillion-rupee production-linked incentive scheme (PLI), launched in 2020 which currently targets 14 sectors ranging from electronic products to drones.

India will receive heavy monsoon rains in September:

India will receive heavy monsoon rains at the tail end of the four-month season, according to the chief of the weather office, bringing farmers succour after the driest August in more than a century hit some summer crops. Most rice areas except some eastern regions would get good rains, he said. Also crucial for crops such as corn, cotton, soybeans, sugarcane and peanuts, the monsoon is 7% above average in September but 8% below average since the season began on June 1.?

Equities

Domestic Equity

Indian equity indices?indexes fell on Wednesday in their worst day in two months, led by Reliance Industries and HDFC Bank, whose warning about its asset quality ratios also weighed on other financials. The Nifty 50 closed 1.2% lower at 19,901.4, while the S&P BSE Sensex closed 1.2% down to 66,800.84. The benchmarks have fallen for two straight sessions after hitting all-time highs last week. HDFC Bank, the heaviest weighted stock on the Nifty, slid 4% in its worst day since early May after it said its completed merger with HDFC Ltd would?hit key financial metrics, including its margins and bad loan ratios. The public sector enterprises index?was the only one of the 13 major sectors to gain, climbing 0.17%, led mainly by coal and power stocks, as they continued to rally on expectations of unusually high electricity consumption in October and November.

Global Equity

Global indices ended mixed on Wednesday. U.S. S&P 500 slumped by 0.9% after the U.S. Federal Reserve held key interest rates unchanged as widely expected, and revised economic projections higher with warnings that the battle against inflation was far from over.? UK’s FTSE gained 0.9% after data showing a surprise fall in inflation in August boosted speculation the Bank of England was nearing the end of its interest rate hiking cycle.

Currencies

Global currencies closed mixed with the DXY edging higher by 0.2% after the Federal Reserve held interest rates steady but stiffened its hawkish stance with a further rate increase projected by the end of the year. The pound declined 0.4%, a near four-month low, while the Indian rupee rose by 0.2% after the central bank once again likely intervened.

Bonds

Global yields closed lower. US 10Y yield edged lower but hovered around 4.4%, the highest level since late 2007 as the yield curve between two- and 10-year notes remains firmly inverted in a harbinger of a recession ahead. Benchmark 10-year Japanese government bonds are at 0.72%, but have been creeping toward the Bank of Japan's adjusted tolerance for yields 1% either side of zero.

Commodities

Brent crude fell about 1% to a one-week low after the U.S. Federal Reserve left interest rates unchanged as widely expected, but stiffened its hawkish stance with a further rate increase projected by the end of the year. Gold fell by 0.7%, while copper prices fell by 0.6%.

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

*Disclaimer - https://bit.ly/46agtHy