Macro Pulse - September 7, 2023

KEY MACRO HIGHLIGHTS:

US services sector picked up in August: ?

U.S. ISM non-manufacturing PMI rose to 54.5 last month, the highest reading since February and higher than market estimates (Refinitiv: 52.5), from 52.7 in July. A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy.

Fed survey shows US economy grew modestly in recent weeks:?

U.S. economic growth was modest amid a cooling labor market and slowing inflation pressures in July and August, a Federal Reserve report showed, buttressing expectations that the central bank was either done, or close to being done, with interest rate increases.

Fed official says now is time to be patient, deliberate with policy: ?

Federal Reserve Bank of Boston President, Susan Collins, said that while there are signs of progress in cooling inflation, now is a time for the central bank to proceed carefully when it comes to its next monetary policy steps. Collins added that patience does not mean the Fed won’t be resolute in its choices or that there’s some softness in pursuing its 2% inflation target, instead it will take "time to ensure that the economy is on a clear trajectory to achieve price stability.” Watch her remarks here.

Bank of Canada holds rates but says further hikes possible:

The Bank of Canada held its key overnight interest rate at 5%, noting that the economy had entered a period of weaker growth, but said it could raise borrowing costs again should inflationary pressures persist. The BoC said that due to a recent increase in gasoline prices, which are higher than was assumed when it made its last round of economic forecasts in July, inflation would increase in the near term before easing again.

India's August fuel consumption perks up:?

India's fuel consumption in August totalled 18.57 million metric tonnes, inching up from a 10-month low of 18.11 million tonnes in July, as strong factory activity in the world's third-biggest oil importer and consumer offset the usual monsoon lull.

Key indicators/ Events to monitor:

Tonight’s key data focus will be the latest US initial jobless claims for the week ending 2 Sep (est. 234k vs. 228k prior) and continuing claims per 26 Aug (est. 1719k vs. 1725k before). Across the Atlantic, Eurozone final 2Q GDP data will also be due for release (estimated to remain unchanged from previous figure of 0.6% YoY).

Equities

Domestic Equity

Indian equity indices?closed higher on Wednesday after a late rebound in consumer stocks, led by Tata Consumer Products on a report of its stake purchase in Haldiram's, eclipsed global growth concerns. The Nifty 50?index rose 0.18% to 19,611.05, while the S&P BSE Sensex?settled 0.15% higher at 65,880.52. Both the benchmarks had lost over 0.4% during the session before rebounding in the final hour.

Global Equity

Global indices closed mixed as concerns over China's growth aggravated. US indices declined most, falling by 0.7%, as stronger than expected services sector data renewed pressure of further interest rate hike expectations. European indices too closed lower after disappointing manufacturing and services data. On the other hand, Nikkei closed in green, rising by 0.6%.

Currencies

Global currencies ended lower with the DXY rising further by 0.1% as US ISM services PMI edged up. EUR closed unchanged despite weak macro data (Germany factory orders and EU retail sales). GBP slid after BOE Governor Bailey suggested UK rates may not have to rise any further. INR depreciated by 0.1% weighed down by a strong dollar and higher oil prices.

Bonds

Barring Japan and India, global yields closed higher. Germany’s 10Y yield rose the most by 4bps following comments by ECB officials. 10Y yield in US edged up after US ISM services PMI came in stronger than expected. Despite a jump in oil prices, India’s 10Y yield closed flat. It is trading at 7.19% today.

Commodities

Brent crude price rose by 0.6% on Wednesday to settle at USD 90.6 pb, due to expectations of tight supply amidst production cuts by Russia and Saudi Arabia as well as drawdown in US inventories. Gold prices declined marginally by 0.4%, while copper prices declined by 1.5%.

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