QuantEco | Macro & Markets Review August 1, 2023

Key economic developments

• Inflation in Eurozone continued to decline in Jul-23, with CPI printing at 5.3% YoY compared to 5.5% in Jun-23. Core CPI inflation depicted a similar trajectory, printing at 6.6% YoY, down from 6.8% in Jun-23. Providing further relief was Eurozone’s Q2 -23 GDP that returned to expansion, rising 0.3% QoQ after shrinking and stagnating in the prior two quarters.
• Chinese authorities released additional policy guidelines on Monday without confirming details on specific and concrete measures to boost economic activity.
• Meanwhile, PMI data released yesterday indicated a sombre outlook for China and Japan. Notwithstanding the minor improvement to 49.3 from 49.0 in Jun-23, China’s NBS Manufacturing PMI showed persistence of contraction for the fourth straight month. In case of Japan, the manufacturing PMI fell to 49.6 from 49.8 in Jun-23.
• In case of India, there were three key developments that caught our attention: (i) the core infrastructure index witnessed a 5-month high growth of 8.2% YoY in Jun-23; (ii) as per IMD officials, Aug-23 is likely to see below average rainfall due to the El Nino weather pattern; and (iii) the central government hiked windfall tax on petroleum crude and diesel with immediate effect, while leaving tax on ATF unchanged.

Equities

Most global indices ended higher on Monday. China’s Shanghai Composite rose by 0.5% amidst expectation of imminent stimulus from the government. UK’s FTSE 100 and US S&P 500 indices posted mild gains of 0.1%, While, Germany’s DAX faced slight dips, closing 0.1% lower. Nifty rebounded by 0.5% led by Power, oil, IT, and FMCG sectors.

Currencies

Most global currencies ended mixed against the USD on Monday, with the DXY and CNY rising slightly by 0.2% and 0.1% respectively. In contrast, EUR and GBP ended lower by 0.2% and 0.1% respectively, while JPY fell by 0.8% as a result of Friday's BoJ’s policy shift.

Bonds

Bond yields were largely steady on Monday, with no strong triggers. Japan’s 10Y JGB yield surged by 5 bps, after the BoJ loosened its grip on interest rates. While India’s 10Y g-sec yield rose by 1 bp, it dropped by 1 bp for the same benchmark bond in US and UK.

Commodities

Crude oil closed higher by 0.7% to settle at USD 81.80 /bl on signs of a tightening oil market. Price of gold rose by 0.3% as cooling of global inflation spurred hopes that interest rates have peaked.

Source: Refinitiv, QuantEco Research

Note: (i) Levels for Brent crude and Gold represent price in USD per barrel and USD per oz respectively for near month contracts and spot markets respectively.