Macro Pulse - September 26, 2023

KEY MACRO HIGHLIGHTS:

Delayed Monsoon Retreat in India:

India's monsoon rains started withdrawing from the northwest of the country on Monday, more than a week later than normal, the state-run India Meteorological Department (IMD) said in a statement. Monsoon rains were 9% below average in June before rebounding to 13% above average in July. The weather office then registered 36% below average rains last month.

U.S. business activity nears stand-still in September:

U.S. Composite PMI index dipped to a reading of 50.1 in September from a final reading for August of 50.2, with the vast services sector essentially idling at the slowest pace since February, and overall new order activity slipping to the lowest level this year.

German housing prices show sharpest drop since 2000 year over year:

German housing prices fell by 9.9% YoY, the steepest decline since the start of data collection in 2000, as high interest rates and rising materials costs took their toll on the property market in Europe's largest economy.

British retail sales grows in August:

British retail sales partially recovered in August, rising by 0.4% MoM after a sharp 1.1% fall in July, slightly lower than market expectations (Refinitiv: 0.5%), adding to signs that the country's consumers were mostly coping with the cost-of-living squeeze.

German business sentiment worsens in September: 

German business morale deteriorated to 85.7 in September, falling for the fifth month in a row and underlining recession fears in the euro zone's largest economy, from a revised August figure of 85.8 but above the 85.2 market forecast.

ECB's President says record high interest rates will curb inflation:

ECB President Christine Lagarde said the central bank's record high deposit rate could help cut inflation to 2%. She highlighted some modest softening in an otherwise resilient labour market, which is set to help disinflation after rapid nominal wage growth kept pressure on prices.

US government shutdown would delay release of key economic data: 

The publication of major U.S. economic data, including employment and inflation reports of critical importance to policymakers and investors, will be suspended indefinitely should the federal government shut down at the end of this week because of lack of funding. The suspension of the reports would occur across all government agencies such as the Labor Department's Bureau of Labor Statistics (BLS) and the Commerce Department's Census Bureau and Bureau of Economic Analysis (BEA).

India to cut floor price for basmati rice exports:

India will cut the floor price for basmati rice to $850 a metric ton, down from $1,200 a ton, to help millers and traders ship out the rice grade exports, after millers and traders complained about a sharp drop in overseas sales of the premium aromatic grain.

Equities

Domestic Equity

Indian equity indices indexes closed nearly flat on Monday as gains in financial stocks offset the losses in the information technology sector, while casino operator Delta Corp plunged 19% after receiving a notice from the tax department. The Nifty 50 and the S&P BSE Sensex closed mostly unchanged at 19,674.55, and 65,958, respectively.

Global Equity

Global indices ended mixed. UK’s FTSE fell on Monday by 0.8%, in a grim start to the last week of the quarter. US S&P 500 posted gains, with increases in Amazon.com shares and the energy sector, as investors looked to economic data and Federal Reserve policymakers' remarks later in the week for clarity on the path for interest rates.

Currencies

Global currencies closed lower with DXY reaching the highest in almost 10 months after the Federal Reserve last week signalled it could raise interest rates further and was likely to hold them higher for longer than investors had expected. The GBP dipped to its lowest in six months against the dollar, as jitters across asset classes hurt the currency already bruised by markets' reevaluation of the Bank of England's rate outlook. The Indian rupee depreciated by 0.3%, pressured by elevated U.S. Treasury yields and higher crude oil prices.

Bonds

Global yields closed higher. US benchmark 10-year yield surged by 11 basis points after the Fed gave a hawkish longer-term rate outlook. India’s 10Y yield fell by 3bps, awaiting RBI’s decision next week.

Commodities

Brent crude settled flat as Russia relaxed its fuel ban and investors eyed elevated interest rates that could curb demand. Gold fell by 0.5%, while copper prices fell by 1.1%.

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