Sensex is trading higher today in line with other Asian stocks

Barring EUR (lower) and GBP (higher), other global currencies ended flat

Jahnavi Prabhakar,

Economist,

Bank of Baroda 

Mumbai, January 19, 2024: Expectations of early rate cuts took a back seat as data sets (higher retail sales and sharp drop in Unemployment benefits) continue to signal strength in the US economy. In line with Fed, even ECB in its minutes had highlighted that it is premature to discuss policy easing. Separately, Japan’s inflation cooled off to 2.6% (lowest level since Jun’22) from 2.8% in Nov’23 with core inflation down to 2.3%. This data print comes ahead of BoJ’s policy meet which supports the Bank’s decision to wait before ending the negative rates. On domestic front, RBI’s monthly bulletin noted ‘potential output is picking up and actual output is running above it’ and this gap is moderate. Furthermore, government‘s push towards capex has started to crowd in private investment. On inflation, it noted Dec’23 print was due to unfavourable base and core inflation has moderated (lowest in more than 4-years.

•   Apart from Nikkei (flat) and Sensex (lower), other global indices ended higher. US indices climbed higher supported by gains in technology stocks amidst optimism surrounding AI. Lower jobless claims also provided further support. Sensex extended its fall and was dragged down by consumer durable and power stocks. However, it is trading higher today in line with other Asian stocks.
•   Barring EUR (lower) and GBP (higher), other global currencies ended flat. DXY was up by 0.1%, as investors scale back their expectations around Fed’s rate cut trajectory. GBP gained owing to dimmed hopes of rate cut by     BoE any time before Q2CY24. INR ended flat, even as oil prices picked up pace. It is trading lower today, while other Asian currencies are trading higher.
•   Except UK (lower) and China (flat), other global yields closed higher. US’ 10Y yield rose the most. Better than expected retail sales data in the US and continued tightness in the labour market has raised uncertainty around the  timing of Fed’s rate cuts. India’s 10Y yield rose by 1bps, as oil prices inched up. Following global cues, it is trading further higher today at 7.19%.

(The views expressed in this research note are personal views of the author(s) and do not necessarily reflect the views of Bank of Baroda. Nothing contained in this publication shall constitute or be deemed to constitute an offer to sell/ purchase or as an invitation or solicitation to do so for any securities of any entity.)