China’s official PMI data reflects that contraction in manufacturing activity deepened in Dec’23, while non-manufacturing activity improved
Jahnavi Prabhakar,
Economist,
Bank of Baroda
Mumbai, January 1, 2024: The Fed policy meet in Dec’23 has made a crucial shift
with Fed Chair signalling a dovish pivot in CY24. Investors anticipate a 75bps rate
cut through the year on the back of moderation in inflation. Against this backdrop,
dollar is expected to weaken further, it had already declined by 2% for CY23. Oil
prices have fallen by 10%, steepest decline since CY20 (-22%) owing to muted
demand. As global economic activity is expected to weaken further in H1CY24,
investors are hoping for rate cuts by other central banks (ECB and BoE) also. In
Asia, China’s official PMI data reflects that contraction in manufacturing activity
deepened in Dec’23, while non-manufacturing activity improved. Domestically,
India’s eight core index moderated to 7.8% in Nov’23 from 12.5% in Oct’23, with
contraction in crude oil output.
§Global indices ended mixed. US indices closed the last trading day of the year on
lower note. Sensex too ended the day in red led by losses in oil & gas and banking
stocks. In CY23, Sensex ended CY23 18.7% higher, second to S&P 500 (24.2%), as
other major indices end the year with slower growth. However, it is trading lower
today.
§ Global currencies closed mixed. DXY inched up by 0.1% but is expected to
weaken amidst anticipation of aggressive rate cuts by Fed. JPY and CNY gained the
most. Investors hope BoJ to exit the ultra-loose monetary policy in CY24, though
cues from BoJ itself are awaited. INR ended flat, after falling by 0.6% in CY23. It is
trading higher today, in line with other Asian currencies.
§ Barring China and India, other global yields closed higher. Tracking gains in US
treasury yields, Germany and UK’s 10Y yields also climbed higher by 8bps and 4bps
respectively. India’s 10Y yield declined a tad by 1bps, and during CY23, it was down
by 17bps, even as US 10Y yield closed CY23 at similar levels as last year (+0.4bps).
India’s 10Y yield is trading slightly higher today.
(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.)
