Sensex opened flat today while other Asian stocks are trading higher

Deflationary pressures in China continue to persist

Sonal Badhan,

Economist,

Bank of Baroda

Mumbai, November 9, 2023:  As a concern for global economy, deflationary pressures in China continue to persist. China’s CPI fell by (-) 0.2% in Oct’23 (est.: -0.1%), following flat growth in Sep’23 (0%). Headline print was impacted by food prices, particularly 30% decline in pork prices. However, even core inflation eased (0.6% versus 0.8%), due to sluggish demand conditions and ongoing debt troubles in the property sector. Even PPI remained in the negative territory (-2.6% versus -2.5% in Sep’23) for the 13th consecutive month now. Separately, in Eurozone, demand too remains muted as retail sales fell by (-) 0.3% (MoM) in Oct’23 versus est.: (-) 0.2% and (-) 1.2% in Sep’23. This was on account of dip in sales of non-food items (-1.9%), online sales (-1.9%) and fuel sales (-0.9%). Higher prices are also the key reason for dip in sales.

• Global indices ended mixed. European indices ended lower as investor monitored corporate earnings. S&P 500 continued its winning streak. Treasury yields retreated and pushed the stock rally further. Amongst indices, Hang Seng dropped the most. Sensex ended in green led by gains in real estate and oil & gas stocks. It opened flat today while other Asian stocks are trading higher.
• Global currencies ended mixed. DXY remained steady amidst expectation of Fed nearing its rate hike cycle. JPY fell by 0.4% as investors expect a possible intervention. INR ended flat. It is trading stronger today while other Asian currencies are trading mixed.
• Global yields closed lower, led by 7bps decline as investors await for more cues on state of the economy in the US and remarks of various Fed officials. Yield in UK continued to benefit from increased probability of rate cuts by mid-2024. India’s 10Y yield was down by 1bps as oil prices eased. It is trading further lower today at 7.25%.

(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.)