Macro developments
India’s WPI inflation eased to 3-month low of 11.2% in Jul’21 from 12.1% in Jun'21, led by lower food (4.5% in Jul’21 from 6.7% in Jun'21) and fuel inflation (26% in Jul’21 from 32.8% in Jun'21). The decline in food inflation was quite broad-based. On the other hand, core inflation inched up. Manufactured products inflation also picked up (11.2% from 10.9% in Jun’21). Pass-through of higher commodity prices to consumers is yet not complete.
China’s industrial production eased to 6.4% in Jul’21 (est.: 7.8%) from 8.3% in Jun’21, owing to slowdown in both manufacturing (6.2% in Jul’21 versus 8.7% in Jun’21) and mining (0.6% versus 0.7%) output. FAI growth too eased to 10.3% in Jan-Jul’21 (est.: 11.3%) from 12.6% in H1CY21, led by real-estate investment (12.7% versus 15%). Retail sales too missed expectation (11.5%) and eased to 8.5% in Jul’21 from 12.1% in Jun’21. While moderation was broad-based, contraction was seen in automobile sales (1.8% versus 4.5% rise in Jun’21).
Japan’s GDP returned to growth in Q2CY21 and rose by 0.3% on a QoQ basis, compared with a decline of 0.9% in Q1. The rise was led by personal consumption (0.8% in Q2 from -1% in Q1) and GFCF (1.1% in Q2 from -0.9%). Exports also remained strong and rose by 2.9% compared with 2.4% in Q1. On a QoQ annualized basis, GDP rose by 1.3% compared with a fall of 3.7% in Q1. Growth is likely to be lower in Q3CY21 impacted by the more infectious Delta variant cases and lockdown restrictions.
Markets
Bonds: Global yields closed mixed. While US and Japan’s 10Y yield fell by 1bps, UK, Germany and China’s 10Y yield closed flat. Crude prices fell by 1.5% (US$ 70/bbl) amidst rising cases in China, Europe and North America igniting concerns of muted demand. India’s 10Y yield is trading lower at 6.23% today, boosted by drop in CPI and WPI print.
Currency: Global currencies closed mixed. DXY rose by 0.1% as weaker than expected macro prints from China, surge in spread of Delta variant, and geo-political risks from Afghanistan impacted investor sentiments. AUD (0.4%) and EUR (0.2%) fell the most. INR closed flat even as oil prices fell. It is trading lower today while other Asian currencies are trading mixed.
Equity: Global indices ended mixed led by concerns over the spread of Covid-19 cases and weaker data print from China. Amongst other indices, Nikkei ended lower by 1.6%, while Dow and Sensex both ended higher by 0.3% each. The gains in domestic market were led by metal and oil and gas stocks. It is trading lower today in line with other Asian stocks.
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