Highlight of the Day
The IMF upgraded its global economic growth forecast in its World Economic Outlook for the second time in three months, while warning about widening inequality and a divergence between advanced and lesser-developed economies
The global economy is to expand 6% this year, up from the 5.5% pace estimated in January
The IMF sees advanced economies less affected by the virus this year and beyond, with low-income countries and emerging markets suffering more – a contrast to 2009, when rich nations were hit harder
IMF’s focus is on the proposed $650 billion issuance of reserve assets known as special drawing rights, which aims to boost global liquidity and help emerging and low-income nations deal with mounting debt and Covid-19 health-care costs
The response to last year’s crisis by policy makers prevented a collapse that would have been at least 3X worse, and the medium-term losses for the global economy are expected to be smaller than the global financial crisis a decade ago
Meantime, inflation data globally could turn volatile in the coming months, given record-low commodity prices a year ago, but the trend should prove short-lived. The muted outlook reflects a weak labor market, high unemployment and little worker bargaining power
“The outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis,” IMF Chief Economist Gita Gopinath said.
“Excessive risk taking in markets is contributing to stretched valuations, and rising financial vulnerabilities may become structural legacy problems if not addressed,” IMF said.
Market Highlights at 07:00 a.m. I.S.T.
• The MSCI Asia Pacific ex-Japan is trading higher 0.42%, and the MSCI Emerging Market index is up 0.36%
• Trends on SGX Nifty look poised for a positive and gap-up opening for Nifty 50 in India. The Nifty futures are trading 55 points, or 0.38% lower at 14,801 on the Singaporean Exchange at 07:00 a.m. I.S.T.
• U.S. equity futures rose marginally in early morning trade; alongside a positive start in Asia-Pacific benchmarks gauges in early Wednesday trade with shares rising in Japan, South Korea and Australia; a positive MSCI Asia-Pacific ex-Japan index; U.S. dollar weakening to 92.26 with 10-Yr Treasury Yields declining to 1.67% and Gold futures edging higher to $1,739 an ounce indicate a positive but volatile outlook in Indian equity markets amid channel-wise resistance and decoupling from global benchmarks
India Markets
India’s equity benchmarks managed to eke out gains and formed an Inside Bar pattern on Tuesday trade
The blue-chip NSE Nifty 50 index added 45 points or 0.31% to 14,683 and the benchmark S&P BSE Sensex added 42 points or 0.09% to close at 49,201
Bank Nifty dropped 177 points or -0.54% to settle at 32,501
Broader markets out-performed headline peers — Midcap 100 index added 0.91%; Smallcap 250 index added 1.07% and Nifty 500 added 0.48%
Nifty P/E for Apr. 06 increased to 33.18 from 33.08 with Nifty P/B steady to 4.20 from 4.19, as recorded by NSE India
India VIX or the barometer of nervousness in the market, moved down -1.77% from 21.21 to 20.84 levels
Overnight Call Money rate weighted average stood at 3.11% as per RBI data. It moved in a range of 1.90 — 3.50% for Apr 05
Under Liquidity Operations by RBI, Reverse Repo for the week (Mar 22 to Mar 28) stood below 5 lakh crores (4.93 lakh crores), marking lower surplus liquidity in the market
Yield curve on the benchmark 10-Yr government bond dipped to 6.12%, while the rupee weakened to 73.4860 per U.S. dollar
State-run refiners in India are looking to buy less crude from Saudi Arabia as demand in the Asian nation is poised to dip amid a resurgence of Covid-19, and relations between the two countries have soured over prices. Processors in the world’s no. 3 oil importer have sought to reduce May supplies by about one-third of their average monthly purchases. India has become a vocal critic of Saudi’s hawkish stance on oil prices and OPEC+ cut output in recent months
Petroleum product usage could shrink by as much as 20% over the next six months, on top of the seasonal effect of the monsoon reducing fuel demand
Adani Ports shares climbed nearly 15% with high volumes following its acquisition of 25% stake in Vishwa Samudra Holdings in Krishnapatnam Port for Rs 2,800 crore. This port located on the east coast of India in Nellore district of Andhra Pradesh, is an all-weather, deep water port and has multi-cargo facility with a current capacity of 64 million tonne p.a.
Economists believe that Reserve Bank of India’s rate-setting panel on Wednesday will reiterate its commitment to keeping monetary policy accommodative in the wake of a raging second wave of Covid-19 infections in the country
“While economic recovery has been strong so far, we haven’t exited the health crisis yet. This has increased demand uncertainty particularly for high contact services in transport, culture and social space, which were slowly moving towards normalcy,” said Prithviraj Srinivas, economist at Axis Securities. “For RBI, the question is should it keep broader monetary conditions at crisis level or set an exit path and use specific measures to provide relief to targeted stressed sectors.”
America Markets
U.S. stock indexes pulled back on Tuesday trade a day after notching all-time highs on signs of rapid economic recovery with volume slipping below 10 billion shares for the first time this year
The broad-based S&P 500 slipped 3.97 points, or -0.1%, to 4,073
The Dow Jones Industrial Average, composed mostly of cyclical stocks, fell 96.95 points, or -0.3%, to 33,430
The tech-heavy Nasdaq Composite Index edged down 7.21 points, or -0.1%, to 13,698.38, off 2.8% from its February record
U.S. equity futures rose marginally in early Wednesday trade. S&P500 futures is up 0.12%; Dow Jones futures is up 0.14% and Nasdaq futures is up 0.14%
10-Yr U.S. Treasury yields, which move inversely to the price, drifted lower to 1.67% in early Wednesday. Dollar was weak at 92.26
The Cboe Volatility Index, known as Wall Street’s “fear gauge,” rose 1.17% to 18.12 on Tuesday
The IBD/TIPP Economic Optimism Index in the U.S. rose 1.8% to 56.4 in April of 2021, a new high since February 2020 before the Covid-19 shutdown. The six-month outlook for the U.S. economy jumped 5.1% to 55.9. In contrast, the personal finances subindex, a measure of how Americans feel about their own finances in the next six-months, edged down -1.2% to 57.3
The number of job openings in the U.S. rose by 268 thousand from the previous month to 7.367 million in February 2021, the highest level since January 2019 and above market expectations of 6.995 million. Job openings increased in health care and social assistance (+233,000) accommodation and food services (+104,000) and arts, entertainment, and recreation (+56,000)
Germany and France welcomed on Tuesday a pledge by U.S. Treasury Secretary Janet Yellen to work on a global corporate minimum tax rate, adding that a deal among more than 140 countries was now possible. As part of a domestic overhaul of U.S. corporate tax, the Biden administration wants to set a minimum tax on U.S. corporations of 21% no matter where they earn the income being taxed, up from 10.5% currently
Countries are negotiating a global minimum corporate tax rate and new rules for taxing cross-border commerce to discourage big multinationals from booking profits in low-tax countries like Ireland regardless where their income is earned
“Labor demand should continue to heat up as companies brace for a post-pandemic burst in pent-up demand,” said Lydia Boussour, lead U.S. economist at Oxford Economics in New York.
“The labor market continues to improve but remains a long way from what the Federal Reserve would describe as the conditions to restore maximum employment,” said John Ryding, chief economic advisor at Brean Capital in New York.
“Stocks’ momentum is strong, no doubt about that,” said Lindsey Bell, chief investment strategist at Ally Invest. “But the market may be ready to take a breather as investors digest all the good news, determine how much of that is priced in and weigh it against uncertain risks like inflation.”
Asia-Pacific Markets
Asian stocks headed for a calm open in early Wednesday trade as a global rally that drove stocks to all-time highs paused
Japan’s benchmark climbed with stocks in Australia, Hong Kong and South Korea
Japan’s Nikkei 225 added 0.36% to 29,804 and Topix 500 added 0.54% to 1,528
South Korea’s Kospi added 0.58% to 3,145
In Hong Kong, Hang Seng added 0.56% to 29,101 and Hang Seng China Enterprises added 0.57% to 11,281
In China, CSI 300 fell -0.41% to 5,140 and Shanghai Composite added 0.01% to 3,483
Australia’s S&P/ASX 200 added 0.63% to 6,929
China’s central bank asked the nation’s major lenders to curtail loan growth for the rest of this year after a surge in the first two months stoked bubble risks
Recent economic data for China has been robust, but analysts warn that it could lead to concerns of inflation and policy tightening. A recovery in China’s services sector picked up speed in March as firms hired more workers and business optimism surged, although inflationary pressures remained
Japanese health authorities said on Monday they were concerned that variants of the coronavirus are driving a nascent fourth wave in the pandemic with just 109 days remaining until the Tokyo Olympics
The Reserve Bank of Australia left its cash rate unchanged at a record low of 0.1% during its April meeting, as widely expected. Policymakers reaffirmed their commitment to maintaining highly supportive monetary conditions until at least 2024 when actual inflation is sustainably within the 2 to 3% target. The board also remains committed to the 3-year government bond yield target of 10 basis points. Later in the year, it will consider whether to retain the April 2024 bond as the target bond or to shift to the next maturity. It added that the second $100 billion government bond purchase program will start next week. Regarding CPI inflation, it is expected to rise temporarily because of the reversal of some Covid-19-related price reductions. On rising housing prices, the bank said it will monitor trends in borrowing carefully and it is important that lending standards are maintained
“If China’s inflation and GDP growth data, due later this month, beat expectations, policy tightening worries will be kindled,” Huaan Securities said.
EU Markets
Europe’s benchmark equity index closed at a record high on Tuesday trade, recovering all of its pandemic-driven losses as investors bet on a speedy global economic recovery, spurred by bumper stimulus spending and Covid-19 vaccination programmes
The pan-European Stoxx Europe 600 added 0.63% to 430 and Stoxx 50 added 0.62% to 3,970
Germany’s DAX30 added 0.70% to settle at 15,212
London’s blue-chip FTSE 100 added 1.28% to settle at 6,823
France’s CAC40 added 0.47% to settle at 6,131
Economically sensitive sectors such as banking, commodity and automakers rebounded strongly this year, boosting European stocks
Data showed, euro zone unemployment was unchanged in February compared with an upwardly revised reading for January, as European furlough schemes limited the impact of the second wave of the pandemic in the fourth quarter on jobs
London stocks took cheer as British Prime Minister Boris Johnson said the next phase of a planned reopening of the economy could take place next week
Swiss bank Credit Suisse slipped -0.4% after sharp losses last week, as it announced an estimated loss of 4.4 billion Swiss francs ($4.7 billion) from its relationship with Archegos Capital Management
“European equity markets have a higher percentage tilt to the more distressed cyclical and value parts of the market that performed poorly not only in 2020, but for several years before as well,” Niall Gallagher, investment director for European equities at GAM said. “Any change in the economic environment that sees a pick-up in growth and a pick-up in inflation is likely to positively impact these sectors and as they are a higher weighting in the market, this explains the recent expectations that European equities may do better in the next few months.”
Oil & Natural Gas Markets
Crude-oil prices regained some ground in early Wednesday trade, after slumping on concerns that coronavirus outbreaks in India, Europe and other major economies will weigh on demand
While the consumption recovery in countries like the U.S. is picking up steam, the global rebound remains shaky. In India, state-run refiners are looking to buy less crude from Saudi Arabia as demand in the Asian nation is poised to dip amid a resurgence of Covid-19
WTI Crude is trading at $59.45 per barrel
Brent Crude, the international benchmark for oil, is trading at $62.88 per barrel
Natural Gas futures slipped to $2.507/MMBtu
“With supply side support dwindled, marginal price action in oil markets will now shift to demand dynamics, without as much of a safety blanket from the supply side,” TD Securities commodity strategists led by Bart Melek said. “While the demand outlook is expected to improve substantially into the second half of the year, and should keep markets on a tightening path, near term markets are likely to be balanced rather than in hefty deficits as they have been.”
“We’ve had these wild moves for the better part of the past ten days,” said Bob Yawger, head of the futures division at Mizuho Securities. “There’s a recovering economic picture, with an improving vaccine situation in the U.S., on one side of the equation. It’s supply versus demand here for control of the market.”
Commodities Markets
Gold futures advanced to the highest in more than a week in early Wednesday trade, as gains in bond yields and the dollar abated
Gold has been under pressure this year because of increasing optimism over the post-pandemic economic recovery in the U.S., which buoyed bond yields and the dollar. Investors fled bullion-backed exchange-traded funds, a major pillar in gold’s ascent to an all-time high last year, with holdings in ETFs dropping to the lowest since May
Gold is in a “bottoming-out phase” with support at a low of $1,680 an ounce and an upper bound of $1,760 an ounce
U.S. Gold futures (Comex) is trading at $1,739 an ounce
Silver futures (Comex) is trading at $25.09 an ounce
Gold / Silver Ratio rose marginally to $69.02
Copper futures (Comex) rose to $4.1095 per pound
In India, Spot Gold is trading at INR 45,801 per 10 grams
“As the yields fall, the reduced opportunity cost of being invested in bonds, along with a weaker dollar are likely primary reasons why gold is doing better,” said Bart Melek, head of commodity strategies at TD Securities. “Investors believe that we are not going to see another huge run-up in the yields and that has prompted gold to just technically rebound.”
Currency Markets
U.S. dollar index, DXY ebbed to 92.26 in early Wednesday trade, even as positive economic data shows rapid growth for U.S. businesses and jobs amid inflation bets while making gold cheaper for holders of other currencies
INR weakened with USD / INR at 73.4860
EUR strengthened with EUR / USD at 1.1851
GBP weakened with EUR / GBP at 0.8573
GBP weakened with GBP / USD at 1.3824
“The trickiest thing for markets right now is to figure out what the dollar’s sensitivity is to good U.S. economic news,” said Erik Nelson, a macro strategist at Wells Fargo in New York. “This is a huge question because if we’re entering a phase where the dollar is no longer a safe haven and more of a ‘risk on’ currency, that’s big regime change.”
| 3-Month LIBOR Rate | As on 06 Apr 2021 |
| US DOLLAR | 0.20 per cent |
| Euro | – 0.55 per cent |
| British Pound | 0.09 per cent |
| Swiss Franc | – 0.75 per cent |
| Japanese Yen | – 0.07 per cent |
Bitcoin
Bitcoin / U.S. Dollar dropped -0.71% in early Wednesday trade to $57,603 as of 06:45 a.m. I.S.T.
The recent pullback in Bitcoin’s volatility is setting the stage for a trend that could encourage institutions to dive in, according to JPMorgan Chase. The coin’s volatility has kept institutions away, which is a key consideration for risk management – the higher the volatility of an asset, the higher the risk capital consumed by it
Goldman Sachs is close to offering investment vehicles for Bitcoin and other digital assets to private wealth clients. Morgan Stanley plans to give rich clients access to three funds that will enable ownership of crypto and BNY Mellon is developing a platform for traditional and digital assets
Rally in Bitcoin over the past two quarters has come at the expense of gold, JPMorgan’s strategists said, citing $7 billion of inflows into Bitcoin funds and $20 billion of outflows from ETFs tracking the precious metal
“These tentative signs of Bitcoin volatility normalization are encouraging,” strategists including Nikolaos Panigirtzoglou said. “In our opinion, a potential normalization of Bitcoin volatility from here would likely help to reinvigorate the institutional interest going forward.”
Bond Markets
Americas : 10 – Year Govt Bond Yields
United States : 1.67%
Canada : 1.49%
Europe, Middle East & Africa : 10 – Year Govt Bond Yields
Germany : -0.32%
United Kingdom : 0.79%
France : -0.06%
Asia Pacific : 10 – Year Govt Bond Yields
India : 6.12%
Japan : 0.10%
Australia : 1.77%
South Korea : 2.09%
Fund Flows on NSE, BSE and MSEI — 06 Apr 2021
FII/FPI Net Sell Rs (1,092.75) Crore in Capital Market
DII Net Buy Rs 416.59 Crore in Capital Market
Where We’ve Been Reading —
- Bloomberg
- The Wall Street Journal
- Reuters
- Trading Economics
- Seeking Alpha
- Axios
- Tech Crunch
- NSE Indices India
- Morningstar India
- The Star
- Harvard Business Review
- The Economic Times
