Highlight of the Day
Commerce Department data released on Wed, Apr 07 showed that the U.S. trade deficit widened to a record high as a 2.6% decline in exports outweighed a slight drop in imports
U.S. exports of vehicles and parts dropped in February to the lowest level in eight months, as auto makers since late last year have been grappling with a shortage of semiconductor chips, which go into software modules used to control everything from brakes to dashboard touch screens
Imports and exports of autos started to pick up after demand plummeted early in the pandemic as factories reopened in July and buyer interest accelerated. But car companies, like their counterparts in other industries, were unprepared for that sudden jump in demand, leading to a chip shortage as they competed with technology companies for supply
The effect of the bottleneck in semiconductor supply — output for which is concentrated in Asia — has crimped production at virtually every major car company in recent months, including Toyota, Volkswagen, Honda and Stellantis; which could lead to more than $60 billion in lost revenue for the industry this year
The supply-chain crunch is unlikely to be resolved until the bottleneck clears
President Biden has ordered a supply-chain review and met with a bipartisan group of lawmakers to address the issue. Next week, top administration officials will meet with chip manufacturers to discuss what might be done
“GM continues to leverage every available semiconductor to build and ship our most popular and in-demand products,” a company spokesman said. “So far, GM has avoided taking downtime at the four factories where it makes the company’s largest pickup trucks and SUVs.”
Market Highlights at 07:00 a.m. I.S.T.
• The MSCI Asia Pacific ex-Japan is trading lower -0.34%, and the MSCI Emerging Market index is down -0.30%
• Trends on SGX Nifty look poised for a muted opening for Nifty 50 in India. The Nifty futures are trading flat at 14,943 on the Singaporean Exchange at 07:15 a.m. I.S.T.
• U.S. equity futures rose in early morning trade after S&P 500 closed at another record on Thursday; alongside a mostly negative start in Asia-Pacific benchmarks gauges in early Friday trade with shares rising in Japan, but falling in South Korea, Australia, Hong Kong and China; a negative MSCI Asia-Pacific ex-Japan index; U.S. dollar weakening to 92.10 with 10-Yr Treasury Yields drifting lower to 1.62% and Gold futures advancing to $1,755 an ounce as the Federal Reserve reiterated its dovish policy stance indicate a mixed and volatile outlook in Indian equity markets amid a doji candlestick formation on Thursday’s trading, channel-wise resistance and decoupling from global benchmarks
• Treasury Secretary Janet Yellen unveiled details of a plan to bring back about $2 trillion in corporate profits into the U.S. tax net. That would help fund the government’s spending initiatives, potentially reducing reliance on more borrowing that could drive rates higher
India Markets
India’s equity benchmarks ended up for a third straight session on Thursday trade led by gains in metals and information technology stocks after the central bank’s accommodative monetary policy lifted investor sentiment amid a record surge in domestic Covid-19 cases
The blue-chip NSE Nifty 50 index added 54 points or 0.37% to 14,873 and the benchmark S&P BSE Sensex added 84 points or 0.17% to close at 49,746
Bank Nifty dropped 208 points or -0.63% to settle at 32,782
Broader markets out-performed headline peers — Midcap 100 index added 0.53%; Smallcap 250 index added 1.06% and Nifty 500 added 0.48%
Nifty P/E for Apr. 08 increased to 33.61 from 33.49 with Nifty P/B edged higher to 4.25 from 4.24, as recorded by NSE India
India VIX or the barometer of nervousness in the market, moved up marginally 0.32% from 20.24 to 20.31 levels
Overnight Call Money rate weighted average stood at 3.14% as per RBI data. It moved in a range of 1.90 — 3.50% for Apr 07
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 dropped to 6.03%, while the rupee weakened further to 74.5610 per U.S. dollar
It is becoming crazy for metal stocks. Everything is positive in the sector from fundamentals in China to rising prices. Metals stocks rose 3.92%, led by a 9.2% jump in JSW Steel after the steel maker reported a 6% rise in fourth-quarter production. Steel prices in top steelmaker China hit a record high on Wednesday on strong domestic demand
India’s equity mutual funds recorded inflows in March after eight months of outflows, industry data showed on Thursday, as investors took advantage of a stock market correction to place bets on equities
Mutual funds that invest in equity showed a net inflow of 91.15 billion rupees ($1.22 billion) in March compared with an outflow of 45.34 billion rupees in February, according to data published by the Association of Mutual Funds in India (AMFI)
Mutual funds investing in debt instruments, however, showed steep outflows in March, mainly as companies took out money to pay tax and other expenses as the financial year drew to a close, the AMFI data showed
RBI said the first purchase of government securities worth Rs 25,000 crore under the G-sec Acquisition Programme (G-SAP 1.0) will be done on April 15 with a view to enabling a stable and orderly evolution of the yield curve. G-SAP will run alongside RBI’s regular operations, including Liquidity Adjustment Facility (LAF), open market operations (OMOs) and Operation Twist
“It seems like equity investors waiting on the sidelines for a market correction have started making allocations taking a long-term investing view on equities,” said Kaustubh Belapurkar, a director at investment research group Morningstar India.
“RBI’s endeavor is to ensure orderly evolution of the yield curve, governed by fundamentals as distinct from any specific levels thereof,” Shaktikanta Das said. “The recent surge in infections has, however, imparted greater uncertainty to the outlook. Localized and regional lockdowns could dampen the recent improvement in demand conditions and delay the return of normalcy.”
America Markets
The S&P 500 closed at another record on Thursday trade, propelled by a resurgence in big technology stocks. The largest tech companies have surged ahead as the bond market calmed, easing concerns about the high valuations of growth stocks
The broad-based S&P 500 edged up 17.22 points, or 0.4%, to 4,097, its 19th record close of 2021
The Dow Jones Industrial Average, composed mostly of cyclical stocks, added 57.31 points, or 0.1%, to 33,503
The tech-heavy Nasdaq Composite Index rose 140.47 points, or 1%, to 13,829
U.S. equity futures rose in early Friday trade. S&P500 futures is up 0.21%; Dow Jones futures is up 0.09% and Nasdaq futures is up 0.52%
10-Yr U.S. Treasury yields, which move inversely to the price, stayed lower at 1.62% in early Friday. U.S. stock investors have been encouraged lately by signs of stabilization in the government-bond market. Dollar was weak at 92.10
The Cboe Volatility Index, known as Wall Street’s “fear gauge,” fell -1.22% to 16.95 on Thursday
Applications for U.S. state unemployment insurance unexpectedly rose for a second week, underscoring the uneven nature of the labor market recovery. Initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 744,000 for the week ended April 3 compared to 728,000 in the prior week. Data for the prior week was revised to show 9,000 more applications received than previously reported
Fed officials remain wary about the ongoing risks of the coronavirus pandemic and are committed to bolstering the economy until its recovery is more secure, minutes of the central bank’s latest policy meeting released on Wednesday showed
Fed Chair Jerome Powell said that a surge in spending as the U.S. economy reopens, along with bottlenecks in supply, will likely push prices higher this year, but would not result in the kind of year after year price rises that would constitute inflation
Powell pledged to get the U.S. back to a “great economy” and invoked a homeless encampment in downtown Washington to make the point that the recovery remains incomplete
At a virtual panel Thursday during the Spring meetings of the International Monetary Fund, Powell said, “If inflation were unexpectedly, counter to our expectations, to move meaningfully above levels where we are comfortable – and in particular inflation expectations… if we see them moving persistently and materially above levels we are comfortable with, then we would react to that.”
“Our belief is that continued moves to reopen the economy will result in a solid further advance in payrolls in the April jobs report and that the claims data are likely not capturing the pace of improvement in the labor market,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York
“The doves are in control and today’s cautious comments from Fed Chair Powell delivered another reiteration of their ultra-accommodative stance,” said Edward Moya, senior market analyst at Oanda in New York.
Asia-Pacific Markets
Asian stocks wavered in early Friday trade after a Wall Street rally on Fed Chair Jerome Powell’s assurance that the central bank can reinvigorate the economy without stoking painful inflation
Shares gained in Japan and fluctuated in South Korea, while Australia’s index slipped
Japan’s Nikkei 225 added 0.70% to 29,917 and Topix 500 added 0.75% to 1,529
South Korea’s Kospi fell -0.21% to 3,136
In Hong Kong, Hang Seng dropped -0.05% to 28,980 and Hang Seng China Enterprises dropped -0.23% to 11,090
In China, CSI 300 fell -0.66% to 5,078 and Shanghai Composite fell -0.39% to 3,468
Australia’s S&P/ASX 200 dropped -0.33% to 6,975
India and Indonesia have emerged as key beneficiaries of a Chinese ban on Australia’s coal exports which is expected to further shift global trade in the fuel used for power generation and steelmaking this year. Coal traders and buyers expect India’s buying spree of Australian coal to last into next year due to its price and quality. Indonesia’s coal miners signed a $1.5 billion supply deal with China in November
As the largest consumer of most commodities apart from oil, China has long had a heavy influence on resources trade through its sheer size. But the ban has particularly benefited Indian buyers, while Chinese importers are complaining that they are having to pay more for lower quality coal from other countries
Indian cement companies last year started snapping up cargoes of Australian coal that were being offered at steep discounts after being turned away from China. India became the second-biggest buyer of Australian thermal coal in February
Governor of Tokyo said that she would request that the central government adopt emergency measures in the capital in response to a sudden increase in coronavirus infections and the spread of a new variant of the virus. The western city of Osaka is also set to declare a medical emergency after its number of new infections rose to a record high, which has sparked alarm among public health officials
South Korea reported 700 new coronavirus cases on Thursday, its highest daily tally since early January, and the prime minister reiterated warnings that new social distancing rules would likely be needed
“Japanese equities may slow down relative to other markets,” Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management Co said. “Markets are placing a lot of emphasis on the size of fiscal stimulus and the vaccination rate. More restrictions would be a negative factor because that would delay a recovery in services consumption.”
“Global trade flows will be self-adjusting with Australian coal flowing to Indian and European markets and South African and Colombian sources coming into China,” said Winston Han, chief analyst from China Coal Transportation and Distribution Association at a Coaltrans seminar this week.
EU Markets
European stocks hit record highs on on Thursday trade as optimism grew around a global stimulus-fuelled economic rebound after the U.S. Federal Reserve signalled that it was in no hurry to tighten its monetary policy
The pan-European Stoxx Europe 600 added 0.49% to 432 and Stoxx 50 added 0.53% to 3,977
Germany’s DAX30 added 0.17% to settle at 15,202
London’s blue-chip FTSE 100 added 0.83% to settle at 6,942
France’s CAC40 added 0.57% to settle at 6,165
ECB policymakers discussed a smaller increase in bond purchases under the PEPP and agreed that the central bank did not need to use the envelope in full if favorable financing conditions could be maintained, the accounts of the March’s meeting showed. Also, officials noted that that the pick-up in nominal yields reflected almost entirely markets’ reappraisal of the inflation outlook; while it was argued that higher real rates were not necessarily a cause for concern and should not trigger a policy intervention if they reflected higher growth prospects rather than higher real term premia. Last month, the ECB said it would conduct emergency bond purchases at a significantly higher pace over the April-June period, aiming to bring government bond yields down and to support the Eurozone economic recovery
Credit Suisse is tightening the financing terms it gives hedge funds and family offices, in a potential harbinger of new industry practices after the Archegos blowup cost the Swiss bank $4.7 billion. The bank has been calling clients to change margin requirements in swap agreements so they match the more restrictive terms of its prime-brokerage agreements
Chemicals maker Johnson Matthey jumped almost 4% after it forecast annual profit at the top end of market expectations and said it had started a strategic review of its health business
“A dovish set of meeting minutes from the Federal Reserve has further reassured investors that Jay Powell and the gang won’t be turning off the stimulus taps any time soon,” Connor Campbell, an analyst at Spredex, said.
Oil & Natural Gas Markets
Crude-oil prices extended losses in early Friday trade, after official data showed a big increase in U.S. gasoline stocks on the back of higher refinery runs while demand remained subdued compared with pre-pandemic levels
U.S. crude oil inventories dropped by 3.5 million barrels last week to nearly 502 million barrels while gasoline stocks increased by 4 million barrels to a little more than 230 million barrels as refiners ramped up output before the summer driving season. At the same time, Russian oil output increased from average March levels in the first few days of April
WTI Crude is trading at $59.73 per barrel
Brent Crude, the international benchmark for oil, is trading at $63.22 per barrel
Natural Gas futures slipped to $2.519/MMBtu
“A huge build in road fuel stocks is not what the market was expecting and concerns over the speed of the oil demand recovery resurfaced, leaving traders wondering how stable road fuel usage actually is,” said Rystad Energy analyst Bjornar Tonhaugen.
“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.”
Commodities Markets
Gold futures hit their highest level in more than a month in early Friday trade, as the dollar and U.S. yields dropped and the Federal Reserve’s reiteration of its dovish policy stance also lifted the bullion’s appeal
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 $1,756 an ounce
Silver futures (Comex) is trading at $25.44 an ounce
Gold / Silver Ratio rose marginally to $69.32
Copper futures (Comex) steady at $4.0860 per pound
In India, Spot Gold is trading at INR 46,808 per 10 grams
“The dollar and U.S. yields are coming off and that’s the key catalyst right now, with a pretty unimpressive jobs number is also helping push gold higher,” said Bob Haberkorn, senior market strategist, RJO Futures. “And the fact that we’re above $1,750, which is a key technical level, shows that gold has some legs to continue higher.”
Currency Markets
U.S. dollar index, DXY fell to a two-week low of 92.10 in early Friday trade, weighed down initial claims for state unemployment benefits unexpectedly rose for the 2nd week to 744K but remained below 800K in a sign that the labor market is slowly recovering but remains under pressure
A retreat from havens will likely drag on the currency as the global economy improves and short-term interest rates in the U.S. remain relatively low — making it appealing for investors to move capital overseas. However, other analysts said that strong U.S. growth and rising interest rates might support the dollar over the short term
INR weakened with USD / INR at 74.5610
EUR strengthened with EUR / USD at 1.1926
GBP weakened with EUR / GBP at 0.8676
GBP weakened with GBP / USD at 1.3746
“With the job market moving in the wrong direction, it underscored this week’s Fed minutes that emphasized how the economy was far from what the Fed considers to be healthy,” Joe Manimbo, senior market analyst at Western Union Business Solutions said. “Data that reinforces the Fed’s dovish stance is likely to keep Treasury yields and the dollar anchored.”
| 3-Month LIBOR Rate | As on 08 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 rose 0.07% in early Friday trade to $58,148 as of 07:15 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 : 1.62%
Canada : 1.47%
Europe, Middle East & Africa : 10 – Year Govt Bond Yields
Germany : -0.34%
United Kingdom : 0.75%
France : -0.08%
Asia Pacific : 10 – Year Govt Bond Yields
India : 6.03%
Japan : 0.08%
Australia : 1.73%
South Korea : 2.04%
Fund Flows on NSE, BSE and MSEI — 08 Apr 2021
FII/FPI Net Buy Rs 110.85 Crore in Capital Market
DII Net Buy Rs 552.78 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
