In this briefing:
- FLASH: BoE Keeps Its Head Down in Mar-19
- India Monthly Report Feb’19 – Mar’19
- FLASH: UK Retail High as BoBs Ignore Brexit Lows
- UK Inflation: Devilish Detail Extending Trends
- Global Credit Cycle: Full-Blown Repeat of 2008 Crisis Unlikely…Contrary to Doomsayers
1. FLASH: BoE Keeps Its Head Down in Mar-19
- The MPC unsurprisingly voted unanimously for no policy change again in Mar-19.
- Recent news was deemed ‘mixed’ as soft surveys and global demand partly offset the otherwise good domestic news.
- How Brexit resolves remains crucial to the optimal policy response, which can be judged after seeing the reaction of other agents amid a high option value of delay.
2. India Monthly Report Feb’19 – Mar’19
Indian indices were the least performing among the select global indices with S&P BSE Sensex and Nifty 50 generating returns of negative 1.65% and negative 0.81% in domestic terms respectively. In Dollar terms, they fell by 0.81% and 0.09% respectively. Indian Rupee witnessed an appreciation of 0.85% during the period and has risen from 71.44 USD/ INR to 70.84 USD/ INR. Among the select indices, Dow Jones was the best performer with dollar returns of 3.4%.
| Performance of Select Indices during Feb’19 | ||
| Index | Returns in Domestic Currency | Returns in USD |
| S&P BSE SENSEX | -1.65% | -0.81% |
| NIFTY 50 | -0.93% | -0.09% |
| Nikkei 225 | 2.87% | 1.17% |
| Dow Jones Industrial Average | 3.40% | 3.40% |
| HANG SENG | 2.51% | 2.49% |
| FTSE 100 | 0.78% | 2.22% |
Among the sectoral indices, Nifty Media was the highest gainer with a 17.56% return in domestic terms and 18.56% in USD terms. The worst performer has been Nifty PSU Banks with a decrease of 5.82% in domestic terms and 5.02% in USD terms.
Performance of Indian Sectoral Indices in USD | INR Returns | USD Returns |
NIFTY MEDIA | 17.56% | 18.56% |
NIFTY METAL | 1.99% | 2.85% |
NIFTY IT | 0.05% | 0.90% |
NIFTY REALTY | -0.50% | 0.35% |
NIFTY PVT BANK | -0.59% | 0.26% |
NIFTY PHARMA | -0.94% | -0.10% |
NIFTY AUTO | -1.02% | -0.18% |
NIFTY BANK | -1.09% | -0.25% |
NIFTY FIN SERVICE | -2.04% | -1.20% |
NIFTY FMCG | -3.10% | -2.28% |
NIFTY PSU BANK | -5.82% | -5.02% |
3. FLASH: UK Retail High as BoBs Ignore Brexit Lows
- UK retail sales rose again in Feb-19, contrary to Consensus expectations. Sales remain above their brisk trend and are supporting stronger GDP growth in 1Q19.
- Parliament continues to indulge in its political pantomime, but British consumers are Bored of Brexit (BoB) and more interested in spending their increasing real wage. Surveys remain bias to exaggerate the effect of uncertainty.
4. UK Inflation: Devilish Detail Extending Trends
- UK inflation was marginally stronger on the CPI and weaker on the PPI in Feb-19. Partially offsetting surprises lift my March forecast lightly before lowering it.
- Airfares and household energy prices are still set to significantly raise inflation to April before the latter unwinds enough in October to fall below target again.
- Annual updates to weightings extend trend changes in average rates and seasonality. The latter is likely to remain a source of surprise, while some market benchmarks might move almost 20bp further as they keep converging to reality.
5. Global Credit Cycle: Full-Blown Repeat of 2008 Crisis Unlikely…Contrary to Doomsayers
The slowing world economy has raised concerns in some quarters about an inflexion point in the global credit cycle that could provoke a repeat of the 2008 crisis due to higher levels of debt.
Governments have mainly contributed to the rise in global debt since 2008, particularly in advanced economies, while China has presided over debt expansion across all non-financial sectors of its economy.
Concerns about the US corporate bond market have centred around the significant growth of the BBB-rated segment since 2008, along with its ability to sustain liquidity given the looming satiation of investor mandates.
China’s corporate debt has risen aggressively and become increasingly risky since 2008, but a sovereign backstop and predominantly domestic funding sources limit any prospective cross-border fallout.
A full-blown repetition of the 2008 debt crisis is unlikely due to: 1) lower cross-border banking linkages, 2) a smaller role for banks in overall credit intermediation, and 3) far lower leverage in the US financial system.
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