In this briefing:
- Gold May Rise on Lower Real Ylds; Canada Leads Fall in Real Ylds; Aust Inflation Expectations Slump
- Thailand’s Election – Growth Story Plays Wait and See
- 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
1. Gold May Rise on Lower Real Ylds; Canada Leads Fall in Real Ylds; Aust Inflation Expectations Slump
- The broad decline in global bond yields and curve flattening suggest that the market has become more concerned about weak global economic growth.
- The fall in yields is at odds with the rise in equity and commodity prices this year, but the later may have lost upward momentum.
- Safe haven currencies, gold and JPY, have strengthened this week and are likely to perform well if yields remain low.
- US real yields have fallen more than nominal yields this year, with a partial recovery in inflation expectations from their fall in Q4 last year. Lower real yields point to weaker fundamental support for the USD, and further support safe havens like gold.
- Canadian real long term yields have fallen more abruptly than in the USA, into negative territory, suggesting the outlook for the Canadian economy has deteriorated more than most. This may relate to concern over a peaking in the Canadian housing market. The fall in real yields suggests further downside risk for the CAD.
- Long term inflation breakevens have fallen in Australia sharply since September last year to now well below the RBA’s 2.5% inflation target.
- Australian leading indicators of the labour market have turned lower, albeit from solid levels, and may be enough, combined with broader evidence of weaker growth, for the RBA to announce an easing bias as soon as April.
- Asian trade data and flash PMI data for major countries point to ongoing and significant weakness in global trade.
2. Thailand’s Election – Growth Story Plays Wait and See
With the elections this week, the Bank of Thailand (BoT) held rates steady at its March MPC meeting. We are eagerly awaiting the outcome of the election. We won’t place any bets on which party(ies)/coalition(s) will form the new government, but once the political fog clears, the growth story is positioned to continue.
3. 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.
4. 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% |
5. 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.
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