India’s WPI inflation eased to 3-month low of 11.2 per cent in July 2021 from 12.1 per cent in June 2021, led by lower food (4.5 per cent in July 2021 from 6.7 per cent in June 2021) and fuel inflation (26 per cent in July 2021 from 32.8 per cent 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 per cent from 10.9 per cent in June 2021). Pass-through of higher commodity prices to consumers is yet not complete.

China’s industrial production eased to 6.4 per cent in July 2021 (est.: 7.8 per cent) from 8.3 per cent in June 2021, owing to slowdown in both manufacturings (6.2 per cent in July 2021 versus 8.7 per cent in June 2021) and mining (0.6 per cent versus 0.7 per cent ) output. FAI growth eased to 10.3 per cent in Jan-Jul '21 (est.: 11.3 per cent) from 12.6 per cent in H1CY21, led by real-estate investment (12.7 per cent versus 15 per cent). Retail sales too missed expectations (11.5 per cent) and eased to 8.5 per cent in July 2021 from 12.1 per cent in June 2021. While moderation was broad-based, the contraction was seen in automobile sales (1.8 per cent versus 4.5 per cent rise in Jun’21).

Japan’s GDP returned to growth in Q2CY21 and rose by 0.3 per cent on a QoQ basis, compared with a decline of 0.9 per cent in Q1. The rise was led by personal consumption (0.8 per cent in Q2 from -1 per cent in Q1) and GFCF (1.1 per cent in Q2 from -0.9 per cent). Exports also remained strong and rose by 2.9 per cent compared with 2.4 per cent in Q1. On a QoQ annualised basis, GDP rose by 1.3 per cent compared with a fall of 3.7 per cent 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 per cent (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 per cent today, boosted by a drop in CPI and WPI print.

Currency: Global currencies closed mixed. DXY rose by 0.1 per cent 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 per cent) and EUR (0.2 per cent) 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 per cent, while Dow and Sensex both ended higher by 0.3 per cent each. The gains in the domestic market were led by metal and oil and gas stocks. It is trading lower today in line with other Asian stocks.

[Inputs from Bank of Baroda]