Market Bizzz

The US dollar was weaker due to speculation of another rate hike by the US Federal Reserve. Higher expectations of US and global interest rates were generated by unexpected rate increases from the Bank of Canada and the Reserve Bank of Australia this week. The Canadian dollar remained steady and the US dollar index slightly dipped. Contrarily, sterling and the euro both gained slightly. The Japanese yen was strengthened by data showing Japan’s economy grew in the first quarter, higher than the initial estimate. The Chinese offshore yuan was weak due to China’s weak trade data.

Oil prices were barely changed in Asia trade as investors assessed the potential impact of Saudi output cuts against concerns over a global economic slowdown. Brent crude futures fell 1 cent to $76.94 a barrel, with the US West Texas Intermediate futures up 5 cents at $72.58 a barrel. Supporting the benchmarks was Saudi Arabia’s proposals for deep output cuts on Wednesday, though rising US fuel stocks and weak Chinese export data, as well as later comments from Citigroup analysts, capped price gains.

The S&P 500 and Nasdaq ended the day lower on Wednesday as investors booked profits after a long megacap stocks run and ahead of key economic events. The Russell 2000 climbed 1.78%. The US inflation data for May is expected to show consumer prices eased, although core prices remain high. The Bank of Canada’s decision to raise interest rates pushed up the 2-year and 10-year Treasury yields. The CBOE Volatility Index closed at its lowest since 14 Feb 2020. Wells Fargo raised Netflix’s price target, with shares climbing 0.12% on the news. Yext soared 38.44% and Campbell Soup fell 8.91%.

​In fact, what we have also seen that we start every year, financial year with a quite optimistic earnings expectation anywhere in the range of 15 to 25%, depending on the survey of varied range of market participants if we take.

Obviously, a rate cut sort of a scenario is very positive for growth cyclicals and banking, auto, consumer discretionary all these companies fall under growth cyclicals. If you observe for the last 12 to 18 months, despite strong earnings growth in all these three sectors, we have not seen any massive earnings or massive sort of a stock price re-rating.

​Currently, India’s market share is about 1.8% and there is scope for this to go up meaningfully over the next five-six years and, in fact, our India economist is expecting that this will go up and almost double by 2030

The RBI certainly seems to be on a pause mode. And in fact, global central banks also, especially the US Federal Reserve, also seems to be indicating that they would pause soon.

​The first part is that if you look at the differential between repo and the FFTR, upper bound, then that is today at 125 basis points. Now, that is the lowest number that we have seen in 23 years.