Weekly Global Markets Update

The uncertainty around upcoming US administration continued to weigh on broader market sentiment. According to Washington Post report, new US administration was considering narrowing the focus to a select set of goods and services, but later it was denied by President-elect Donald Trump. Another report showed that President-elect Donald Trump was considering a national economic emergency declaration to allow for new tariff program.

Dollar index fell after the report but then it regained momentum and broke 109 levels in the last week. Euro remained weak during the week, although some recovery was seen above 1.04 levels on the back of USD weakness. But it reversed and is near 1.02 levels. Cable also fell sharply below 1.23 levels on concerns about the UK’s fiscal outlook and on USD strength.

US jobs data was the major highlight for the week. Non-farm payrolls data for December surprised to the upside (256k vs. 165k expected), which dampened expectations for further Fed rate cuts. Unemployment rate also unexpectedly declined to 4.1% from 4.2% prior, reflecting robust job market. UST yields jumped, while US equities plunged after the NFP report.

In China, PBOC said that it will suspect buying government bonds this month as the supply of the bonds has fallen short of demand, which have pushed Chinese 10yr bond yield to 1.68% and is near 1.64% levels. The yuan weakened against the USD, with USDCNY pair breaking 7.33% levels.

Stringent US sanctions on Russian oil exports sparked concerns about global supply disruptions, lifting crude oil prices. Additionally, colder US weather also heightened demand for heating fuels, which also supported oil prices.

On the domestic front, USDINR pair continued its upward momentum, although pace has been curtailed by probable PSBs action. It touched a weekly low of 85.6513 (on 7th Jan) but bounced back and ended higher at 85.965 levels. Benchmark indices remained under pressure tracking global cues with the Nifty50 ended the week lower by 2.4% (w-o-w), whereas Sensex was down 2.3% (w-o-w). G-sec 10yr bond yield ended the week at 6.77% levels.

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