Multi-Asset Weekly Newsletter

Global Developments & Global Equities

TARIFF DRAMA CONTINUES TO RESULT IN HEIGHTENED UNCERTAINTY 

This week, the EU retaliated by imposing tariffs on USD 28bn of US imports in response to increased tariffs on steel and aluminum by 25%. President Trump in turn, threatened imposing 200% tariffs on alcohol imports from the EU. We have the Fed, BoE, BoJ, and SNB policies in the coming week. The Fed, BoE, and BoJ are expected to keep Rates unchanged while SNB is likely to cut 25bps. The US Feb CPI this week came in lower than expected. March Michigan consumer sentiment dropped to 57.9 against the expected 63.2. 1y inflation expectation rose to 4.9% from 4.3% last month. The market is pricing in 2.6 cuts by the Fed and 2 cuts by the ECB until 2025 end. 

NIFTY V/S GLOBAL MARKETS

Despite the recovery on Friday, the S&P 500 ended the week 2.3% lower. Major European stock indices ended the week with cuts ranging from 0.1-1.2%. Nikkei was the exception this week, ending 0.5% higher. Most Asian equity indices also traded soft this week. Kospi (+0.1%) was the exception. 

FIXED INCOME: 

US 10y treasury yield rose 10bps this week to 4.31%. The US 2y yield was up 13bps at 4.02%. 10y Yields across Europe were up 1- 7bps this week. Yield on the benchmark 10y ended 1bps higher at 6.70% this week. It traded in a narrow 6.675-6.704% range. India's Feb CPI print came in at 3.61%, a seven-month low. 1y OIS ended 7bps lower at 6.12%, while 5y OIS ended flat at 5.97%. Liquidity in the banking system is neutral at this point. RBI's OMO would help tide over the advance tax outflows. 1y CD is at 7.64%, while 1y T-bill is at 6.52%. 10y Gsec annualized is at 6.70%, while 10y AAA PSU and NBFC papers are around 7.36% and 7.5,4% respectively. FPIs have invested a net USD 2.8bn in domestic debt in March so far.  

FOREIGN EXCHANGE:

Commodity currencies had a good run this week. NOK (+1.9%) and NZD (+0.7%) were the best performers, while safe havens JPY (-0.4%) and CHF (-0.6%) underperformed. Among Asian currencies, CNH (+0.1%) was the best performer while MYR(-0.8%) was the worst performer. Rupee weakened 0.15% this week to end at 87.00. It has weakened to 87.39 during the holiday shortened weak but recovered on Thursday. Rupee is the worst performing Asian currency YTD, down 1.6%, while CNH is the best performer, up 1.4%.% FX Reserves rose USD 15.3bn in the week ending 7th March to USD 654bn. USD 10bn increase was on account of the settlement (4th March) of near leg of Buy-Sell swap conducted on 28th Feb. 1y forward yield was almost unchanged at 2.14% 3m ATMF implied volatility was also steady at 3.54%. 

COMMODITIES:

Precious metals were the outperformers this week. Gold ended the week up 2.6% at USD 2984 per ounce while Silver rose 3.9% to USD 33.8. Gold traded above the USD 3000 mark for the first time this week. Brent was steady and ended the week 0.3% higher at USD 70.6 per barrel. LME Aluminum was down 0.9% while LME. Copper was up 1.7% this week.