Multi-Asset Weekly Newsletter

Global Developments & Global Equities

SOFTENING OF STANCE BY THE TRUMP ADMINISTRATION LIFTS SENTIMENT

After the initial liberation day shock in the form of massive reciprocal tariff rates, there has been some mellowing down of stance by the Trump administration. It seems to be more willing to give concessions while it negotiates trade deals. Especially in the case of China, there appears to be a realization that the Trump administration went too far. Treasury Secretary Bessent acknowledged that a 145% tariff rate is unsustainable and is akin to a trade embargo. Softening stance would minimize the extent of trade and supply chain disruption expected earlier. Risk sentiment has seen a definite improvement from a softening stance. Key data in the coming week would be the US April jobs report due on Friday. The market is pricing in 3.5 cuts by the Fed until the end of 2025.

NIFTY V/S GLOBAL MARKETS

Equities globally did well this week. 

FIXED INCOME:

US 10-year treasury yield dropped 17 bps this week to 4.23%. 2y yield ended almost flat at 3.75% Yields across Eurozone and UK were steady this week Yield on the India 10y had dipped to 6.30% (lowest level since Nov'21) but ended the week at 6.36% 1y and 5y OIS ended the week almost flat at 5.72% and 5.68% respectively Banking system liquidity is in surplus. Overnight call rate fixings have been happening below the repo rate in a 5.93-6% range. FPIs have sold net USD 2bn of domestic debt in April so far. 

FOREIGN EXCHANGE:

Commodity currencies NOK (+0.4%), NZD (+0.4%), and AUD (+0.3%) were the best performers against the Dollar in the week gone by. Safe havens Yen (-1%) and Swiss Franc (-1.4%) underperformed. Among Asian currencies, MYR (+0.9%) was the best performer while KRW (-1.1%) was the worst performer. Rupee was volatile this week, trading a 85.03-85.67 range but ended the week just 0.1% weaker against the Dollar at 85.45. 1y forward yield rose 6bps to 2.15%. 3m ATMF implied volatility rose 43 bps to 4.83%. 

COMMODITIES:

Brent ended the week 1.6% lower at USD 66.9 per barrel. Base metals had a good week. LME Copper and Aluminium were both up 1.9%. As the demand for safe havens tempered, Gold saw a bit of profit taking, ending the week 0.2% lower at USD 3320. Silver, however, did well, ending 1.7% higher for the week.