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Global Market – U.S. Fed, ECB & BOE meeting outcome – Difference in policy rates

Global Market – U.S. Fed, ECB & BOE meeting outcome – Different interest rate policy

This week, we will discuss U.S Fed, ECB & BOE meeting outcome.  All 3 central banks have kept rate unchanged, but their commentary was different.  We will discuss what is decision by these central banks and how market has reacted to it.

US Fed meeting outcome on 13-Dec-23

• US Fed keeps rate unchanged at 5.25% to 5.50%.
• The Fed statement was extremely on the dovish side.  The U.S. central bank is unlikely to raise rates any further, bringing an end to its most aggressive tightening cycle in decades.
• FOMC members forecast THREE rate cuts in 2024 amounting to 75Bbps worst of policy easing.
• The Fed’s statement said it will assess the extent of ‘ANY’ additional policy firming, adding the word ‘any’.

ECB meeting outcome on 14-Dec-23

• ECB hold key interest rate at 4.50%
• ECB will step up to exit from € 1.7 billion of pandemic era stimulus package.  ECB will accelerate end of reinvestment under the PEPP bond buying program.
• ECB President Christine Lagarde “The risks to economic growth remain tilted to the downside,”.

BOE meeting outcome on 14-Dec-23

• BOE keep rate unchanged at 5.25%.  Interest rate is at 15-years high, borrowing cost to remain high.
• The BOE reiterated its policy will be “sufficiently restrictive for sufficiently long” to curb inflation.

Equichain Wealth Advisors: Market View & Opinion

We would like to highlight that U.S. Fed continues to enjoys the highest impact as far as global interest rate is concern.  ECB & BOE meeting outcome is in contrast with US Fed which has been surprisingly dovish against expectation seen in past few weeks.  We expect global asset class would continue to remain robust and expect year end rally on all major risk-on asset class.  

After underperforming in 2022 and first half of 2023, market are heading towards interesting time in 2024.  US Fed pivot will be “Big turning point” in global market as two major democracies will be going into election, India’s election in April – May 2024 & US election in November 2024.

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Global Market – U.S. Fed, ECB & BOE meeting outcome – Different interest rate policy.pdf
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Global Market – US Fed meeting on 13-Dec-23 & US CPI & Core CPI Inflation in focus

Global Market – US Fed meeting on 13-Dec-23 & US CPI & Core CPI Inflation in focus

This week, we would focus on economic data CPI & Core CPI inflation data due to be released on 12-Dec-23 ahead of US Fed meeting.  We would focus on economic data released this week and whether this narrative of interest rate peaking will change or not

US Economic data in last week & Upcoming week

Global market continues to trade near its recent high as optimism on interest rate hike cycle may have ended and interest rate would remain at current level from some time and expectation of rate to come down is later in 2024.

Equichain Wealth Advisors: Market View & Opinion

Key data is yet to be released next week, a day ahead of US Fed meeting outcome, we assume that US Fed will be well aware about the trend which will be considered in the US Fed meeting outcome due on 13-Dec-23.  Currently Fed fund rate monitor tool indicate 94.3% probability of rate to remain unchanged on 13-Dec-23.

We remain cautiously optimistic and we are not expecting any surprise in US Fed decision or any big movement in any of the asset classes as reaction to US Fed meeting outcome.  We expect US Fed to keeps interest rate unchanged and commentary of US Fed chair Jerome Powell will be important

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Global Market – US Fed meeting on 13-Dec-23 & US CPI & Core CPI Inflation in focus.pdf
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Global Market – Trading at 2023 high & Economic data in focus

Global Market – Trading at 2023 high & Economic data in focus

This week we will discuss how global equity market which either have made fresh high for 2023 and trading near to highest level and market is now factoring in pause by all major central banks.  Today we will also focus on the economic data of U.S. which will be released ahead of U.S. Fed meeting outcome on 13-Dec-23.

U.S. Economic data

We would focus on jobs data which will be released in next week on 5th, 6th & 7th December 2023.  Jobs data have been robust and continue key factor for U.S. Fed to keep interest rate at elevated level.

Global Market – Rallied around 5% – 7% on major indices

Here we would like to highlight U.S. market which has rallied in range of 5% to 7% on major indices.  European stocks where DAX has rallied by around 7% & CAC by less than 4%.  Indian market in last 1 month has rallied by around 6%.

Equichain Wealth Advisors: Market View & Opinion

We have mentioned last week that we are optimistic and we maintain our positive view.  Market will now focus on upcoming economic data and central banks meeting starting from next week.  Any confirmation of pause by major central banks will be taken as positive.  After current rally, we see market evenly balance to react to any outcome, but in case of any disappointment correction in global market could be painful.  

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Global Market – Trading at 2023 high & Economic data in focus.pdf
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AXITA Cotton Ltd – Research Report

AXITA Cotton established in 2013 (ACL, The Company) is a manufacturer
and exporter of international quality Cotton Bales & Cotton Yarn. The
Company have its cotton, ginning and pressing plant at Kadi in Mahesana
district of Gujarat. The plant is close to rich cotton growing areas if
Saurashtra and other regions of Gujarat. The Company is also into sustainable
cotton farming and ginning of sustainable fibers. The Company a certified by
GOTS (Global organic Textile Standards) and OCS (Organic Content Standards)

On 25-Mar-22, AXITA migrated from BSE SME segment to main
board in NSE & BSE segment providing much need liquidity to small investor.

AXITA Cotton listed on BSE SME segment on
10-Jan-19 at Rs. 60/- per share and lot size of 2000 shares and investment
amount of 120,000/- would current be at 17,40,000/- at rate of Rs. 29/- per
shares.

Indian Textile Industry overview

The textiles and apparel industry contribute 2.3% to the country’s GDP, 13% to
industrial production and 12% to exports.

India’s textile and apparel exports (including handicrafts) stood at US$ 44.4 billion
in FY22, a 41% increase YoY.

Equichain Wealth Advisors: Short term investment target of 45 – 50.

Raw material prices are stable and current trading near to MSP (minimum support price set by Government of India).   This will provide stability for company as stable prices will help company to maintain its margin.  Any high volatility in raw material (KAPAS) price could have positive or negative depending on company’s inventory as AXITA is also engaged in trading activity of KAPAS, COTTON BALES, COTTON SEEDS & COTTON YARN.

We expect AXITA to perform consistently in coming quarters maintaining revenue growth and stable margin.  In current FY company has posted Net profit of 12.26 crores Vs 17 crores in last financial year.  If company manages to maintain the stable growth rate, we expect company to deliver net profit of 24 – 26 crores in FY24 which would be more than 40% growth in Net profit.

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AXITA Cotton Ltd – Reserach Report
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Global Market – U.S. & China’s economic – Mix picture

Global Market – U.S. & China’s economic data – Mix picture

This week we will discuss U.S. and China’s economic data which continue to give mix indication and two different strategies by world’s top two economy.  U.S. continue to witness robust growth and inflation is key concern and on the other hand for China – recession & slowdown remain key concern.

U.S Economic data & key takeaways

U.S. economic data released this week indicates mix set and which will influence decision making for interest rate in upcoming FOMC meeting on 20-Sep-23.  As guided by U.S. Fed chair Jerome Powell – Fed may pause at September meeting and wait for incoming data.

China’s Economic data & Steps

China’s Caixin manufacturing PMI came at 51 Vs expectation of 49 while PMI data released a day earlier came at 49.7 Vs estimate of 49.1.  

China last week reduced tax on stock trading to boost confidence for the first time since April 2008.  China’s central bank will trim the amount of foreign currency deposits banks are required to hold as deposits.

Equichain Wealth Advisors: Market View & Opinion

Recent steps by China could provide boost to consumption which will result in increase in commodity prices such as Crude oil & Metal.  In this week, crude oil and metal prices have been rising.  This increase in commodity prices will result in high inflation globally and increase worry for U.S. 

Global market continues to indicate mix picture whereas Indian story is getting strong day by day.  U.S. market continues to remain resilient where as China’s market is showing sign of stabilizing after measures of steps taken by Chinese government.  We expect some positive move for global market in the month of September 2023.

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Global Market – U.S. & China’s Economic data mix picture .pdf
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Global Market – Whether U.S. Fed will manage “Soft Landing”?

Global Market – Whether US Fed will manage to get “Soft Landing”?

This week we will discuss that whether US fed will manage to get “Soft Landing” of economy.  Here by we mean by “Soft Landing” is that inflation gets under control without any major downturn in economy.  U.S. economic data released so far in the month of August 2023 indicates mix view.

U.S. economic data from 1-Aug-23 to 11-Aug-23

Jobs data released in the month of August 2023 indicate stable number with no major surprises, neither positive nor negative.  U.S. Inflation data released on 10-Aug-23 came at 3.20% Vs estimate of 3.30%.  PPI & Core PPI data released on 11-Aug-23 came above estimate. 

What is “Soft Landing” of economy?

“Soft Landing” of economy here means that inflation comes under control without any major economic shock or recession.  U.S. Fed ‘s objective is to keep inflation target at 2% for long term and optimum employment, which usually can be referred to as stable economy with steady growth.

Equichain Wealth Advisors: Market View & Opinion

Current economic data from U.S. indicates mix picture and we see this as long-term positive development for U.S. economic and global stability.  We also expect some softness in economic activity and expect market to correction in next 1 – 2 months.

Looking at the data mentioned in table above, we believe this set of data does indicate moderation in economic activity at slow pace, which we assume as high probability of “Soft Landing”.   

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Global Market – Whether US Fed will manage to get “Soft Landing”?.pdf
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Global Market – Fitch downgrades U.S. rating to AA+ from AAA

Global Market – Fitch downgrades U.S. rating to AA+ from AAA

This week we will discus the decision by Fitch, a rating agency which downgrade U.S. rating from AAA to AA+ as budget deficit increases.  China may continue to support economy and provide stimulus package to aid recovery and we will discuss BOE policy outcome as it raises rates by 25-bps to 5.25%.

U.S. rating downgrade by FITCH

U.S. sovereign credit rating was downgraded to AA+ from AAA, 1 notch down from AAA rating which highest rating by FITCH.  The rating downgrade expects the fiscal deterioration over next three years on concern of growing general government debt burden and erosion of governance.

BOE Raises Rates to 5.25%

The UK central bank lifted its key rate a quarter point to 5.25% on Thursday, which was in line with market expectations after a surprise half-point increase in June. Still, signs of debate between policymakers prompted traders to pare bets on the pace of further hikes, with markets priced in for rates to peak below 5.75% in February.

China expected to cut Bank’s RRR to boost economy

That’s according to several analysts who’ve pointed to the mounting value of policy loans maturing this month and through the rest of the year as reason for the People’s Bank of China to unleash more liquidity.

Equichain Wealth Advisors: Market View & Opinion

Interest rate at current level is high compared to 2006 – 07 period which was followed by 2008 economic crisis.  Interest rate hike seen from March 2022 was steepest rate hike in recent history and is yet to show its impact on economic activity.

Globally equity market is trading near its recent high, commodities are trading at lower level compared to post Russia-Ukraine crisis increase in prices.  Global financial have not factored in any of the risk which can arise out of high interest rate and rating downgrade for U.S. or any other develop economies.  

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Global Market – Fitch downgrades U.S. ratings to AA+ from AAA.pdf
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Global Market – U.S. Fed meeting outcome & BOJ Policy outcome

Global Market – U.S. Fed meeting outcome & BOJ Policy outcome

This week we will discuss U.S. Fed meeting & Bank of Japan policy outcome.  U.S. Fed increase rate by 25-bps to 5.25% to 5.50% is highest in 22 years and further tightening not ruled out.  Bank of Japan continue to maintain ultra-low interest policy and continue with its QE and manage JGB yield between -0.50% to 0.50%.

U.S. Fed hike rate to 22-year high, keeps door open for further rate hike

The Federal Reserve resumed raising interest rates and Chair Jerome Powell left open the possibility of further hikes, which he emphasized will depend on incoming data that has recently signaled a resilient US economy.

Bank of Japan policy decision outcome

The key move that jolted markets was the BOJ’s switch to a more flexible approach on bond buying. The bank turned its heavily defended yield cap into little more than a yardstick. The BOJ will now allow movements beyond 0.5%, further diluting the meaning of a 0% target aimed at stimulating the economy and prices.

Equichain Wealth Advisors: Market View & Opinion

Global market continues to focus on U.S. Fed and BOJ which are currently adopting contrarian policy approach.  U.S. Fed continue to raise rates and keep door open for further rate hike while BOJ keeps rate ultra-low and but however, they may allow JGB yield to move up to 1%.

We would continue to focus where we see risk arising out of tight monitory policy.  Globally inflation seen softening.  Global monitory policy shift to downward trajectory will provide fresh trigger to risk-on sentiment whereas further tightening would lead to risk-off.

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Global Market – U.S. Fed meeting outcome & BOJ policy outcome.pdf
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Global Market – U.S. inflation softening & U.S. Fed preparing for another rate hike

Global Market – Inflation softening & U.S. Fed preparing for another rate hike

This week we will discuss softening of inflation to below 4%, lowest level since April 2021.  US Fed is behind the curve in this cycle.  US CPI & Core CPI data do indicate softening, so now the focus will shift to US Fed meeting on 26-Jul-23.  

US CPI & PPI data – indicate softening

After strong jobs data in first week of July and US FOMC meeting minutes, market is now factoring in 25-bps rate hike on 26-Jul-23.  But CPI & Core CPI data released this week could trigger one more pause before US Fed could review its decision.

Equichain Wealth Advisors: Market View & Opinion

US Fed has long term inflation target of 2% and latest data released is still above U.S. Fed’s long term inflation target.   Current US interest rate is at 5.00% – 5.25%.  In year 2006 – 07, interest rate in US was at 5.25% and sustain at that level for 14-months before we have seen sub-prime crisis.

We believe, economic slowdown and inflation cooling has direct co-relation.  Corporate earnings may get impacted with leg effect as interest rate hike takes some time to show its impact on bottom of pyramid.

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Global Market – U.S. inflation softening & US Fed preparing another rate hike.pdf
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Global Market – U.S. Fed focus to shift to inflation on strong jobs data

Global Market – US Fed – focus shift to inflation on strong jobs data

This week we will discuss another part of the world where high inflation is problem will be back in focus as US Fed meeting on 26-Jul-23.  Last week, we have discussed that China’s PBOC is reducing policy rates and support growth and providing stimulus package.  

US Fed to hike to highest level seen in year 2000

US Fed current policy rates is 5.00% – 5.25%.  If US Fed increase policy rates by 25-bps on 26-Jul-23 to 5.25% – 5.50% – it will be highest policy rates in 21st Century near to rates seen in the year 2000.  Back in 2006 – 2007 policy rates in U.S. were at 5.25% before market has seen sub-prime crisis followed by recession.

US FOMC meeting minutes for June 2023 policy

Almost all members agreed for more rate hike needed and guided for at least 1 – 2 more rate hike in 2023.  Powell said at a conference in Madrid hosted by the Bank of Spain last week. “Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go.”  

Equichain Wealth Advisors: Market View & Opinion

We believe, it is time keep balance approach as globally risk-on sentiment is high despite fear of further rate hike by U.S. Fed.  We do believe that such high interest rate in U.S. could have global impact and market has not fully factored in steepest rate hike by US Fed in last 15 – 16 months.

Click on the attachment to read the full report:
Global Market – U.S. Fed focus to shift to inflation on strong jobs data.pdf
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