China's export growth slows to single digits, the weakest in almost two years

Key highlights

China's export growth slowed to single digits, the weakest in almost two years, while imports barely changed in April as tighter and wider COVID-19 curbs halted factory production and crimped domestic demand, adding to wider economic woes.

Bank of Japan policymakers remained unwavering in their resolve to keep massive monetary stimulus, even as some saw signs of change in the country's low-inflation environment, minutes of their March policy meeting showed.

China's central bank said it would step up support for the slowing economy, while closely watching domestic inflation and monitoring policy adjustments by developed economies. The PBoC will keep liquidity reasonably ample, prioritize stability and take steps to boost confidence, the bank said in its first-quarter monetary policy implementation report.

USD/INR movement

The USDINR pair ended at an all-time high amid a strong dollar and FPI outflow from Indian assets following the global sell-off. Risk-off moods in global equities and multiyear high in the dollar in overnight trade created dollar demand today. The dollar rocketed to a new two-decade high as worries about higher interest rates and a tightened lockdown in Shanghai deepened investors' fears that the global economy is headed for a slowdown.

Global currency updates

The EURUSD pair traded sideways, tracking the strong American currency and investors' fears of stagflation in the Eurozone after the Ukraine crisis. The U.S. Dollar Index has recently climbed to get around the 104 level and is trying to develop additional upside momentum due to the safe-haven demand on global recession fears. The GBPUSD pair too traded slightly up which could be due to profit-taking. Lately, the pound was trading lower due to renewed recession fears after the monetary policy announcement by the Bank of England and the strong dollar index. Both the pairs are at risk of further US dollar strength as the US inflation numbers, which are expected to land at 8.1%, are lower than the previous figure of 8.5%.

Bond market

U.S. Treasury yields extended their rise, with yields on benchmark 10-year debt pushing further above 3% to fresh 3-1/2 years as expectations of higher interest rates unnerved investors. The yield curve has steepened further after the data showed that the U.S. jobs growth increased more than expected in April supporting the view that the Fed has more tightening to do. Benchmark 10-year U.S. Treasury yields climbed to their highest levels since November 2018 at 3.2%. The domestic bond market too felt the heat of the rising US yield and continuous FII outflows as the 10-Year G-Sec benchmark closed the day at 7.47%.

Equity market

Indian equity benchmarks Sensex and Nifty 50 slid to fresh two-month closing lows, extending losses to a second straight session. Weakness across global markets on concerns about rising interest rates and a tightening lockdown in Shanghai that fuelled worries about global economic growth dampened the sentiment on Dalal Street. Barring IT, all sectors were in the red. Financial, consumer durables and metal shares were the biggest drags on both headline indices. Broader markets suffered deep cuts, with the Nifty midcap 100 and Nifty smallcap 100 indices falling around 2% each.

Evening sunshine

"Focus to be on the US Wholesale Inventories data due later today."

European stocks fell sharply, tracking negative sentiment globally as investors continued to mull over persistently high inflation. Global markets have been volatile in recent weeks as uncertainty reigns over the outlook for monetary policy, inflation and economic growth. U.S. stock futures fell, led by losses in technology shares, as investors shunned both government bonds and stocks on worries that further interest-rate increases and China’s Covid-19 policies would weigh on growth.