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Arjun G Nagarajan Profile picture
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11 Aug, 4 tweets, 2 min read
China PMI weakness ahead? Following up on the quoted tweet, one zeroes in on #China's #manufacturing #PMI. Key Asian economies have seen weakness on the back of a rise in their #COVID-19 curves and related restrictions on activity. China has been experiencing multiple...(1/4)
...issues. The recent policy shock aside, from mid-July, China saw power outages, significant floods, all in provinces housing key manufacturing-hubs. Adding to this, the recent surge in COVID-cases have led to a string of lockdowns/restrictions across 14 provinces. While...(2/4)
...the extreme weather disturbances in July was expected to have dented China's production, the PMI manufacturing numbers were only marginally lower. Focus now shifts on August activity that is now expected to tag its Asian neighbours like Malaysia, Vietnam and...(3/4)
...Indonesia. The question that could arise now is if the drop in China activity, however temporary, would have an impact on global value/supply chains.(4/4)

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More from @arjungn80

Arjun G Nagarajan Profile picture
9 Aug
Is the #RBI's #VRRR move policy normalisation? Fridays' note argued that the upward calibration of the variable rate reverse repo (VRRR) was not a sign of normalisation of policy, especially when the Governor said it himself explicitly. The note argued that the VRRR...(1/12)
...calibration was just shifting of monies from one pocket to another, especially when the #callmoney rate is still 22bps below the reverse repo rate. The focus therefore is to bring the call rate closer to the policy rate, when system liquidity is on the rise. One can...(2/12)
...justify the market narrative on three counts. Firstly, the markets saw a surprise dissent against the policy decision (5:1) and noted that it was not unanimous. Secondly, the 60bps upward revision to inflation created a flutter especially when the RBI maintained a...(3/12)
Read 12 tweets
Arjun G Nagarajan Profile picture
16 Jul
Have faith in the Fed. In his testimony to the Congress/Senate Banking Committee, Powell urged lawmakers to have faith in the Fed's judgement. The Fed Chair reiterated his message that inflation would stay elevated for a few more months before moderating...(1/6)
...and that it would be too risky to tighten policy too early. He said:
“The challenge we’re confronting is how to react to this inflation, which is larger than we had expected or that anybody had expected. To the extent that it is temporary, then it would not...(2/6)
...be appropriate to react to that. But to the extent that it gets longer and longer, we’ll have to continue to revaluate the risks that would affect inflation expectations and would be of longer duration and that’s what we’re monitoring...”.
On the nature of...(3/6)
Read 6 tweets
Arjun G Nagarajan Profile picture
16 Jul
#Crude down 5% in the last few days. Crude prices have been correcting over the last few days by around 5% from its recent high of $75.4 on Wednesday. This comes on the back of press reports quoting #OPEC+ sources that the #UAE had reached a compromise. UAE's baseline...(1/4)
...output is expected to be increased to 3.65mbpd from the current 3.17mmbpd. This is broadly in line with recent market expectations. This eases the markets' read of a tight supply situation and helps soften the demand-supply balance, especially given the...(2/4)
...expectation of a demand pickup in H2 of 2021. Further on the Iranian wildcard we had written about in an earlier tweet, Iran is not expected to return to the negotiating table with the #US until it forms a new government, that is expected to take office...(3/4)
Read 4 tweets
Arjun G Nagarajan Profile picture
14 Jul
US inflation reaffirms 'transitory'. US inflation continued to rise and stood higher than expectations for a third month in a row. US inflation for the month of June stood at 5.4% y/y, much higher than market expectation of 4.9%. Core inflation also rose higher to...(1/8)
...4.5%, higher than the 4% consensus.
Why does this again reaffirm transitory for the Fed? This is mainly because the key drivers of inflation came from almost the same items seen in earlier months: used cars/trucks (45%), gasoline (45%), fuel oil (45%), utility...(2/8)
...gas service (16%) and transportation services (10%). These are almost entirely reflective of reopening of the economy and could moderate into the months ahead as the economy continues to normalise. July is a month when most of the US would be up and...(3/8)
Read 8 tweets
Arjun G Nagarajan Profile picture
14 Jul
Vaccines seem at work in the #UK. With every incremental day of contained deaths in the UK, the efficacy of the #vaccines in containing #COVID19 mortalities appears clearer. The infection and mortality curves in the UK make this fairly clear. While the infections curve...(1/6)
...in the UK continues to rise and is yet to see a peak, the daily fatalities have barely seen a pickup, compared to where it was the last time around. During the last wave, the mortality curve saw a pickup around a month or so after the infections curve. Looking...(2/6)
...at absolute numbers, the 7D average (7DAvg) of daily infections is now at 34k+ and the 7DAvg of daily deaths are at 30. During the last wave, on the rising part of the curve, when 7DAvg cases stood at 34k+ (25 Dec), the 7DAvg mortality stood at 480. This can be...(3/6)
Read 6 tweets
Arjun G Nagarajan Profile picture
12 Jul
Does the #US10Y yield puzzle affect India? An earlier tweet covered the various angles to the US10Y yield puzzle. The perceived softness around #USgrowth appears to stand-out as a prominent reason. During the same time last week, we saw a sharp rise in the Indian 10Y...(1/12)
...yield to 6.18%. This appears to have been on the back of the #RBI's surprising (disappointing for traders/underwriters) choice of picking relatively illiquid papers for its new tranche of G-SAP 2.0. The announcement of a new 10Y benchmark paper auctioned on...(2/12)
...Friday, with a higher traded yield was another reason. Are the US and Indian bond markets related in anyway? The answer is an obvious yes. Given that the US is a key global driver, the #Fed's policy rates naturally push monetary policy of emerging markets and...(3/12)
Read 12 tweets

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