Indian inflation slows to multi-year low in May

CPI inflation in India slowed to 2.8% y/y in May, down from 3.2% the previous month and beating the predicted 3.0% rise. This marked the seventh month in a row of lower inflation and the slowest pace of annual price growth since February 2019, with a notably modest rise (1.0% y/y) in food prices driving much of the slowdown. The lower-than-expected inflation print raises the chances of another rate cut from the RBI at its August meeting following the surprise 50bps cut implemented last week when a quarter-point cut had been anticipated.

Industrial production in Turkey was up 3.3% y/y in April, compared with a 2.5% rise the previous month. However, production was 3.1% lower than seen in March. The monthly drop was driven by a 2.5% fall in mining and quarrying and a 3.4% decline in manufacturing, while electricity, gas, steam & air conditioning rose 0.2%. All constituents were up on the previous year and the annual rise was the strongest since December last year.

Following on from the softer CPI print earlier in the week, US PPI inflation was also a little weaker than predicted at 0.1% m/m compared to the predicted 0.2% rise. Core PPI was also up 0.1% on the month. Just like the CPI print there was no discernible pass-through from tariffs manifesting in the data. Meanwhile, the weekly initial jobless claims was at 247,000 last week, down from 248,000 the week before. Recurring claims in the week prior rose to the highest level since late 2021 at 1.96mn.

UK GDP contracted 0.3% m/m in May, worse than the predicted 0.1% contraction and compared with growth of 0.2% the previous month. The government attributed the disappointing print to the effects of US tariff uncertainty.

Today’s Economic Data and Events

18:00 US University of Michigan sentiment index, June. Forecast: 53.6

Fixed Income

• A strong 30-yr bond auction in the US prompted a rally in USTs yesterday, with yields falling across the curve. The 2yr yield fell 7bps to 3.9515%, while the 10yr ended the day 6bps lower at 4.3592%.

Currencies

• The dollar index fell to a three-year low yesterday as it closed down 0.7% on the day, with a softer PPI print the near term catalyst for the decline. The losses were broad based, with CHF the biggest gainer as it added 1.2% to 0.8102. EUR closed up 0.8% at 1.1584, while GBP was up 0.5% at 1.3613.

Equities

• Asian equities have sold off this morning as markets digest the news from the Middle East. The Hang Seng is presently trading down around 0.9% while the Nikkei has lost 1.3%.
• US futures are also showing a decline, though yesterday there was some positivity as the Dow Jones and the NASDAQ both added 0.2% and the S&P 500 gained 0.4%.
• Locally, the DFM fell 2.3% yesterday and the ADX ended the day 1.1% lower. Saudi Arabia’s Tadawul fell 1.5% on the final day of its trading week, closing up marginally w/w at 0.1%.

Commodities

• Oil prices have spiked this morning following Israeli strikes on Iran. Brent futures have been trading up around 12% at USD 77.5/b at the time of writing, from a close of USD 69.4/b yesterday, while WTI is currently up around 10.5% at USD 75.3/b from yesterday’s USD 68.0/b.