Here's what changed for the market while you were sleeping

Good morning, dear reader!

A late rally on the Wall Street in overnight trade saw the Dow Jones close 183 points higher. Crude oil prices rebounded in overnight trade and Asian shares are trading mixed this morning. That should ensure a positive start to our market.

Here’s what else changed in macros and markets when you were sleeping.

BoE likely to hold rates
The Bank of England, one of the biggest central banks in the world, is expected to hold rates at the current level of 0.5 per cent at its rate-setting meeting later today. UK’s January service sector PMI print came in at 55.6 in January compared with 55.5 in December. A looming referendum this summer on whether Britain will stay in the EU may force BoE to keep rates unchanged. Analysts, though, say a rate hike is off the table till, at least, the fourth quarter of 2016, as inflation is still not showing an uptick.


Fresh Fed rate hike off the table
The US Fed is growing increasingly concerned about the health of the global financial markets and its impact on the US. New York Fed chairman William Dudley last night said: “Financial conditions are tighter than they were in December” and “needed to be considered in March rate review.” Should the current turmoil persist till March, a rate hike may well be off the table. Data too points in that direction. January Markit services business activity index fell to a two-year low of 53.2 vs 54.3 while US companies created less than 200,000 jobs for the first since September.

US dollar is losing it
The dollar index, a gauge of the greenback against of six major global currencies, fell 2 per cent wiping out all the gains from a week ago when BoJ had initiated negative rates. The fall in the greenback came after NY Fed chairman William Dudley’s comments and US data pointed that a Fed rate hike decision may get delayed this year. The 10-year German Bund yield fell below minus 0.5 per cent for the first time as markets factored in the stimulus from European central bank (ECB).

Dollar’s pain is crude oil’s gain
Brent crude prices surged by 8 per cent to climb back above $35 a barrel in one of its biggest rallies in five months as a weak dollar afforded investors an advantage. Investors were also able to shrug off a large rise in US oil stocks in Cushing, Oklahoma, after Russian oil minister’s comment renewed hopes of talks on cutting the current supply glut in the market. Analysts expect a 50 per cent bounceback in the black gold by the year-end.

India’s inflation expectations above 10%
An RBI survey showed that people’s inflation expectation is still pegged at above 10 per cent. However, the number of people expecting prices to spike has fallen. Of the total households surveyed, 31.3 per cent expect prices to rise in the coming three months, indicating an increased upward pressure on RBI’s medium-term inflation target. This may squeeze the space for RBI to cut rates. It also explains the slacking demand as consumers set aside lower amount from their income for discretionary spending.

OROP payments cleared by govt
The government has cleared a roadmap for the implementation of the One Rank One Pension (OROP) scheme for ex-servicemen. The outlay is pegged at Rs 7,500 crore every financial year with ex-servicemen getting arrears of Rs 10,900 crore paid in four instalments this financial year. The move will aid consumer spending in the economy helping demand to rise for consumer discretionary and durable goods. FMCG, consumer durable companies are expected to benefit.

GM posts record profits, shares tank
One of the world’s biggest automakers, GM, posted record profits for the fourth quarter and for 2015 with net sales soaring to record at $9.7 billion. Shares of the company, though, got dumped as investors remained unimpressed by the current downtrend. The stock slipped 2.46 per cent despite the management maintaining a bullish guidance for 2016.