Days after China reported some moderation in its April mfr’g indices following tightening steps taken by the PBOC, the Reserve Bank of India stepped up its pace of rate hikes as both their repo and reverse repo rate were hiked by 50 bps vs expectations of 25 bps. In response, the Sensex index fell 2.4% to a 6 week low. The hope of course is that both countries, the two fastest in the world, can achieve a reversal in inflation that both are fighting while at the same time only see a modest slowdown in economic growth. While the long term secular reflation trade/emerging growth commodity story remains firmly in place, the long term bull I’ve been on it has to acknowledge these events and the recent short term toppy action in the group, especially as we approach the end of QE2. The RBAustralia left rates unchanged as expected at 4.75%. April mfr’g PMI in the UK fell to a 7 month low and the pound is sharply lower in response as data like this doesn’t point to any soon to be rate hike from the BoE.
