Domestic stocks are likely to see a gap-down start on Thursday after the US Fed projected two rate hikes by 2023, pushing the dollar up and stocks down. US stocks settled lower overnight while Asian markets were trading lower down in early trade. Here’s breaking down the pre-market actions:
STATE OF THE MARKETS
SGX Nifty signals gap-down start
Nifty futures on Singapore Exchange traded 105.5 points, or 0.67 per cent, lower at 15,670, signaling that Dalal Street was headed for a gap-down start on Thursday.
- Tech View: Nifty50 snapped a four-day winning streak on Wednesday and formed a bearish candle on the daily scale after forming three indecisive candles.
- India VIX: The fear gauge jumped 2 per cent to 14.86 level on Wednesday over its close at 14.60 on Tuesday.
Asian markets drop in early trade
Asian stocks opened lower on Thursday, tracking overnight losses in US stocks. The mood was largely negative after the US Federal Reserve officials projected hikes in interest rates by 2023. MSCI’s broadest index of Asia-Pacific shares outside Japan was down by 0.68 per cent.
- Japan’s Nikkei tanked 1.21%
- Korea’s Kospi shed 0.66%
- Australia’s ASX 200 declined 0.46%
- China’s Shanghai Composite retreated 0.05%
- Hong Kong’s Hang Seng slipped 0.30%
US shares ended lower
Wall Street stocks declined as the Federal Reserve edged a bit closer to tightening monetary policy while adopting a broadly dovish response to recent signs of inflation.
- Dow Jones declined 0.77% to 34,033.67
- S&P 500 shed 0.54% to 4,223.70
- Nasdaq retreated 0.24% to 14,039.68
Dollar jumps to six-week high
The dollar jumped to a near six-week high on Wednesday as the Fed brought forward its projections for the first post-pandemic interest rate hikes into 2023, citing an improved health situation and dropping a long-standing reference that the crisis was weighing on the economy.
- The dollar index gained to 91.103
- Euro climbed to $1.2003
- Pound gained to $1.3988
- Yen declined to 110.49 per dollar
- Yuan is down against the greenback at 6.4225
Crude oil prices fall
Crude oil prices fell, pressured by a stronger US dollar, but losses were limited by a big drop in crude oil inventories in the United States, the world’s top oil consumer. Brent crude oil futures dropped by 74 cents, or 1%, to $73.65 a barrel by 0103 GMT after reaching its highest since April 2019 in the previous session.
Q4 earnings today
Power Grid Corporation, Tube Investments of India, Natco Pharma, Indostar Capital Finance, Novartis India, Healthcare Global Enterprises, Jammu & Kashmir Bank, DB Corp, Nava Bharat Ventures and Bajaj Hindusthan Sugar are among the companies that will announce their March quarter results today.
FPIs sell shares worth Rs 870 cr
Net-net, foreign portfolio investors (FPIs) turned sellers of domestic stocks to the tune of Rs 870.29 crore, data available with NSE suggested. DIIs, turned sellers to the tune of Rs 874.2 crore, data suggests.
Rupee: Extending its losses for the seventh straight session, the rupee slipped by 1 paisa to end at 73.32 against the US dollar following risk-off sentiment among investors ahead of the outcome of the US Federal Reserve meeting.
10-year bond: India’s 10-year bond yield marginally jumped 0.08 per cent to 6.01 after trading in 6.00 – 6.07 range.
Call rates: The overnight call money rate weighted average stood at 3.14 per cent, according to RBI data. It moved in a range of 1.90-3.45 per cent.
DATA/EVENTS TO WATCH
- China House Price Index YoY May (07:00 am)
- EU New Car Registrations YoY May (11:30 am)
- Euro Area Core Inflation Rate YoY Final May (02:30 pm)
- Euro Area Inflation Rate YoY Final May (02:30 pm)
- Euro Area Inflation Rate MoM Final May (02:30 pm)
- US Jobless Claims 4-week Average June/12 (06:00 pm)
- US Initial Jobless Claims 12/June (06:00 pm)
Covid 2.0 loss pegged at Rs 2 lakh cr
RBI has estimated that the second wave may result in a Rs 2 lakh crore loss in output during the current fiscal, in what is the first such exercise conducted by the central bank or the government. A loss of economic output may not have a direct corelation with the GDP, but points to some loss in the value-addition across the economy. Already, several agencies, including the RBI, have lowered growth projections for the year.
Fed signals 2 rate hikes in 2023
US Fed held interest rates near zero, but signalled they expect two increases by the end of 2023, pulling forward the date of liftoff as the economy recovers. The central bank held the target range for its benchmark policy rate unchanged at zero to 0.25% — where it’s been since March 2020 — and pledged to continue asset purchases at a $120-billion monthly pace until “substantial further progress” had been made on employment and inflation.
Demand-led inflation to ease soon
India’s inflation may have breached the prescribed target for the RBI, but the economists at the central bank believe that it may just be transitory and is driven by the release of pent-up demand. High-frequency indicators show pressures easing, which may get support from a normal monsoon even as core inflation is at its highest since 2014.
Borrowing costs begin to rise in India
Borrowing costs in India could begin to harden, albeit marginally, after trader-focused lender Karur Vysya Bank took the lead Tuesday, increasing benchmark rates about 20 basis points. Shorter duration sovereign rates, too, rose to a 56-week high in Wednesday’s primary sale.
RBI says short-term yields may rise
RBI on Wednesday signalled that there is scope for yields to rise on short-maturity papers although they should ease for longer maturities, including the10-year benchmark. “The empirical results obtained in this paper indicate that a yield-only model tends to over-predict the level of yields across the spectrum, except 6-8 years maturities segment,” RBI said in a research paper.
Indians spent Rs 15,000 cr on immunity boosters
Indians bought nearly Rs 15,000 crore of vitamin supplements and other immunity boosters in the twelve months to May, up about a fifth from the same period the preceding year, as sales of drugs related directly or indirectly to Covid-19 treatment surged. Prescription antivirals and antibiotics, such as Favipiravir, Remdesivir and Azithromycin, were also in demand.