The Indian stock market is expected to open lower following weakness in Asian and US markets after hawkish signals from the Federal Reserve.
A rise in US treasury yields lowered appetite for risky assets amid concerns that the US central bank can continue to raise interest rates to fight inflation. Signs of economic stress in China further dampened investor sentiment.
On the domestic front, the Indian markets remained volatile on Wednesday, with both the benchmark indices, Sensex and Nifty closing marginally higher.
“The market has been witnessing pressure on account of weak global cues especially because of the faltering of the Chinese economy and Fitch’s warning to downgrade US midsized banks. Even on the domestic front sharp surge in inflation data and weak monsoon progress in the month of August 2023 seems to have dented the investor’s sentiments,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.
He expects this weakness to persist in the market in the near term in the absence of any positive trigger.
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Let us take a look at key global cues for the Indian stock market today:
Asian Markets
Asian markets declined on Thursday following overnight fall in US stocks amid hawkish signals from the Federal Reserve and signs of economic stress in China.
Japan’s Nikkei 225 fell 0.45% and the Topix eased 0.38%. South Korea’ Kospi declined 0.70%, while the Kosdaq dropped 0.6%.
Hong Kong’s Hang Seng index futures were around 265 points lower at 18,064 compared to the previous close of 18,329.3.
Australia’s S&P/ASX 200 fell 0.15%.
Meanwhile, Gift Nifty was trading lower at 19,392, as compared to the Nifty futures’ previous close of 19,466, indicating a lower start for the Indian benchmark indices.
Wall Street
US stock indices ended lower on Wednesday after the minutes of the Federal Reserve’s latest policy meeting showed that the FOMC members were divided over the need for more interest rate hikes.
The S&P 500 fell 33.53 points, or 0.76%, to close at 4,404.33 points. The index has recorded its deepest two-day decline since April, falling 1.9% over the past two sessions.
The Nasdaq Composite declined 156.42 points, or 1.15%, to 13,474.63, while the Dow Jones Industrial Average ended 180.65 points, or 0.52%, lower at 34,765.74 points.
The minutes of the Federal Reserve’s July policy meeting showed that the central bank has likely not finished raising interest rates. The support to raise interest rates by a quarter point wasn’t unanimous among the broader panel of about 18 officials.
“Most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy… Participants remained resolute in their commitment to bring inflation down to the … 2% objective,” the minutes said.
Read here: Fed minutes: Key takeaways
The Fed minutes said future moves “should depend on the totality” of incoming information and its implications for the outlook.
In the July meeting, policymakers on the Federal Open Market Committee’s (FOMC) had agreed to raise the benchmark overnight interest rate to the 5.25%-5.50% range.
US Treasury Yields at 10-month high
The benchmark 10-year US Treasury yields hit a 10-month high on Wednesday after minutes from the Federal Reserve’s July meeting were released.
Benchmark 10-year yields reached 4.280%, the highest since October 24. A break above the 4.338% level reached in October would bring yields to their highest since 2007, Reuters reported.
Meanwhile, the two-year yields were at 4.984%. It had reached 5.120% on July 6, the highest level since June 2007. The inversion in the yield curve between two-year and 10-year notes narrowed to minus 71 basis points (bps).
Japan exports fall for first time since 2021
Japan’s exports fell in July for the first time in more than two years. As per the data released by the Ministry of Finance (MOF), Japanese exports fell 0.3% in July year-on-year, compared with a 0.8% decrease expected by economists in a Reuters poll. It followed a 1.5% rise in the previous month.
The fall in exports came amid faltering demand for light oil and chip-making equipment, and concerns about a global recession as key markets like China weakened, Reuters reported.
(With inputs from Reuters)
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