Indian equity benchmarks extended their gains on Tuesday from a sharp rally, in line with gains in broader Asian stocks, reflecting a late-night rebound on Wall Street, even as investors weighed the impact of rising oil prices. widely reduced.
Still, downside risks remain, even after strong US economic data reiterated the Federal Reserve’s aggressive rate hike trajectory.
The BSE Sensex index climbed over 440 points, and the Nifty opened in the green on Tuesday to add to a rally of over 2 per cent.
Indian markets remained closed on Wednesday on account of Dussehra.
As US futures advanced, MSCI’s index of Asia-Pacific shares outside Japan gained 0.4 per cent in early trade. The index has gained 4 per cent this week after falling 13 per cent in September.
Australian shares quickly recovered early losses, and stocks in Japan and South Korea opened higher, tracking a jump in US futures, with the S&P 500 falling marginally on Wednesday.
While the dollar faced an overall bullish mood after its biggest single-day jump in a week on Wednesday, a rise in oil prices threatens to keep inflation above target for the longer term, with hopes that the central Banks will soon roll back their aggressive interest rate hike. ,
On Wednesday, a cartel of oil producers led by Saudi Arabia agreed to cut production drastically, pushing Brent crude futures to a three-week high of $93.99 a barrel.
“More adjustments in oil prices could impact inflation numbers,” Rubila Farooqui, chief US economist at High Frequency Economics, told Bloomberg. He said there has been a slight decline in the last two months. “Inflation measures may reverse in October if prices continue to rise.”
The US services sector continued to expand in September, with data released overnight showing that the labor market is doing well and the trade deficit narrowed.
Mary Daly, the chair of the San Francisco Fed, reiterated that the primary concern of policymakers is to control inflation while lowering market expectations for interest rate cuts in 2023.
In an interview with Bloomberg TV, Emily Rowland, co-chief investment strategist at John Hancock Investment Management, said, “Inflation fears may subside, but then they turn into growth fears, and that becomes a problem for corporate earnings. She goes.” “Even if rates do drop, it’s probably too early to take a call on the stock altogether.”
The unexpected decision earlier this week by the Reserve Bank of Australia to raise rates by only 25 basis points, as well as US economic data suggesting the labor market and economy was weakening, led to more cautious interest rates by central banks. Promoted growth prospects and fostered a sense of risk.
However, those aspirations were dashed when data from the Institute for Supply Management that came in slightly above expectations revealed a return to employment index for the US services sector.
“The bullish optimism in financial markets earlier this week waned as US data continued to illustrate the need for further, decisive central bank policy action,” ANZ analysts told Reuters.
“Attention is now firmly focused on the September labor market report … the market needs to be dominant for a stronger number.”