MUMBAI: Indian stock markets will likely be volatile on Wednesday while SGX Nifty futures suggest a soft opening for domestic benchmark indices. On Tuesday, the BSE Sensex ended at 58,117.09, down 166.33 points or 0.29% and the Nifty was at 17,324.90, down 43.35 points or 0.25%.
Asian markets were precariously poised on Wednesday as the world waited to hear from the U.S. Federal Reserve on when it would stop buying assets and start raising interest rates, possibly piling pressure on its peers to follow.
Futures have already priced in an end to tapering by March and a first hike to 0.25% in May or June, with rates approaching 0.75% by year end.
Also vital will be the ultimate destination for rates given markets are currently priced for a peak of just 1.5-1.75%, a level that would likely not even top inflation.
The rapid spread of the Omicron variant is an added complication that could incline the Fed to be less hawkish, though recently officials have sounded more concerned about the persistence of inflation than the pandemic.
Whatever the Fed decides, it will set the bar for the central banks of the EU, UK and Japan when they meet this week, and add to pressure for further tightening in emerging markets.
So many potential pitfalls kept investors nervous and MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1% in slow trade.Japan’s Nikkei edged up 0.1% and South Korea lost 0.3%. Data on Chinese retail sales and industrial production are also due later Wednesday, followed by U.S. retail sales.
Nasdaq futures and S&P 500 futures were all but flat in early trade, having lost ground overnight.
Back home, multi-business conglomerate ITC Limited has not given any concrete plan for demerger and listing of businesses to unlock value at its analyst meet on Tuesday, but did not rule out that those are options for the company, according to analysts present on the occasion.
The market was expecting some concrete announcements from the company management in this direction at the meet.
State Bank of India on Tuesday said it has raised ₹3,974 crore by issuing Basel III compliant bonds to subscribers. The committee of directors for capital raising at its meeting held on Tuesday approved allotting 3,974 Basel III compliant non-convertible taxable, perpetual debt instruments qualifying as additional tier I capital of the bank, the lender said in a regulatory filing.
Nearly two decades after introducing the prompt corrective action framework to nurse wobbly banks back to health, the banking regulator on Tuesday said similar rules would soon apply to non-banking financial companies following several high-profile shadow lenders collapsing in recent years.
Treasury yields were a shade higher in the wake of an unexpectedly strong reading for U.S. producer price inflation overnight.
Ten-year yields nudged up to 1.44%, but remain well short of the recent top of 1.693%. The yield curve continued its flattening trend as investors wager an earlier start to Fed tightening will lead to slower inflation in the long run.
The prospect of rising short term rates supported the U.S. dollar, particularly against the euro and yen where monetary policy is expected to lag.
The single currency eased back to $1.1256 and was again approaching its recent trough of $1.1184. The dollar firmed to 113.71 yen and near resistance at 113.95.
The dollar index pushed up to 96.554, with bulls eyeing the November peak at 96.938.
The risk of rising cash rates has been a burden for gold, which offers no fixed return, and left it sidelined at $1,772 an ounce.
Oil prices eased after the International Energy Agency (IEA) said the spread of Omicron coronavirus variant would dent the recovery in global fuel demand.
U.S. crude lost 34 cents in early action to stand at $70.39 per barrel.
(Reuters contributed to the story)
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Read More: India stock markets seen volatile ahead of Fed policy; ITC, SBI in focus