Indian stock benchmarks opened higher on Friday and are on track to extend their weekly gains for the fifth consecutive week, even as the debate over the US Federal Reserve’s policy trajectory continues.
The NSE Nifty Index and the 30-stock BSE Sensex Index opened in the green, bucking a general trend of global gloom for the second day in a row.
The Sensex index climbed 113.2 points to 60,411.20 in early trading and the Nifty gained 35.7 points to 17,992.20.
India’s equity benchmarks extended their bull run for the fifth consecutive week, with the Sensex and Nifty indexes ending Thursday at a more than four-month high.
In the wake of the recent rally in equities, the the market capitalization of BSE-listed companies hit a new high from ₹2,80,52,760.91 crore on Thursday. Earlier on January 17, the market capitalization (m-cap) of BSE-listed companies hit a lifetime high of ₹2,80,02,437.71 crore.
That even as Asian markets were left uncertain on Friday as the clouds of recession gathered over Europe, underscoring the relative strength of the US economy, the US dollar did all the movements.
MSCI’s broadest index of Asia-Pacific stocks outside Japan fell 0.3%, to be down 1.1% on the week, amid renewed concerns over the health of the Chinese economy have emerged.
South Korea lost 0.5%, while blue chips in China were unchanged. With a rise of 0.3%, the Japanese Nikkei performed better, partly thanks to the continued decline of the yen.
The “R” alarm is sounding in Europe, where natural gas prices hit all-time highs on Thursday, adding to a surge in inflation that will undoubtedly lead to more painful policy tightening and increase the likelihood of a recession.
London’s FTSE futures rose 0.2% while European EUROSTOXX 50 futures fell 0.1%.
After repeatedly failing to break above the 200-day moving average, S&P 500 futures slipped 0.1% and barely changed for the week, while Nasdaq futures fell 0. .2%.
No less than four US Federal Reserve officials warned that there was still work to be done on interest rates, the main difference being the speed and the level to be reached. This raised the possibility of higher borrowing costs weighing on the markets.
Market expectations point to a half-point rise in September and a 3-in-3 probability of 75 basis points (bps). Rates are expected to peak at 3.5% or more; however, some Fed members are pushing for 4% or even more in this tightening cycle.
“There is no sign that the labor market or inflation data is slowing enough for the Fed to declare victory on inflation,” Brian Martin, head of G3 economics at Reuters, told Reuters. ANZ,
“We see upside risks to the Fed’s inflation projections, and we expect those and the dot plot to be revised upwards in September,” he added. “We have revised our year-end federal funds rate forecast up 25 basis points to 4.0% and now expect three 50 basis point hikes over the remainder of 2022.”
All of this underscores the importance of Fed Chairman Jerome Powell’s August 26 speech in Jackson Hole, which is often a highlight in the calendar of central banks.
With two-year yields 34 basis points lower than 10-year yields and blazing recession indicators, the bond market is unmistakably on the hawkish side.
Oil prices were a little more stable on Friday but still down on the week, with Brent hitting its lowest since February at one point on demand concerns.
Brent rose slightly 2 cents to $96.61, while U.S. crude rose 5 cents to $90.55 a barrel.
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