Markets likely to be marginally up, shares of HUL, IndiGo in focus
The US yield curve inversion deepened on Tuesday to levels not seen since 2007. Finance minister Nirmala Sitharaman on Tuesday indicated that all options are open for the government.
Indian stock markets are expected to be marginally higher on Wednesday. Asian shares eked out meager gains on Wednesday, as higher Wall Street futures provided some relief for investors after an overnight US selloff, though deeper worries about the global economy are likely to keep a lid on sentiment.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.03%, Japan’s Nikkei rose 0.04% and Australia’s shares rose 0.07%. The US yield curve inversion deepened on Tuesday to levels not seen since 2007, which sent Wall Street stocks lower. The S&P 500 fell 0.33%.
Back home, finance minister Nirmala Sitharaman on Tuesday indicated that all options are open for the government to utilize the Reserve Bank of India’s ₹1.76 trillion largesse. Accepting the recommendations of the Bimal Jalan committee, the central board of RBI on Monday decided to transfer ₹1.23 trillion of its surplus and ₹52,637 crore of excess provisions, in a relief for the government struggling to meet revenue targets in a slowing economy.
Shares of Hindustan Unilever Ltd (HUL) are likely to be in focus as it has cut prices of its Lux, Lifebuoy and Dove soaps in the past month, passing on the benefit of cheaper inputs, as India’s largest consumer goods company aims to win customers amid stiff competition and weak demand. For some packs, the price cuts are as steep as 20-30%.
InterGlobe Aviation Ltd’s board has agreed to make policy changes only when all the proposed 10 directors are present, a key demand by co-founder Rakesh Gangwal, according to a Mint report.
Market regulator Securities and Exchange Board of India (Sebi) hinted on Tuesday that it may tighten existing asset valuation norms, which guide mutual fund investments to shield investors from risks of capital erosion in debt-oriented mutual funds and to protect asset management companies (AMCs) from unwarranted redemption pressure.
Among commodities, gold, which is bought as a safe haven during times of economic uncertainty, traded close to a six-year high. Spot gold was unchanged in Asia at $1,542.25 per ounce, but still close to a six-year high.
US stock futures were 0.14% higher, which helped ease investors’ nerves in Asian trading, but there were still plenty of reasons to be concerned.
Investors will focus on how Chinese shares open after China late on Tuesday unveiled measures to boost consumption. A trade dispute between the United States and China is now in its second year and is placing increasing strain on the global economy, forcing policy makers to respond with interest rate cuts and stimulus measures to bolster growth.
A bond yield curve inverts when long-term yields trade below short-term yields and is commonly considered a signal of an impending economic recession. The yield on benchmark 10-year Treasuries stood at 1.4744%, compared with the two-year yield of 1.5159%. The yield curve inversion is the deepest since May 2007, when the US subprime financial crisis started to unfold.
Yields on 30-year Treasuries stood at 1.9554%, below 3-month T-bill yields of 1.9951%, which some traders say is an even more bearish signal.
The dollar was little changed at 105.67 yen after falling 0.3% on Tuesday.
Investors are also focused on 1 September 1, when the first stage of US tariffs on $300 billion worth of Chinese goods is scheduled to go into effect. In response, China has unveiled tariffs on U.S. products set to go into effect the same day.
US crude ticked up 1.17% to $55.57 a barrel, supported by expectations of a drawdown in US crude inventories. (Reuters contributed to the story.)