Index Trend & Conditions – 07:15 a.m. I.S.T.
• Domestic market will be shut on Thursday, Mar 11 on account of Mahashivratri
• The MSCI Asia Pacific ex-Japan is trading higher 0.84%, and the MSCI Emerging Market index is up 0.98%
• U.S. equity futures rose in early morning trade with S&P 500, Dow Jones and Nasdaq futures in green territory; alongside a positive opening in Asia-Pacific benchmarks gauges in early Thursday trade with stocks rising in Japan, Korea, Hong Kong and China; a positive MSCI Asia-Pacific ex-Japan index; U.S. Dollar sinking to 91.84 with 10-Yr Treasury Yields pulling back to 1.53% on tepid inflation data and Gold futures erasing earlier losses at $1,725 indicate a stable-to-positive outlook for the Asian markets
• 10-year U.S. Treasury yield slipped from its session highs as data showed core consumer prices index, which excludes volatile items such as food and energy, rose less than expected last month, at 1.3% year-over-year
India Markets
| NIFTY 50 | OPEN | HIGH | LOW | CLOSE |
|---|---|---|---|---|
| Wednesday | 15,202 | 15,218 | 15,100 | 15,174 |
India’s equity benchmarks advanced on Wednesday trade, tracking gains in Asian peers and amid progress over the $1.9 billion stimulus package in the U.S.
The blue-chip NSE Nifty 50 index advanced 76 points or 0.51% to 15,174 and the benchmark S&P BSE Sensex added 254 points or 0.50% to close at 51,279
Broader markets out-performed headline peers — Midcap 100 index added 0.82%; Smallcap 250 index added 1.06% and Nifty 500 added 0.59%
Nifty P/E for Mar 10 is at 41.33 from 41.12 and Nifty P/B is at 4.30 from 4.28, as recorded by NSE India
Bank Nifty opened with a gap up but moved in a consolidative manner throughout the session. Banking stocks are lacking the momentum to continue the run. The index formed a bearish candle on the daily scale and added 72 points, or 0.20%, to settle at 35,938
India VIX or the barometer of nervousness in the market, fell -7.79% from 22.49 to 20.74 levels
A cooldown in VIX below the 21-20 zone is needed for the bullish grip and a smoother move to continue in the market
Overnight Call Money rate weighted average stood at 3.17% as per RBI data. It moved in a range of 1.90 — 3.40% for Mar 09
Yield curve on the benchmark 10-year government bond steepened to 6.43%, while the rupee strengthened to 72.7880 per U.S. dollar
5 Yr interest-rate swaps jumped 63 basis points in Feb, the biggest advance since the 2013 taper tantrum, reflecting growing expectations of a tighter monetary policy. Swap rates signal India will see the most rapid tightening of any nation in Asia, according to Standard Chartered. Fears of a resurgence in inflation driven by rising oil prices is adding to the speculation
Swap markets across Asia are signaling tighter monetary policies going ahead, making it challenging for central banks to nurture a recovery without stifling growth
India’s benchmark 10-year bond yields have surged to 6.21%, from as low as 5.81% in Jan. Similarly, top-rated corporate bond yields have jumped by more than 60 points in 2021, convincing a number of borrowers to scrap debt offerings in recent days amid the volatility
India’s forex reserves increased for the 2nd-consecutive week, touching $584.554 billion as of Feb. 26, up by $689 million
• Core currency assets – the largest component of the overall reserves – rose by $509 million to $542.615 billion
• Gold reserves increased by $172 million to $35.421 billion
• Special drawing rights (SDRs) with the International Monetary Fund (IMF) rose by $9 million to $1.517 billion
• Reserve position with the IMF declined marginally to $5.001 billion
“Markets are expecting a rise in inflation due to the rapid increase in the monetary base across economies, and more recently the increase in commodities prices,” said Nagaraj Kulkarni, senior Asia rates strategist at Standard Chartered in Singapore. “However, central banks are more sanguine about their own inflation expectations so far.”
“The market is swept up by high intensity global reflation trade,” said Suyash Choudhary, head of fixed income at IDFC Asset Management. “Within this, India’s sensitivity to crude oil prices as well as the V-shaped rebound in economic activity may be creating divergent expectations of the monetary policy path ahead.”
America Markets
Wall Street’s benchmark indices jumped on Wednesday trade, with the Dow hitting a record high, as data showed underlying consumer prices remained tepid in February, easing concerns about a spike in inflation
The broad-based S&P 500 gained 23 points, or 0.6%, to 3,898
The Dow Jones Industrial Average, composed mostly of cyclical stocks, jumped 464 points, or 1.5%, to 32,297, marking its 11th record of 2021 and first close above 32,000
The tech-heavy Nasdaq Composite Index lost 5 points, or less than 0.1%, to 13,068
U.S. equity futures rose in early Thursday trade. S&P500 futures is up 0.08%; Dow Jones futures is up 0.10% and Nasdaq futures is up 0.06%
10-yr U.S. Treasury yields, which move inversely to the price, pulled back to 1.53% with dollar slipping to 91.84
The Cboe Volatility Index, known as Wall Street’s “fear gauge,” fell -6.12% to 22.56 on Wednesday
Annual inflation rate in the U.S. increased to 1.7% in Feb from 1.4% in Jan, compared to market forecasts of 1.7%. It is the highest rate since Feb of 2020 with main upward pressure coming from energy cost (3.7% vs -3.6% in Jan), namely gasoline (1.6% vs -8.6% in Jan), electricity (2.3% vs 1.5% in Jan) and utility gas service (6.7% vs 4.3% in Jan)
On a monthly basis, consumer prices were up 0.4%, also in line with expectations as gasoline went up 6.4% and accounted for over half of the increase. Annual core inflation on the other hand, came in below forecasts at 1.3%
President Joe Biden’s $1.9 trillion Covid-19 relief bill cleared its final congressional hurdle, with the House passing the bill on a 220-to-211 vote
“Expectations for near-term inflation to rise is going to remain due to the huge public borrowings, but the tame inflation data that has come today would definitely drive some optimism among investors,” said Arthur Weise, chief investment officer at Kingsland Growth Advisors
“We have seen a genuine rotation from growth to value,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. “The companies that were laggards before, like financials and energy, have ruled the roost lately.”
Asia-Pacific Markets
Asian benchmark stocks opened higher in early Thursday trade, following U.S. peers as the rotation into value shares resumed in the U.S. after a tame inflation report
Japan’s Nikkei 225 added 0.25% to 29,107 and Topix 500 dropped -0.02% to 1,494
South Korea’s Kospi added 1.53% to 3,003
In Hong Kong, Hang Seng added 0.28% to 28,986 and Hang Seng China Enterprises added 1.05% to 11,179
In China, CSI 300 added 0.66% to 5,003 and Shanghai Composite added 0.70% to 3,381
Australia’s S&P/ASX 200 dropped -0.56% to 6,674
China’s producer prices rose at the fastest pace in more than two years in Feb, fueled by surging commodity costs, while consumer deflation eased
• The producer price index rose 1.7% YoY in Feb, stronger than economists’ forecasts for a 1.5% increase
• The consumer price index fell -0.2% YoY in Feb, following a -0.3% drop in Jan
Resurgent producer prices raises the prospect of China exporting inflation to the rest of the world as factories start hiking prices for goods sold abroad. Bond markets have already been roiled by expectations that faster global growth and massive fiscal stimulus will push up inflation
China’s government outlined new economic targets last week, setting a goal of about 3% for consumer inflation for this year, down from 3.5% in 2020. It’s aiming for economic growth of more than 6%
China reported a trade surplus of $103.25 billion in Jan-Feb period, rebounding sharply from a $7.21 billion deficit in the same period YoY, and easily beating market consensus of a $60 billion surplus
• Exports jumped 60.6% YoY in dollar terms in the Jan-Feb period to $468.87 billion, far above market estimates of a 38.9% rise. Exports of refined oil rose by 1.9% YoY to 10.96 million ton, while those of steel jumped 29.9% to 10.14 million ton
• Imports climbed 22.2% YoY in the same period, to $365.62 billion, beating market consensus of a 15% increase, boosted by improving domestic demand and higher commodity prices. Arrivals grew in terms of volume for iron ore (2.8%), steel (17.4%), unwrought copper and copper materials (4.7%), natural gas (17.4%), crude oil (4.1%), the primary form of plastics (8%), mechanical and electrical products (25.4%), and meat (27.6%). Imports soared from the U.S. (66.3%), Japan (26%), South Korea (21.7%), Taiwan (41.2%), and the EU (32.3%)
“Metal prices were on the rise due to global fiscal stimulus money to be spent on infrastructure projects,” said Iris Pang, chief economist at ING Wholesale Banking. “If crude oil price keeps increasing it would push up other prices, like transportation, and therefore production cost, then it could generate inflation.”
EU Markets
European equities hovered near pre-pandemic highs on Wednesday trade, as a rise in shares of Adidas after an upbeat sales forecast and gains in telecom stocks outweighed losses in mining and travel sectors
The pan-European Stoxx Europe 600 added 0.40% to 422 and Stoxx 50 added 0.80% to close at 3,816
European markets recorded a strong start to March, with the German DAX hitting an all-time high as investors snapped up so-called cyclical stocks like banks and oil firms on hopes of a strong economic rebound from the coronavirus crisis
Germany’s DAX30 added 0.73% to life high of 14,542
London’s blue-chip FTSE 100 added 0.06% to 6,732
France’s CAC40 added 0.80% to 5,973
Denmark’s OMX Copenhagen 20 added 1.15% to 1,439
Spain’s IBEX 35 added 0.36% to 8,527
Italy’s FTSE MIB added 0.46% to 23,925
Industrial production in France jumped 3.3% month-over-month in Jan, rebounding from losses in each of the previous 2 months and beating market forecasts of a 0.5% increase. It is the biggest gain in six months. Production rose in manufacturing (3.3%), namely manufacture of machinery and equipment goods (8.4%), food products and beverages (1.6%) and coke and refined petroleum due to the re-opening of several refineries that had been shut down (7.2%)
Investors will closely watch a European Central Bank meeting later this week to see if policymakers have decided to step up the pace of emergency bond purchases to calm skittish markets
“For the time being, these big intraday and day-by-day moves are probably to be expected until we see what inflation does genuinely look like after the recovery takes hold,” said Edward Park, chief investment officer at Brooks Macdonald. “The question there is whether Chinese factories start passing on the increase in prices to global customers. You could have inflation being stoked from China, and coming on to the rest of the world.”
Oil & Natural Gas Markets
Crude-oil prices held onto gains in early Thursday trade, as the dollar strengthened, adding more volatility to the market after a mixed industry report on U.S. stockpiles
The American Petroleum Institute reported gasoline stockpiles fell last week, while crude inventories expanded. U.S. gasoline inventories dropped by 8.5 million barrels last week, while distillates – a category that includes diesel – fell by 4.8 million barrels, where as crude stockpiles rose by almost 13 million barrels
Major banks upgraded price forecasts. Goldman Sachs raised its Brent forecasts by $5 a barrel and now sees the global crude benchmark at $80 in Q3. JPMorgan increased its Brent projection by $2 to $3 a barrel and Australia & New Zealand Banking Group Ltd. boosted its 3-month target to $70. Citigroup said crude could top $70 before the end of March
WTI Crude is trading at $64.74 per barrel
Brent Crude, the international benchmark for oil, is trading at $68.21 per barrel
Natural Gas futures is trading lower at $2.661/MMBtu
“Demand is expected to improve and supply is continuing to shrink, but some are feeling the burden of this massive rally,” said Kim Kwangrae, commodities analyst at Samsung Futures Inc. “It’s a mixed market.”
Commodities Markets
Gold futures erased earlier losses to hit a 1-week high in early Thursday trade, as U.S. treasury yields eased after subdued inflation data, with bullion gaining further support from a dip in the dollar
Gold’s status as an inflation hedge has been challenged by a firmer dollar and higher bond yields, which translate into a higher opportunity cost of holding non-yielding bullion
U.S. Gold futures (Comex) is trading at $1,725 an ounce
Silver futures (Comex) is trading at $26.04 an ounce
Gold / Silver Ratio rose to $66.01
Copper futures (Comex) steadied at $4.0145 per pound
Citigroup forecasts copper prices will rally to $5 per pound in six to 12 months on a better-than-expected recovery in demand, most notably outside China
SGX Iron-Ore futures is trading at $164.75 per tonne
In India, Spot Gold is trading at INR 44,744 per 10 grams
“Although inflation is becoming a theme, gold is struggling,” Robert Jan van Der Mark, a portfolio manager at Aegon NV who sold his gold holdings in late November. “The recent move in U.S. yields was also mainly driven by real yields moving up, not really by break-even inflation. That’s not helping gold prices.”
Currency Markets
U.S. dollar index, DXY remained lower at 91.84 in early Thursday trade, after pulling back from multi-month high as a retreat in Treasury yields reduced the currency’s appeal
Positioning data shows hedge funds paring net short-dollar positions to $29 billion last week. But that is still well above historical averages of $9 billion and not far from decade-high levels around $36 billion hit at the end of January
INR strengthened with USD / INR at 72.7880
JPY weakened with USD / JPY at 108.6200
CNY strengthened with USD / CNY at 6.5055
EUR weakened with EUR / USD at 1.1895
GBP strengthened with EUR / GBP at 0.8556
GBP strengthened with GBP / USD at 1.3901
“Usually, a healthy U.S. economy benefits the rest of the world. But the explosive rebound in U.S. growth is allowing the dollar a three to six month advantage over other currencies,” said Aaron Hurd, a portfolio manager who helps manages $145.3 billion in assets at State Street Global Markets. “This is about the differential pace of economic recovery, and the macro risk sentiment due to the potential for occasional risk-off moves.”
| 3-Month LIBOR Rate | As on 10 Feb 2021 |
| US DOLLAR | 0.18 per cent |
| Euro | – 0.55 per cent |
| British Pound | 0.08 per cent |
| Swiss Franc | – 0.75 per cent |
| Japanese Yen | – 0.09 per cent |
Bitcoin
Bitcoin / U.S. Dollar fell -0.40% in early Thursday trade to $55,600 as of 07:15 a.m. I.S.T.
Bitcoin has rallied to a two-week high as a risk-on sentiment returned following selloffs in more speculative corners of financial market
Even as high-flying bets like Tesla Inc. and the ARK Innovation ETF have cratered recently, Bitcoin prices have been buoyed by news of more institutional adoption, fueling crypto proponent’s argument that big financial players are rushing to gain exposure to the token, while another viewpoint stands that the digital asset is a stimulus-fueled bubble destined to burst like its 2017-2018 boom and bust cycle
“Bitcoin is unlikely to be a great ‘flight to safety’ play going further,” Matt Maley, chief market strategist at Miller Tabak + Co. said. “Instead, we feel that it is more of a ‘risk-on/risk-off’ play. Therefore, if we see a deeper decline in the stock market, then we think that Bitcoin will likely see a decent decline.”
Bond Markets
Americas : 10 – Year Govt Bond Yields
United States : 1.53%
Canada : 1.43%
Europe, Middle East & Africa : 10 – Year Govt Bond Yields
Germany : -0.31%
United Kingdom : 0.72%
France : -0.06%
Italy : 0.68%
Netherlands : -0.18%
Asia Pacific : 10 – Year Govt Bond Yields
India : 6.43%
Japan : 0.12%
Australia : 1.70%
Hong Kong : 1.09%
Singapore : 1.53%
South Korea : 2.03%
Fund Flows on NSE, BSE and MSEI — 10 Mar 2021
FII/FPI Net Sell Rs (15.69) Crore in Capital Market
DII Net Buy Rs 447.67 Crore in Capital Market
Where We’ve Been Reading —
- Bloomberg
- The Wall Street Journal
- Reuters
- Trading Economics
- Seeking Alpha
- Axios
- Tech Crunch
- NSE Indices India
- Morningstar India
- The Star
- Harvard Business Review
- The Economic Times
