Indian stock benchmarks opened higher on Friday and are on track to extend their weekly gains for the fifth straight week, even as debate over the US Federal Reserve’s policy path continues.
The NSE Nifty Index and the 30-share BSE Sensex Index opened in green, breaking a broad global gloomy trend for the second straight day.
Indian stock benchmarks have extended their bull run for the fifth week in a row, with the Sensex and Nifty indices ending at a more than four-month high on Thursday.
Following the recent rally in equities, the market capitalization of BSE-listed companies jumped to a new all-time high of ₹2,80.52,760.91 crore on Thursday. Earlier on January 17, the market capitalization (m-cap) of BSE-listed companies had reached a lifetime high of ₹2,80.02,437.71 crore.
That even as Asian markets remained in limbo on Friday as recession clouds gathered over Europe, highlighting the relative strength of the US economy, the US dollar was making all the moves.
The broadest MSCI index of Asia-Pacific stocks outside of Japan fell 0.3 percent, down 1.1 percent on a weekly basis, as new concerns about the health of the Chinese economy emerged.
South Korea lost 0.5 percent, while the blue chips in China remained unchanged. Up 0.3 percent, Japan’s Nikkei outperformed, partly as a result of the yen’s continued decline.
The “R” alarm is sounding in Europe, where natural gas prices hit all-time highs on Thursday, adding to an inflation pulse that will no doubt lead to more painful policy tightening and increase the chances of a recession.
London’s FTSE futures were up 0.2 percent, while Europe’s EUROSTOXX 50 futures fell 0.1 percent.
After repeatedly failing to break the 200-day moving average, S&P 500 futures fell 0.1 percent and barely changed this week, while Nasdaq futures fell 0.2 percent.
No fewer than four US Federal Reserve officials warned that interest rates still have work to do, the main difference being how fast and high they can go. This raised the possibility of higher borrowing costs looming in the markets.
Market expectations point to a half-point increase in September and a one-in-three chance of 75 basis points (bps). Rates are expected to peak at 3.5 percent or higher; however, some Fed members are aiming for 4 percent or even more in this tightening cycle.
“There are no signs that labor market or inflation data is slowing down enough for the Fed to declare victory over inflation,” Brian Martin, head of G3 economics at ANZ, told Reuters.
“We see upside risks to the Fed’s inflation projections, and we expect it and the dot plot to be revised upwards in September,” he added. “We have revised our forecast for the Fed fund rate by 25 bps to 4.0 percent before the end of the year and now expect three increases of 50 bps for the remainder of 2022.”
All of this highlights the importance of Fed Chair Jerome Powell’s August 26 address in Jackson Hole, which is often a milestone on the central bank’s calendar.
With two-year yields 34 basis points lower than a 10-year and burning recession indicators, the bond market is undeniably on the aggressive side.
Oil prices were slightly more stable on Friday, but still lower than the week, with Brent at one point hitting its lowest point since February amid demand concerns.
Brent rose just under 2 cents to $96.61, while US crude rose 5 cents to $90.55 a barrel.