Mumbai: Indian stock markets may rally on Monday riding on the fiscal stimulus package announced last week. The government rolled back some of the controversial measures introduced in the budget, including the enhanced surcharge levied on capital gains. This is expected to reverse the foreign institutional investors (FII) fund outflow from Indian equities.

On Friday, finance minister Nirmala Sitharaman also announced a slew of measures to stoke demand, including a rejig of the government's spending programme by front-loading it, addressing supply-side bottlenecks and easing bank credit rules, even as she promised to end “tax terrorism" that has left India Inc. jittery.

Among global markets, Asian shares sank on Monday as the latest salvo in the Sino-US trade war shook confidence across the world economy and sent investors steaming to the safe harbour of sovereign bonds and gold, while slugging emerging market currencies.

Yields on benchmark 10-year Treasury debt dropped to their lowest since mid-2016, while gold hit its highest since April 2013 as risk was shunned.

There was some relief that China fixed the yuan’s midpoint at a relatively steady 7.0570 per dollar when it had been trading as weak as 7.1850 offshore, countering concerns Beijing would let the currency slide to keep exports competitive.

The MSCI’s broadest index of Asia-Pacific shares outside Japan shed 2.0% and Australia 1.5%. Japan’s Nikkei lost 2.3%, while Shanghai blue-chips fell 1.2%. Wall Street nose-dived on Friday when US President Donald Trump announced a 5% additional duty on $550 billion in targeted Chinese goods, hours after China unveiled retaliatory tariffs on $75 billion worth of US products.

At the G7 meeting in France over the weekend, Trump caused some confusion by indicating he may have had second thoughts on the tariffs. But the White House said on Sunday that Trump wished he had raised tariffs on Chinese goods even higher last week. He also signalled he did not plan to follow through with a demand that US firms close operations in China. Trump is now set to hold a joint news conference with French President Emmanuel Macron later on Monday.

The latest broadside overshadowed a pledge by Federal Reserve Chairman Jerome Powell to “act as appropriate" to keep the US economy healthy, although he stopped short of committing to rapid-fire rate cuts. The markets clearly believe, however, the Fed will have to act aggressively and are fully priced for at least a quarter-point cut in September and more than 110 basis points of easing by the end of 2020.

Back home, Tata Motors Ltd has indefinitely deferred a planned fundraise of up to $1.5 billion in foreign currency loans after failing to garner sufficient interest from potential lenders, according to a Mint report.

Mukesh Ambani’s Reliance Retail Ltd is likely to launch its “new commerce" venture around Diwali, according to another Mint report. New commerce is Reliance Retail’s offline-to-online initiative, which will link producers, traders, small merchants, brands and consumers through technology.

Meanwhile, the drop in yields caused the yen to touch 104.47, but the currency pared losses as the session wore on and was last at 105.21. The next major chart point is a low around 104.10, briefly touched during the “flash-crash" of early January.

The euro was firm at $1.1143, having climbed 0.6% on Friday, although restrained somewhat by speculation the European Central Bank will also have to ease aggressively next month. The dollar fared better elsewhere, making inroads on most emerging market currencies. The Turkish lira briefly tumbled as far as 6.4700 per dollar.

Spot gold received a boost from the slide in yields, rising 1.1% to $1,544.23 per ounce and touching its highest since April 2013.

Oil prices went the other way on worries the tariff dispute would crimp world demand. Brent crude futures slid 68 cents to $58.66, while US crude lost 79 cents to $53.38 a barrel.

(Reuters contributed to the story)