Indian stock markets may be under pressure on Wednesday following weakness in global peers. Also, market investors are likely to be cautious ahead of September quarter corporate earnings which are expected to be bleak. Asian stocks fell the most in a week on Wednesday as the US and China’s ever-expanding dispute over trade and foreign policy showed little sign of coming to an end, weighing on global economic growth.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3%. Japan's Nikkei slid 0.81%. Australian shares were down 0.92%.
Yield on the two-year US Treasury note fell and the curve steepened in Asia after Federal Reserve Chair Jerome Powell signaled further interest rate cuts and the resumption of bond purchases to address a recent spike in money markets rates.
Oil prices fell in Asia as US visa restrictions on Chinese officials and the addition of more Chinese companies to a US trade blacklist battered already slim hopes that Washington and Beijing could reach a truce at trade negotiations this week.
The United States and China are engaged in a year-long row that has slowly expanded beyond trade policy, suggesting even more damage to an already fragile global economy.
US stock futures edged 0.06% higher in Asia, but sentiment was weak after the S&P 500 ended 1.56% lower overnight in response to the US visa restrictions.
The US State Department announced the move just a day after the Commerce Department cited the mistreatment of Uighur Muslims in China in its decision to add 20 Chinese public security bureaus and eight companies to a trade blacklist. The US move has cast a pall over US-China trade talks in Washington, where deputy negotiators met for a second day to prepare for the first minister-level meetings in more than two months on Thursday and Friday.
President Donald Trump has said tariffs on Chinese imports will rise on 15 October if no progress is made in the negotiations.
Worries about US-Sino relations boosted safe-haven assets in Asia. The yen edged around 0.1% higher to 106.95 per dollar. Spot gold also rose 0.21% to $1,508.90 per ounce.
Back home, the Mumbai Police’s Economic Offences Wing (EOW) may expand its probe into the ₹4,355.43 crore Punjab and Maharashtra Co-operative (PMC) Bank Ltd fraud to include auditors of the bankrupt Housing Development and Infrastructure Ltd (HDIL), which has been at the centre of the scam, according to a Mint report.
The government will soon invite bids to sell its entire stake in Air India, after potential buyers baulked at an initial attempt to divest a partial stake in the national carrier.
The southwest monsoon is all set to start retreating from 10 October, the India Meteorological Department (IMD) said on Tuesday, after knocking the record for the longest-delayed withdrawal, and illustrated with several extreme rainfall events that caused large-scale loss of life and property.
Among currencies, the pound sterling traded near a one-month low of $1.2196 due to reports that Brexit talks between Britain and the European Union were close to breaking down.
The two-year US Treasury yield fell to 1.4174%. The spread between two-year and 10-year Treasuries, the most common definition of the yield curve, widened to 11.3 basis points.
Fed’s Powell, in a speech on Tuesday, indicated openness to further rate cuts and said the time to allow the Fed’s asset holdings to begin to expand again “is now upon us."
The Fed had been shrinking its balance sheet as it unwound crisis-era bond buying programmes. Recent volatility in US money markets raised concern the Fed’s balance sheet became too small, leaving banks with inadequate reserves. Powell said balance sheet expansion should not be read as an effort to stimulate the economy, but weak data on the US manufacturing and services sector last week rattled investors’ confidence that the US economy remained robust.
US crude oil futures fell 0.42% to $52.41. Slower growth in the US and China, the world’s two-largest economies, suggests less demand for energy in the future. A larger-than-expected increase in US crude inventories also fanned fears that the global oil market will continue to struggle with excess supply.
(Reuters contributed to the story)