Indian markets are likely to be on edge on Wednesday as Asian share markets got off to a cautious start after the White House took a tough line on a trade deal with China just as investors were bracing for the latest batch of economic data from the Asian giant. Shanghai markets had rallied on Tuesday on news Beijing would allow local governments to use cash from special bonds to fund investment projects.
Early Wednesday, the MSCI’s broadest index of Asia-Pacific shares outside Japan was up a slim 0.1%, having climbed 1% the day before. Japan’s Nikkei dithered either side of flat, while Australian shares added 0.3%.
President Donald Trump said on Tuesday he was holding up a trade deal with China and had no interest in moving ahead unless Beijing agreed to four or five “major points" which he did not specify. He also took aim at the Federal Reserve, saying interest rates were “way too high" and the central bank had “no clue".
Fed policymakers will meet on June 18-19 against the backdrop of rising trade tensions, slowing US growth and a sharp step-down in hiring in May that have led markets to price in at least two rate cuts by the end of 2019.
All the uncertainty around trade saw Wall Street break a six-day winning streak to end flat on Tuesday. The Dow eased a tiny 0.05%, while the S&P 500 lost 0.03% and the Nasdaq 0.01%.
Back home, shares of automobile companies are likely to be in focus after passenger vehicle sales in India posted the steepest drop in nearly 18 years in May amid weak demand and a liquidity crunch faced by non-bank vehicle financiers, prompting major automakers to cut production. Sales fell 20.6% in May to 239,347 vehicles from a year earlier, according to data released on Tuesday by the Society of Indian Automobile Manufacturers (Siam). It was the biggest fall since a 22% decline in September 2001 and the seventh consecutive drop in monthly domestic passenger vehicle sales.
Shares of Reliance Industries Limited (RIL) may also be in the spotlight in today's trade as the Mukesh Ambani-led company and its exploration and production partner BP Plc on Tuesday announced the sanction of the MJ project (also known as D55) in Block KG-D6, a deep water gas field off the east coast of India.
Meanwhile, Trump also put currency markets on edge by tweeting that the euro and other currencies were “devalued" against the dollar, putting the US at a “big disadvantage".
That was enough to give the euro a lift to $1.1327, just short of the recent three-month top of $1.1347. The dollar eased back a touch on the yen to 108.44 and stalled on a basket of currencies at 96.708.
In commodity markets, all the chatter of rate cuts globally kept gold near 14-month highs at $1,326.75 per ounce.
(Reuters contributed to the story)