Markets may be subdued as global bourses drift lower, crude falls

  • Shares of Tata Motors are likely to be in focus today
  • Bond yields have plunged worldwide in the past several weeks

Indian equities may be flattish on Thursday but SGX Nifty trends indicated weak opening. SGX Nifty is down 0.23% or 27.50 points in early trade. Asian stocks stuttered on Thursday, dogged by uncertainty over an intractable US-China trade dispute, while oil prices flirted with five-month lows due to higher US crude inventories and a bleak demand outlook.

MSCI's broadest index of Asia-Pacific shares outside Japan ticked down 0.1%, slipping from a one-month high touched earlier this week, while Japan's Nikkei lost 0.3%. On Wall Street, the S&P 500 lost 0.20% on Wednesday.

Back home, India’s factory output picked up in April to hit a six-month high, while retail inflation accelerated at the fastest pace in seven months in May, but is still within the central bank’s tolerance level, leaving scope for more rate cuts. Data released by the National Statistical Office showed the index of industrial production (IIP) expanded at 3.4% in April from 0.3% a month ago, while retail inflation quickened to 3.05% in May from 2.99% in the previous month.

Shares of Tata Motors are likely to be in focus today as Jaguar Land Rover Ltd, its UK subsidiary, showed a 12.2% sales decline in May, the twelfth consecutive month of falling sales for the luxury carmaker. At 26.4% year-on-year, the drop in China sales is lower than the 46.7% drop in April, and the steep decline of 51% in the March quarter.

Meanwhile, crude oil tumbled 4% to its lowest settlements in nearly five months, pressured by another unexpected rise in US crude stockpiles and by a dimming outlook for global oil demand. Brent crude futures barely moved at $60.01 in early trade after a 3.7% slide on Wednesday to $59.97 a barrel, the international benchmark's lowest close since January 28.

US West Texas Intermediate crude futures firmed up slightly to $51.29 per barrel, compared to the previous day's close of 50.72 a barrel, its weakest settlement since January 14.

Data showed on Wednesday US consumer prices barely rose in May, with core annual inflation slowing to 2.0%, compared to a peak of 2.4% last July, adding to the growing expectations of a Federal Reserve rate cut in coming months. Investors will be looking to what Fed policymakers will say after its next policy meeting on 18-19 June with Fed Funds rate futures pricing in a 25-basis-point rate cut for the subsequent policy review on 30-31 July.

The 10-year US Treasuries yield dipped to 2.12%, a tad above Friday's 2.053%, its lowest level since September 2017 while the two-year yield fell to 1.887%.

Bond yields have plunged worldwide in the past several weeks as investors bet the Fed, and possibly other major central banks, will cut rates to cushion the potential economic damage from the US-China trade standoff.

Hopes that the leaders of the two countries will clinch a deal on the sideline of Group of 20 summit meeting in Osaka on 28-29 June have been fading as neither side has shown a willingness to compromise.

Major currencies saw limited moves, and traders say few were placing big bets ahead of key events later this month including the Fed's policy review and the G20 meeting. The euro slipped to $1.1293, stepping back from 2-2.5-month highs of $1.1348 touched on Friday. The dollar was little changed 108.47 yen.

The British pound is on the back foot after British lawmakers defeated an attempt led by the opposition Labour Party to try to block a no-deal Brexit by seizing control of the parliamentary agenda from the government. Sterling fetched $1.2693, not far from this week's low of $1.2653.

(Reuters contributed to the story)