India’s industrial output shrank while inflation swelled. Photo: Hemant Mishra/Mint
India’s industrial output shrank while inflation swelled. Photo: Hemant Mishra/Mint

Stock markets may rise on firm Asian cues, weak macros to weigh

  • Asian share markets jumped as a last-gasp Sino-US trade deal and a likely major election win by Britain's Conservative Party
  • Maruti Suzuki India Ltd has raised its vehicle production target for this fiscal in the first sign that India’s largest carmaker is seeing green shoots of a recovery in the troubled auto sector

Indian stock markets may rise on Friday tracking rally in other Asian shares but weak domestic macroeconomic data may weigh on sentiment. Asian share markets jumped as a last-gasp Sino-US trade deal and a likely major election win by Britain's Conservative Party looked to have cleared a couple of dark clouds from the global horizon.

The double dose of relief slugged safe-haven sovereign bonds and the Japanese yen, even leading investors to scale back the chance of more interest rates cuts around the world.

The pound hit its highest since mid-2018 as UK exit polls seemed to rule out a shock win by the left-wing Labour opposition, and could help clarify the outlook for Brexit. Polls suggested Prime Minster Boris Johnson could gain a commanding 368 seats in Britain's Parliament, settling another long-standing uncertainty.

The pound was last up 2.3% at $1.3464 and reached levels on the euro not visited since mid-2016.

A wave of trade euphoria had already lifted Wall Street to record highs. Reuters reported the United States has agreed to reduce some tariffs on Chinese goods and delay a tranche of tariffs as part of a phase one deal. China also has agreed to make $50 billion in agricultural purchases in 2020 as part of the deal.

In Asia, Japan's Nikkei climbed 2.1% to a 14-month high, while South Korean stocks firmed 1.2%. MSCI's broadest index of Asia-Pacific shares outside Japan put on 0.5%.

Wall Street had celebrated the trade deal news with record highs. The Dow ended Thursday up 0.79%, while the S&P 500 gained 0.86% and the Nasdaq 0.73%.

That was bad news for bonds and yields on US 10-year Treasuries shot up to 1.95%, a rise of 16 basis points in just two sessions.

Back home, India’s industrial output shrank while inflation swelled, official data released on Thursday showed, highlighting challenges for policymakers battling an economic slowdown amid surging food prices. Factory output contracted 3.8% in October after shrinking 4.3% in September, in sharp contrast with an 8.4% expansion in October last year. Retail inflation continued to surge in November, fuelled by soaring food prices, as prolonged rains dampened vegetable supplies.

Maruti Suzuki India Ltd has raised its vehicle production target for this fiscal in the first sign that India’s largest carmaker is seeing green shoots of a recovery in the troubled auto sector. The Suzuki Motor Corp. unit has increased the target for the year ending 31 March by 6%, or 60,000 units, to 1.65 million vehicles.

The National Financial Reporting Authority (NFRA) has indicted Deloitte Haskins and Sells LLP for what it called significant failures in the statutory audit of IL&FS Financial Services Ltd (IFIN) for 2017-18 and is examining whether disciplinary proceedings against the auditor need to be initiated, the audit regulator said on Thursday.

Interest rate futures slipped as investors priced in less chance of a rate cut from the Federal Reserve next year -- a shift seen across a range of developed nations.

Other safe-haven assets also took a beating, with the yen sliding across the board. The dollar firmed further to 109.42 yen, having risen 0.7% overnight.

The dollar fared less well elsewhere as the pound and the euro both benefited from the UK exit polls. The euro added 0.5% to $1.1189, while the dollar dipped 0.35% against a basket of currencies to 96.742.

The dollar also lost out to the Chinese yuan to hit an 18-week low as any truce would be seen as a boon for the export-heavy economy. The dollar was last at 6.9487 yuan having shed a steep 1.2% overnight.

The shift from safe havens saw spot gold ease to $1,465.04 per ounce.

Oil prices rallied on hopes a trade deal would support global growth and thus demand. US crude added 36 cents to $59.54 a barrel.

(Reuters contributed to the story)

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