The build-up to introducing 5G services in India is likely to be marred by more acrimony. Photo: Hemant Mishra/Mint
The build-up to introducing 5G services in India is likely to be marred by more acrimony. Photo: Hemant Mishra/Mint

Stock markets seen higher on firm global cues but inflation may worry investors

  • Asian share markets rose on Tuesday and safe-haven assets slid as signs of goodwill between China and the United States supported optimism for global growth
  • Retail inflation shot to a five-and-a-half-year high of 7.35% in December, breaching the central bank’s tolerance limit of 6%

Indian stock markets may continue to tick higher following firm global cues but domestic macro concerns may keep a few investors on the sidelines. Asian share markets rose on Tuesday and safe-haven assets slid as signs of goodwill between China and the United States supported optimism for global growth, with the world’s two biggest economies preparing to formalize a trade-war truce.

The US Treasury Department on Monday said China should no longer be designated a currency manipulator - a label it applied as the yuan slid in August. China, meanwhile, has allowed the tightly managed currency to climb to its highest point since July.

China’s offshore yuan extended strong gains to the dollar on Tuesday morning to a 5.5-month high, supported by rising optimism toward Sino-US trade developments. The offshore yuan surged to a high of 6.8745 per dollar, the firmest level since July 26.

The moves come as a high-level Chinese delegation arrived in Washington ahead of Wednesday’s signing of the phase one trade agreement, a step toward de-escalating a prolonged dispute that has hurt the world economy.

MSCI’s world shares gauge hit a fresh all time high, while MSCI’s broadest index of Asia-Pacific shares outside Japan drifted higher.

Japan’s Nikkei added 0.8% and hit its highest point in a month. Australia’s S&P/ASX 200 rose 0.7% and touched a fresh record intraday high. Gold fell and the safe-haven Japanese yen dropped to a seven-month low.

With the text of the deal is yet to be finalised, the gains could leave stocks exposed should anything go awry, he added, pointing to modest morning volumes hinting at caution.

Back home, retail inflation shot to a five-and-a-half-year high of 7.35% in December, breaching the central bank’s tolerance limit of 6% and confirming fears raised by some economists that India is entering a phase of slow growth and rising prices.

The Securities and Exchange Board of India (Sebi) on Monday allowed two more years for companies to ensure their chairman has a non-executive role, in a major relief for companies that will now get additional time for succession planning.

The build-up to introducing 5G services in India is likely to be marred by more acrimony as operators and vendors claimed that onerous conditions laid out by the government will make 5G trials a costly affair even as commercial uses for the new technology have not been established.

Meanwhile, overnight, Wall Street notched fresh record closing highs, driven by sharp rises in tech stocks as investors bet firms such as Facebook Inc, Microsoft and Apple Inc might have the most to gain from a growing global economy. The S&P 500 rose 0.7% to a record closing high, while the Nasdaq Composite added 1% and also closed at a record peak. The Dow Jones Industrial Average rose 0.29%.

In tandem with the rally, safe-haven assets slipped and slid lower on Tuesday. Gold extended Monday’s fall to trade 0.2% weaker at $1545.15 per ounce.

Oil prices nursed losses and yields on benchmark US. Treasuries rose as prices fell. US crude sat at $58.14 a barrel. Ten-year Treasury note yields rose to 1.8546% compared with its US close of 1.848%.

In currency markets, the Japanese yen weakened past the 110 yen-per-dollar mark while the trade-exposed yuan stood at its highest since July. Besides the trade deal, investors are also eyeing US inflation data, due later on Tuesday, and the beginning of the fourth-quarter US corporate earnings season.

(Reuters contributed to the story)

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