Stock markets open in red: Sensex plunges 300 points, Nifty below 16,600

Stocks in Asia fell Tuesday amid concerns on the impact on growth due to interest rate hikes by central banks and the surge in crude oil prices

FPJ Web DeskUpdated: Tuesday, May 31, 2022, 09:21 AM IST
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Tokyo stocks opened lower on Tuesday after strong rallies in the previous session and with investors eyeing Chinese economic indicators due later in the day. /Representative image |

The benchmark stock market indices fell amid rising crude oil prices on May 31.

Asian stocks fall

Stocks in Asia fell Tuesday amid concerns on the impact on growth due to interest rate hikes by central banks and the surge in crude oil prices to $118 per barrel after the European Union backed a push to ban some Russian oil.

Tokyo stocks opened lower on Tuesday after strong rallies in the previous session and with investors eyeing Chinese economic indicators due later in the day.

The benchmark Nikkei 225 index was down 0.25 percent, or 69.75 points, at 27,299.68 in early trade, while the broader Topix index slipped 0.31 per cent, or 5.93 points, to 1,916.51.

MSCI's broadest index of Asia-Pacific shares outside Japan snapped a two-day winning streak and dropped 0.2 percent.

World share markets up on Monday

World share markets rose on Monday on bets of a possible slowdown in US monetary tightening and after an easing of COVID restrictions in China. US markets were shut on Monday for the Memorial Day holiday. European equities pared a fourth day of gains, still on course for the longest winning streak since March. Luxury stocks outperformed Monday as China’s reopening plans boosted sentiment.

EU reaches compromises on partial oil embargo on Russia

European Union leaders reached a compromise Monday to impose a partial oil embargo on Russia at a summit focused on helping Ukraine with a long-delayed package of sanctions that was blocked by Hungary.

The watered-down embargo covers only Russian oil brought in by sea, allowing a temporary exemption for imports delivered by pipeline. EU Council President Charles Michel said the agreement covers more than two-thirds of oil imports from Russia.

The new sanctions, which needed the support of all 27 member countries, will be legally endorsed by Wednesday. The punitive move will effectively cut around 90 percent of oil imports from Russia to the EU by the end of the year. The EU gets about 40 percent of its natural gas and 25 percent of its oil from Russia, and divisions over the issue exposed the limits of the 27-nation trading bloc’s ambitions.

China factory activity contracts

China's factory activity contracted at a slower pace in May as COVID-19 curbs in major manufacturing hubs were relaxed, but movement controls still depressed domestic demand, restrained production and weighed on the economy in the second quarter.

China’s official manufacturing Purchasing Managers’ Index for May came in at 49.6, an improvement over April’s reading of 47.4. Japan’s factory output dropped 1.3 percent in April from the previous month, official data showed on Tuesday, on sharp falls in the production of items such as electronic parts and production machinery.

In South Korea, Industrial production in April decreased by a seasonally-adjusted 3.3 percent from a month earlier, shrinking for the first time in seven months and marking the biggest decline since May 2020. Meanwhile, service sector output rose 1.4 percent, extending gains to a second straight month.

Crude prices up

US crude futures rose to $117.70 a barrel. The stronger dollar pushed spot gold a fraction lower to $1,848 an ounce. Bitcoin rallied hard overnight, jumping nearly 8 percent and topping $32,000 for the first time in three weeks. It sat just below there at $31,540 early in the Asian session.

Oil prices rose in early Asian trade on Tuesday after European Union leaders said they had agreed to cut 90 percent of oil imports from Russia by the end of this year. On Monday, oil prices climbed above $121 a barrel, hitting a two-month high as China eased COVID-19 restrictions and traders priced in expectations that the European Union will eventually reach an agreement to ban Russian oil imports.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd said said, "We expect crude oil prices to remain strong in today’s session. Crude oil is having support at $114.50-$112.40 and resistance is at $119.40-$120.80, In INR terms crude oil has support at Rs 8,920-8,780; while resistance is at Rs9,180–9,270".

Fuel prices remain unchanged

Fuel prices remained unchanged for the ninth day in a row on Tuesday, May 31, 2022, according to data available on Indian Oil Corporation’s website. The price of petrol in Delhi stands at Rs 96.72 per litre while that of diesel is at Rs 89.62. In Mumbai, petrol is being retailed at Rs 111.35, and diesel at Rs 97.28, d. In Chennai, petrol is available at Rs 102.63, while diesel is being retailed at Rs 94.24. In Kolkata, petrol is available at Rs 106.03 and diesel at Rs 92.76.

Bullion outlook

Gold and Silver prices have dropped from their morning session's highs but continue to hold support above $1,850 an ounce. Bullion prices' upside were capped amid upside in european stocks and US futures gaining on Monday after China relaxed some of the virus related curbs.

The latest weakness could be linked to the US dollar’s rebound from a one-month low as full markets return to the table. The US Dollar Index snapped a three-day downtrend, around a five-week low, picking up bids to 101.56 at the latest, as bond yields pared recent losses.

Overall, gold and silver prices are likely to witness further selling but the downside appears limited. Rahul Kalantri, VP Commodities, Mehta Equities Ltd said, gold has support at $1838-1824, while resistance is at $1862-1874. Silver has support at $21.55-21.40, while resistance is at $22.10-22.35. In INR terms gold has support at Rs 50,740–50,510, while resistance is at Rs 51,180–51,350. Silver has support at Rs61,080-61,550, while resistance is at Rs 62,680–63,110.

USDINR

The dollar index extended its fall on Monday and slipped below 101.50 levels. The dollar index settled on a weaker note at 101.34 with a loss of 0.31 percent. The USD-INR 28 June futures contract also settled on a weaker note at 77.75 with a loss of 0.09 percent on the National Stock Exchange. The dollar index edged lower with the starting of the new week amid shift in risk sentiments. Rahul Kalantri, VP Commodities, Mehta Equities Ltd said, "We expect the dollar index to remain volatile in today’s session ahead of the consumer confidence data and could hold its support level of 101.20 on a closing basis. On the other hand, the rupee traded sideways but showed some strength after rebound in the domestic equity markets. The rupee is holding its key support level of 78.00 from the last two weeks after weakness in the dollar index and the US bond yields".

GDP data

Official data for Q4 GDP for India due on May 31 is likely to register a 2.7 percent growth for the January-March period, and the FY22 growth is expected to be 8.5 percent.

(With inputs from Reuters and agencies)

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