Trends in SGX Nifty indicate a negative opening for Indian indices

Asian shares made a muted start on Monday as caution gripped ahead of a critical reading on US inflation

FPJ Web DeskUpdated: Monday, June 06, 2022, 08:55 AM IST
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US stocks fell sharply Friday, leaving major indexes with weekly losses /Representative image |

Indian markets could open mildly lower in line with mixed Asian markets today and lower US markets on Friday, said Deepak Jasani, Head-Retail Research, HDFC Securities.

Nifty gave up the early gains on June 03 and ended in the negative after a day of gains. At close Nifty was down 0.26% or 43.7 points at 16584.3.

FPIs seem to have resumed selling activity in Indian markets. After a weekly gain of 1.4 percent, Nifty has formed a Dark cloud cover formation on daily charts. 16,794 on the Nifty will have to be breached for further upmoves to happen. On downmoves 16,443 is an important support, Jasani added.

Mohit Nigam, Head - PMS, Hem Securities said the benchmark Indices are expected to open on negative note as suggested by trends on SGX Nifty. US stock markets ended lower on friday as investors are reacting to solid jobs report that indicates pause in Federal Reserve's aggressive policy-tightening which is needed to cool down high inflation. Dow jones was down by 348 points, whereas NASDAQ was down by 2.67% to 12548.0 levels.

On the technical front 16,300 and 16,700 are immediate support and resistance in Nifty 50. For Bank Nifty 34,800 and 35,600 are immediate support and resistance respectively.

Prashanth Tapse, Vice President (Research), Mehta Equities Ltd said the arkets are likely to start the week on a disappointing note as denting sentiments will be the slump in Wall Street’s indices on Friday on the back of stronger-than-expected US Jobs reports, which revived fears of rate hikes by the Federal Reserve.

The report fanned fears that America's central bank would need to keep up its hawkish bent for longer, meaning that stiff 50-basis-point interest-rate hikes could continue past the Fed's summer meetings. Also, crude oil prices have skyrocketed to $120 per barrel, which can bring back concerns about the inflation, economy and earnings back on the radar. Technically speaking, the perma-bulls will have to really find reasons to protect the downside if Nifty slips below 16,371 mark, Tapse added.

On Friday (June 3), the BSE Sensex fell more than 600 points from day's high to end with 49 points loss at 55,769.23, and the Nifty50 shed 44 points to 16,584.

Asian shares trade mixed

Asian shares made a muted start on Monday as caution gripped ahead of a critical reading on US inflation, while the euro gained on the yen amid wagers the European Central Bank will take a major step toward policy tightening this week.

Asian markets are trading on mix note as investors are reacting to US job data and European Central Banks step toward policy tightening in this week. Nikkei is trading 0.3 percent higher, Hang sang is trading at 0.8% higher whereas strait times is trading 0.4 percent lower.

US stocks fall sharply on Friday

US stocks fell sharply Friday, leaving major indexes with weekly losses, after better-than-expected May payrolls data reinforced expectations for a series of interest-rate rises by the Federal Reserve in coming months. For the week, the S&P 500 fell 1.2 percent while the Nasdaq declined 0.98 percent and the Dow lost 0.94 percent after all three indexes had risen sharply the week before.

Global equity markets fell as US Treasury yields reached two-week highs on Friday (2.946 percent) after data showed the American economy generated a greater-than-expected number of jobs in May, signaling the Federal Reserve will likely continue raising interest rates in its effort to curb inflation.

The technology sector led the way south as Treasury yields rose and a report that Tesla Inc. may be considering job cuts amid CEO Elon Musk’s misgivings about the economic outlook.

US May non-farm payrolls up

US May nonfarm payrolls rose a bigger-than-expected 390,000 data, versus expectations for a gain of 328,000, from an upwardly revised gain of 436,000 in April. The unemployment rate was unchanged in May at 3.6% and average hourly earnings rose 0.3 percent to $31.95 in May. While wage gains slowed slightly to 5.2 percent year over year from 5.5 , they likely remain “too strong for policy makers to take their foot off the brake,

The Institute for Supply Management said its US services index fell to 55.9 percent in May from 57.1 percent a month earlier.

India services sector PMI at highest level in 11 years

Activity in India’s services sector improved to its highest level in eleven years as lifting of virus curbs bolstered demand, though sentiment going forward may be tempered by rising inflation. S&P Global India Purchasing Managers Index for services rose to 58.9 in May from 57.9 in April, making it the best reading since April 2011.

China services activity contracts for third straight month in May

China's services activity contracted for a third straight month in May, pointing to a slow recovery ahead despite the easing of some COVID lockdowns in Shanghai and neighbouring cities, a private business survey showed on Monday. The Caixin services purchasing managers' index (PMI) rose to 41.4 in May from 36.2 in April, edging up slightly as authorities began to roll back some of the strict restrictions that have paralysed the financial city of Shanghai and roiled global supply chains.

FPIs outflow continues for 8th straight month

Continuing its heavy selling spree for the eighth consecutive month, foreign investors pulled out nearly Rs 40,000 crore from the Indian equity market in May on fears of an aggressive rate hike by US Federal Reserve that dented investor sentiments.

With this, net outflow by foreign portfolio investors (FPIs) from equities reached at Rs 1.69 lakh crore so far in 2022, data with depositories showed.

Oil prices jump in early trade

Oil prices jumped in early trade after Saudi Arabia raised prices sharply for its crude sales in July, an indicator of how tight supply is even after OPEC+ agreed to accelerate its output increases over the next two months.

The increase for July shipments resumes a streak of hikes that started in February and was only broken when state producer Saudi Aramco cut prices from record levels for this month.

Aramco raised its key Arab Light crude grade for Asian customers by $2.10 a barrel from June to $6.50 above the benchmark it uses. The market was expecting a boost of $1.50, according to a Bloomberg survey of refiners and traders.

(With inputs from Reuters, Agencies)

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