The U.S. dollar bounced back, and long-term bond yields surged after the Federal Reserve kicked off its easing cycle with a larger-than-expected rate cut. Asian stocks also saw gains, with Japan’s Nikkei jumping 2% and Australian shares hitting record highs.
Japanese shares underperformed and the yen inched down against the dollar, as the Bank of Japan began its two-day policy meeting.
Spot gold eased 0.2% to $2,356.92 per ounce as of 0334 GMT. Prices had hit an all-time high of $2,449.89 on May 20.
Treasury yields rose, the dollar soared, and global shares gained on Friday after a strong U.S. jobs report dashed any remaining hopes of a near-term interest rate cut and emphasised a robust economy.
Due to political stability, healthy economic growth, and a sustained decrease in US bond yields, foreign portfolio investors (FPIs) have poured nearly Rs 57,300 crore into Indian equities markets this month.
Asian shares decline as Wall Street ends winning streak; Treasury yields near five-month lows on expectations of soft U.S. inflation data following Britain's similar trend.
The bullish case for gold appears to be stronger compared to the bearish one, as a number of factors are backing an uptrend in the yellow metal
FPIs shifted from buyers to net sellers, withdrawing over Rs 14,767 crore from Indian equities in September, driven by dollar strength, rising US bond yields, and higher oil prices.
Stocks struggled for headway on Wednesday while U.S. yields stood at or near decade highs along the curve as surging oil prices stoked inflation and set the scene for the Federal Reserve to project interest rates staying higher for longer.
A global index of stocks fell on Friday while U.S. Treasury yields rose after a July inflation reading showed prices.
The Swiss National Bank (SNB) and Norges Bank also hiked their benchmark rates, underscoring worries about global inflation.
Oil prices also rose on Powell's hawkish message in testimony prepared for delivery to the House Financial Services Committee.
Earlier in the day, the 10-year benchmark bond yield dipped to 6.9786%, its lowest since April 8, 2022, on the back of cooling inflation and expectation of U.S. Federal Reserve pivoting.
All three major U.S. stock indexes were green, with megacap tech and tech-related companies putting the Nasdaq in the lead.
All three major U.S. stock indexes struggled for direction, with the benchmark S&P 500 and the Dow little unchanged and the tech-laden Nasdaq giving up an early lead to flip into negative territory.
On Wall Street, the S&P 500 was roughly unchanged, but the Dow Industrials were weighed down by a 1.95% drop in Goldman Sachs after its quarterly results.
Budget 2023: With a holiday-shortened week in India, the Chinese New Year, and no major data releases apart from U.S. economic growth and consumption prints towards the end of the week, market participants will keep a close eye on foreign portfolio inflows into Indian markets.
In the current rising interest rate cycle so far, India’s banks have managed their trading books better than in previous rising interest rate cycles.
The government may avoid incremental borrowing via the bills and only borrow to meet its previous repayment needs in the next quarter, the people, asking not to be identified as they aren’t authorized to speak to the media, said. Another option is to cancel sales if the yields demanded by investors are too high, they said.
Spot gold slipped 0.5% to $1,761.86 per ounce, as of 0239 GMT, after hitting its highest since Aug. 18 on Friday. U.S. gold futures eased 0.3% to $1,764.80.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.55% but above the two-and-a-half year low it touched on Thursday. Australia's resources-heavy share index lost 0.74%, while Japan's Nikkei opened 0.38% lower.
Japan's yen crept close to the psychological barrier of 150 per dollar after earlier marking a fresh 32-year low of 149.93.
Japan's Nikkei dropped 1.26% and touched a two-week low. Australia's benchmark share index slid 1.35% and South Korea's Kospi fell 0.9%.
The Fed is set to announce its decision on Wednesday at the end of a two-day policy meeting. Rate futures traders are pricing in an 81% chance of a 75 basis point hike and a 19% probability of a 100 bps of tightening.