Bond markets are flashing a warning to investors: interest rates may be heading higher even as central banks hold policy rates steady. Rising bond yields in the US, Europe and Japan have weighed on equities, particularly technology stocks. Asian markets are extending the sell-off this morning.
There is still no meaningful progress on the Iran situation, while crude oil remains above $91 a barrel. Gold, which fell sharply on Tuesday, has recovered slightly this morning.
Long-term government bond yields in the US, Japan and Europe have climbed to their highest levels in two to three decades in some cases. Rising yields indicate that markets expect interest rates to remain higher for longer.
Bond prices and yields move in opposite directions: when bond prices fall, yields rise.
The US 30-year Treasury yield was at 5.33 percent this morning, its highest level in 19 years. The 10-year yield eased to 4.71 percent.
Concerns over Iran, higher crude oil prices and rising bond yields pushed US equities lower on Tuesday, with technology stocks bearing the brunt of the selling.
The Dow Jones Industrial Average fell 116.38 points, or 0.22 percent, to 53,343.40. The S&P 500 dropped 53.30 points, or 0.69 percent, to 7,691.76, while the Nasdaq Composite declined 355.20 points, or 1.33 percent, to 26,285.71.
US stock futures are mixed this morning. Dow futures are down 21 points, or 0.04 percent, while S&P 500 futures are up five points, or 0.07 percent, and Nasdaq futures have gained three points, or 0.02 percent.
Asian equities are trading lower this morning. South Korea's Kospi has fallen around 5 percent, with SK Hynix down 10 percent and Samsung Electronics losing 6 percent. Japan's Nikkei has declined about 2.5 percent, while Taiwan's benchmark is down around 1 percent.
Hong Kong's Hang Seng is lower by 0.50 percent and Shanghai by 0.80 percent. Australia's market, however, is up 0.35 percent.
European markets also ended lower on Tuesday. The pan-European Euro Stoxx index fell for the seventh consecutive session. Most major European indices declined, with the FTSE in London the notable exception. A warning from the European Central Bank about the risk of an artificial intelligence bubble also weighed on sentiment.
Indian equities fell for the sixth consecutive session on Tuesday as geopolitical concerns and elevated crude oil prices continued to weigh on sentiment.
Gift Nifty closed at 24,192 on Tuesday night and moved between 24,181 and 24,213 this morning, pointing to another weak opening for Indian equities.
The Sensex fell 492.70 points, or 0.63 percent, to 77,235.46, while the Nifty 50 declined 132.75 points, or 0.55 percent, to 24,154.90. Bank Nifty dropped 235.40 points, or 0.41 percent, to 57,262.80.
The Nifty Midcap 100 fell 0.43 percent to 63,539.40, while the Nifty Smallcap 100 was almost unchanged at 19,808.85.
Market breadth remained weak. On the BSE, 1,890 stocks advanced and 2,426 declined. On the NSE, 1,544 stocks gained while 1,914 fell.
Foreign investors were net buyers on Tuesday, purchasing shares worth ₹1,651.53 crore. Domestic institutional investors were also net buyers, with purchases of ₹2,579.31 crore.
Citi expects the Nifty 50 to reach 26,800 by June next year. The target is based on its projected one-year-forward earnings per share and a valuation multiple of 18 times earnings.
BSE shares continued to fall on Tuesday despite the exchange being set to enter the Nifty 50 at the end of next month. Foreign brokerages Jefferies and Nuvama have downgraded the stock and substantially reduced their target prices, citing several concerns.
The new Closing Auction Session (CAS) has also affected premiums in BSE's options business.
Exide Industries: The company has invested another ₹200 crore in subsidiary Exide Energy Solutions for lithium-ion cell manufacturing.
RailTel Corporation: The company has received a ₹166.8 crore construction contract from the Employees' Provident Fund Organisation.
Aster DM Quality Care: Private equity firm TPG is set to sell a 7.2 percent stake through a block deal worth about ₹4,780 crore.
BPCL: The company plans to raise ₹5,000 crore through non-convertible debentures.
Jubilant Ingrevia: The speciality chemicals company is entering electronics design and has agreed to acquire a 40 percent stake in Setavon Technologies for ₹189 crore.
The prospect of higher interest rates pushed gold lower on Tuesday. Gold fell $82.50, or 1.87 percent, to close at $4,335.40 an ounce. It recovered 0.50 percent this morning to around $4,357.
Higher interest rates tend to reduce the attractiveness of non-yielding assets such as gold, while lower rates generally support demand. Strong central bank purchases over the past three to four years have also supported gold prices.
In Kerala, 22-carat gold rose ₹160 to ₹1,14,320 per sovereign.
Silver fell 3.75 percent on Tuesday to $62.79 an ounce and recovered to $63.22 this morning.
Platinum stood at $1,714, palladium at $1,272 and rhodium at $8,550.
International rubber prices fell again, with Kerala prices also coming under pressure.
In Bangkok, RSS 1 declined to $281.20 per quintal and RSS 3 to $277.70. In Kerala, RSS 4 fell to ₹27,500 per quintal.
Expectations of higher interest rates also pressured industrial metals. Most major metals declined on Tuesday, with nickel the exception.
Copper, which had rallied strongly in recent sessions, suffered the sharpest fall, declining 3.46 percent to $14,334.15. Aluminium fell 1.40 percent to $3,219.35. Zinc, lead and tin also declined, while nickel edged higher.
Cocoa prices fell 2.39 percent on Tuesday to $5,924 a tonne. Ghana's cocoa regulator expects production to decline 16 percent because of adverse weather. Output in Ivory Coast is also expected to fall by more than 10 percent.
The two countries are the world's largest cocoa producers. Production across Asia and Latin America is also estimated to decline by around 100,000 tonnes.
Arabica coffee rose 4.31 percent to $3.32 a pound amid concerns that El Niño could reduce production. Around 90 percent of Brazil's crop has been harvested, while coffee stocks monitored by the ICE exchange are at a three-year low.
The US Dollar Index closed almost unchanged at 99.66 on Tuesday and eased to 99.63 this morning.
The euro slipped to $1.1573 and the pound to $1.3528. The Japanese yen weakened to 159.48 per dollar, while the Chinese yuan remained around 6.74 per dollar.
The Indian rupee weakened for a second consecutive session, with the dollar gaining eight paise to close at ₹95.68. In offshore forward trading, the dollar was quoted around ₹95.77 this morning, suggesting further weakness for the rupee.
The Chinese yuan rose to ₹14.19 and the euro to ₹110.74.
Crude oil prices remain elevated amid continued uncertainty over Iran.
Brent crude gained $0.15 on Tuesday to close at $91.02 a barrel. It rose further to $91.88 this morning, while WTI crude was at $85.78.
Cryptocurrencies moved higher this morning. Bitcoin rose above $64,500, while Ether traded above $1,915 and Solana above $77.
Sensex 77,235.46 -0.63%
Nifty 50 24,154.90 -0.55%
Bank Nifty 57,262.40 -0.41%
Nifty Midcap 100 63,539.40 -0.43%
Nifty Smallcap 100 19,808.85 -0.00%
Dow Jones 53,343.40 -0.22%
S&P 500 7,691.76 -0.69%
Nasdaq 26,289.71 -1.33%
Dollar ₹95.68 +₹0.08
Gold (ounce) $4,335.40 -$82.50
Gold (sovereign) ₹1,14,320 +₹160
Brent crude $91.02 +$0.15