The turmoil in the US bond market has eased temporarily following intervention by the US Treasury, while equity markets have recovered. US stock markets closed higher on Wednesday and futures were also trading with modest gains early Thursday. Asian markets moved higher in morning trade.
Indian equities, which have declined for seven consecutive sessions, are expected to attempt a recovery today. However, concerns remain that the Reserve Bank of India could raise the repo rate in the October-December quarter.
Gift Nifty, which tracks the Nifty 50 through derivatives traded at GIFT City, closed at 24,202 on Wednesday night and rose to 24,226 in morning trade, pointing to a stronger opening for Indian equities.
More vessels are reportedly using a route closer to the Omani coast to avoid the section of the Strait of Hormuz where Iran has been able to exert influence. The shift indicates that Iran’s grip over shipping through the strategic waterway may be weakening.
The development has also eased concerns about an immediate shortage of oil supplies. Brent crude, however, remains in the $90-$92 range.
The UAE has announced a complete suspension of its financial and commercial ties with Iran, adding to the pressure on Tehran. US President Donald Trump has also indicated that further economic isolation measures could be imposed on Iran.
US Treasury Secretary Scott Bessent moved quickly to calm the bond market turmoil by doubling Treasury buybacks. The move pushed bond prices higher and yields lower, providing temporary relief to investors. However, analysts see this as only a temporary reprieve.
US government debt crossed $40 trillion on Wednesday, having more than doubled over the past decade. It crossed the $30 trillion mark about four and a half years ago. The US government recorded a deficit of $432.3 billion in July, the highest monthly deficit in five years.
Rising deficits lead to higher debt, while higher debt increases interest costs. The US is expected to spend about $1.2 trillion on interest payments alone this year. Government debt has now risen to about 124 percent of US GDP.
The rising debt burden is one of the factors putting pressure on Treasury bond prices. When bond prices fall, yields rise, pushing up borrowing costs across the economy. Long-term interest rate expectations surged towards 6 percent on Monday, raising concerns over higher mortgage and other borrowing costs.
Analysts expect the bond market to come under renewed pressure in September.
The US Treasury intervention helped stabilise the bond market temporarily and supported equities.
The Dow Jones Industrial Average gained 119.65 points, or 0.22 percent, to close at 53,463.05 on Wednesday. The S&P 500 rose 16.22 points, or 0.21 percent, to 7,707.98, while the Nasdaq Composite gained 41.38 points, or 0.16 percent, to finish at 26,331.09.
Moderna and Merck shares surged after clinical trial results showed encouraging results for their jointly developed vaccine-drug combination for melanoma, a form of skin cancer.
The treatment combines Moderna’s messenger RNA vaccine with Merck’s Keytruda. The combination was found to be effective in a clinical trial involving around 1,100 patients.
Moderna shares surged 177 percent from the previous close of $62.96 to $174.38. Merck gained 12.60 percent.
US stock futures were trading higher early Thursday. Dow futures were up 19 points, or 0.04 percent, while S&P 500 futures gained 11 points, or 0.14 percent. Nasdaq futures rose 131 points, or 0.44 percent.
In New York trading, HDFC Bank declined 0.04 percent during regular hours before gaining 0.82 percent in extended trading to close at $23.35.
ICICI Bank fell 0.64 percent during regular trading and remained unchanged in extended trading at $29.44.
Infosys gained 1.69 percent during regular trading but slipped 0.17 percent in extended trading to close at $12.01.
Wipro rose 2.09 percent during regular trading before giving up 0.21 percent in extended trading to close at $1.946.
European markets continued to decline on Wednesday, with the US bond market turmoil adding to investor concerns.
The US Treasury measures provided some relief, but expectations of tighter monetary policy remain a concern. Markets are pricing in a 0.25 percentage point increase in the European Central Bank’s policy rate in September.
All major European indices except the UK’s FTSE closed lower.
Asian markets were broadly higher in Thursday morning trading.
South Korea’s Kospi surged around 5 percent after SK Hynix announced a $29 billion share buyback programme. Samsung shares jumped about 7.5 percent.
Japan’s Nikkei gained around 1 percent, while Australia’s market rose 0.35 percent. Taiwan also traded higher.
Hong Kong’s Hang Seng gained around 1 percent, while the Shanghai Composite rose 0.50 percent.
Higher crude oil prices and concerns over interest rates pushed Indian equities lower for a seventh consecutive session on Wednesday.
Minutes from the RBI’s latest policy meeting indicated that a repo rate increase could become necessary in the October-December quarter if inflation and price pressures persist. There are also concerns that the strong earnings growth recorded by Indian companies in the June quarter may not be sustained.
Most sectoral indices closed lower, with IT and consumer durables among the exceptions. IT stocks gave up much of their morning gains by the close. Defence, media, financial services, FMCG, auto, oil and healthcare stocks came under heavier pressure.
Foreign investors reduced their buying on Wednesday, recording net purchases of just Rs 407.99 crore in the cash market. Domestic institutional investors, however, made net purchases of Rs 3,973.72 crore.
The Sensex fell 325.78 points, or 0.42 percent, to close at 76,909.68. The Nifty 50 declined 76.60 points, or 0.32 percent, to 24,078.30. Bank Nifty slipped 22.65 points, or 0.04 percent, to 57,239.75.
The Nifty Midcap 100 declined 130.65 points, or 0.21 percent, to 63,408.75, while the Nifty Smallcap 100 fell 101.70 points, or 0.50 percent, to 19,707.15.
Market breadth remained weak. On the BSE, 1,728 stocks advanced while 2,572 declined. On the NSE, 1,314 stocks gained and 2,157 fell.
SEBI chairman Tuhin Kanta Pandey warned against manipulation during the Closing Auction Session (CAS). SEBI also barred foreign investment entity Copthall Mauritius and broker Mansi Share from the market.
Surging sugar prices lifted sugar stocks by up to 10 percent. There is speculation that the government may reduce incentives for ethanol production and allow duty-free sugar imports.
The US government's intervention in the bond market triggered renewed buying interest in gold. Gold prices surged 4.35 percent on Wednesday.
Spot gold gained $188.50 to close at $4,523.90 an ounce. It eased to around $4,507 in early Thursday trade as investors booked profits.
Higher interest rates generally reduce the appeal of non-yielding gold, while expectations of lower rates support demand. The Treasury intervention has raised expectations that an immediate increase in US interest rates may not be necessary.
In Kerala, 22-carat gold fell Rs 680 per sovereign to Rs 1,13,640 on Wednesday. Prices are expected to rise sharply today.
Silver gained 5.83 percent to close at $67.12 an ounce and eased marginally to $67.07 in morning trade.
Platinum stood at $1,810, palladium at $1,321 and rhodium at $8,550.
International rubber prices edged lower again, with Kerala prices also declining.
RSS 1 in Bangkok fell to $281 per quintal, while RSS 3 stood at $277.50. In Kerala, RSS 4 declined to Rs 27,400 per quintal.
Industrial metals continued to decline.
Copper fell 1.08 percent to $14,178.85, while aluminium declined 0.25 percent to $3,211.35. Zinc, lead, tin and nickel also moved lower.
Cocoa prices rose 0.25 percent to $5,934 a tonne on Wednesday.
Ghana’s cocoa regulator expects production to fall 16 percent because of adverse weather. Production in Ivory Coast, another major cocoa producer, is also expected to decline by more than 10 percent.
Arabica coffee fell 1.29 percent to $3.28 a pound amid concerns that El Niño could affect production.
The US Dollar Index declined to close at 98.83 on Wednesday but recovered to 99.85 in morning trade.
The euro strengthened to $1.1673 and the pound to $1.3597. The Japanese yen stood at 158.47 to the dollar, while the Chinese yuan strengthened to 6.73 per dollar.
The yield on 10-year US Treasuries eased to 4.647 percent in morning trade, while the 30-year yield fell to 5.188 percent.
The Indian rupee weakened for another session on Wednesday. The dollar gained seven paise to close at Rs 95.75.
In the offshore forward market, the dollar was trading around Rs 95.56 in morning trade, suggesting some recovery for the rupee today.
The Chinese yuan rose to Rs 14.23 and the euro to Rs 111.77.
Crude oil prices moved above $92 a barrel.
Brent crude gained $0.60 to close at $91.62 on Wednesday and rose further to $92.23 in morning trade. West Texas Intermediate crude reached $84.85.
The US Treasury intervention in the bond market triggered a sharp rally in cryptocurrencies.
Bitcoin gained more than 7.7 percent to move above $69,600. Ether surged 18 percent to above $2,260, while Solana gained 10 percent to trade above $85.10.
Sensex 76,909.68 -0.42 percent
Nifty 50 24,078.30 -0.32 percent
Bank Nifty 57,239.75 -0.04 percent
Nifty Midcap 100 63,408.75 -0.21 percent
Nifty Smallcap 100 19,707.15 -0.50 percent
Dow Jones 53,463.05 +0.22 percent
S&P 500 7,707.98 +0.21 percent
Nasdaq 26,331.09 +0.16 percent
Dollar ₹95.75 +₹0.07
Gold (ounce) $4,523.90 +$188.50
Gold (sovereign) ₹1,13,640 -₹680
Brent crude $91.62 +$0.60
