Markets flinch on Powell's hint of rate restraint, trade truce doubts

Firm dollar, fragile Trump-Xi peace sap investor sentiment

Indian equities retreated on Thursday as investors turned cautious after Federal Reserve Chair Jerome Powell signalled that further US rate cuts this year are unlikely. Uncertainty over the durability of the latest US-China trade truce also weighed on sentiment across Asian markets. The Sensex ended 593 points, or 0.7 per cent, lower at 84,404.5, while the Nifty slipped 

176 points to close at 25,878.

 

Despite the decline, both indices remain within striking distance of record highs — the Sensex just 1.7 per cent and the Nifty 1.3 per cent shy. The total market capitalisation of BSE-listed firms fell by ₹1.9 trillion to ₹472 trillion. 

 

Make smarter market moves with The Smart Investor. Daily insights on buzzing stocks and actionable information to guide your investment decisions delivered to your inbox.

Subscribe

Investor sentiment weakened after Powell said Wednesday’s 25-basis-point (bp) rate cut may be the last for 2025, dampening expectations of another reduction in December. His comments lifted the US dollar and triggered a risk-off mood across emerging markets (EMs).

 

Adding to the caution, investors were sceptical that the agreements struck between President Donald Trump and Chinese President Xi Jinping would mark a durable reset in bilateral relations.

 

“As expected, the US Fed cut rates by 25 bps. However, Powell’s indication that this could be the final cut of 2025 tempered hopes of further easing. The firmer dollar hurt EM flows, while domestically, mixed second-quarter results and the futures and options expiry added to volatility,” said Vinod Nair, head of research at Geojit Financial Services.

 

Among individual stocks, Hyundai Motor India advanced 2.4 per cent after reporting stronger-than-expected quarterly earnings and a positive export outlook.

 

Equities in India have gained through much of October, supported by robust corporate earnings and hopes of a trade pact with the US that could lower tariffs on Indian exports to 15-16 per cent from about 50 per cent currently. However, lingering uncertainty over the deal and elevated valuations prompted profit booking at higher levels. 

 

“Markets are likely to remain in a consolidation phase, with support for the Nifty seen around the 25,600-25,800 zone and resistance near 26,100. Investors should focus on sectors showing relative strength and use corrections to accumulate quality stocks,” said Ajit Mishra, senior vice-president of research at Religare Broking.

 

Market breadth remained weak, with 2,363 stocks declining and 1,807 advancing. HDFC Bank fell 0.97 per cent and Reliance Industries 1.04 per cent, emerging as the biggest drags on the Sensex.

 

Rupee nears a new low vs dollar

 

The rupee approached a record low, pressured by a stronger US dollar as traders pared bets on a December rate cut by the Federal Reserve, and as the local central bank was not seen stepping in to support the currency.

 

The rupee weakened as much as 0.56 per cent, the most since August 29, to 88.70 per dollar on Thursday, closing in on its September record of 88.8050. Earlier this month, the Reserve Bank of India was alarmed to see the rupee nearing that level and sold dollars to stabilise it, said a person familiar with the matter.

 

“Most Asian currencies have weakened after the Fed cast doubts on a December rate cut, but the rupee has taken a bigger beating in the absence of strong central bank dollar sales in the spot market today,” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors. Rupee also faced pressure from dollar demand linked to the central bank squaring off certain positions in the non-deliverable forwards market, he added. (Bloomberg)  

Gold gains as Fed trims rates

 

Gold prices rose nearly 2 per cent on Thursday, buoyed up by Wednesday’s Federal Reserve interest rate cut as well as lingering uncertainty over the outcome of a trade deal between China and the US. 

 

Spot gold was up 1 per cent at $3,970.36 per ounce as of 09.43 am ET (1343 GMT), having risen nearly 2 per cent earlier in the session. US gold futures for December delivery were steady at $3,992.40 per ounce. (Reuters)