Opening Bell - Morning Commentary

Japan's PM Raises Alarm on Economic Challenges, Late U.S. Market Recovery to Boost Our Markets' Opening.

US stocks recovered from steep early-session losses and closed slightly higher on Monday. Investors digested news that a major ratings agency had downgraded its U.S. federal government debt assessment. The major averages climbed well off their session lows before ending the day modestly higher. The 10-year Treasury shot up to 4.56% early Monday, its highest intraday level in over a month. However, it was at 4.45% in late trading, little changed from its close on Friday.

On the U.S. economic front, the Conference Board released a report showing that its reading on leading U.S. economic indicators slumped more than expected in April. The report said the leading economic index tumbled by 1.0 per cent in April after sliding by a downwardly revised 0.8 per cent in March. Economists had expected the leading economic index to decrease by 0.8 per cent compared to the 0.7 per cent drop originally reported for the previous month.

U.S. Federal Reserve officials took on cautiously the ramifications of the latest downgrade of the U.S. government’s credit rating and unsettled market conditions as they continued to navigate a very uncertain economic environment.

Japanese Prime Minister Shigeru Ishiba has firmly rejected the idea of tax cuts funded through additional debt issuance, warning that Japan’s fiscal health is in a worse state than Greece's. Speaking in Parliament, Ishiba noted that the country is witnessing a shift toward positive interest rates, citing recent moves by the central bank to unwind its decades-long stimulus policy. Japan’s 10-year government bond yield climbed to a six-week high of 1.48%, while the 30-year yield eased to 2.87%.

China’s industrial production in April grew 6.1% YoY, surpassing expectations of 5.7%, though slightly down from the 7.7% rise recorded in March. However, retail sales disappointed, rising only 5.1% YoY compared to a forecast of 6.0% and slower than March’s 5.9% growth.

Nifty fell for the second day in a row on Monday amid weak global cues. The Indian Rupee exhibited strength, appreciating by 10 paise against the greenback to settle at 85.40. This upward movement in the rupee can be attributed to cooling crude oil prices and a softening of the US dollar.

Nifty is placed above all key moving averages, indicating the continuation of an uptrend. Immediate support for the Nifty is seen in the band of 24750-24800, while positional support stands at 24500. On the upside, resistance is placed at 25116 and 25207.

U.S. futures had suggested a soft opening for American markets when our markets closed yesterday. However, U.S. markets ultimately recovered all their early losses by the closing bell, and hence our markets are expected to open with 0.5% gains today.