Asia Falls, Oil Continues Climb, Middle East On Edge; Indian Equities May Get Lower Opening

Mumbai, July 16: Indian benchmark indices are likely to open on a lower note on Thursday, tracking a negative performance across Asian markets as investors weighed easing US inflation against renewed geopolitical tensions in the Middle East that continued to push crude oil prices higher. 

While softer-than-expected US inflation data boosted hopes that the Federal Reserve could refrain from tightening monetary policy in the near term, sentiment remained fragile after US military strikes on Iranian targets heightened concerns over global energy supplies. Oil prices extended gains for a fourth consecutive session, tempering risk appetite across equity markets.  

Asian markets fall 

Asian markets declined on Thursday, led by losses in semiconductor stocks as investors turned cautious ahead of quarterly results from Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker and a key supplier of advanced AI chips. TSMC is widely expected to post a fifth straight quarter of record earnings, with analysts forecasting a 59% year-on-year jump in net profit for the April–June quarter.  

Japan’s Nikkei declined 2.8% while South Korea’s Kospi fell 6.5%. MSCI’s broadest index of Asia-Pacific shares outside Japan went down 1%. 

Wall Street supported by inflation, earnings 

Wall Street ended higher overnight as investors rotated out of semiconductor stocks and into the Magnificent Seven technology names and banking shares, buoyed by strong earnings from major lenders. However, Asian markets remained under pressure, with the regional sell-off more pronounced due to their greater exposure to semiconductor stocks ahead of key chip sector earnings. 

US equities were also helped by encouraging inflation readings. 

The latest producer price data reinforced optimism after consumer inflation earlier showed price pressures easing more than expected. Investors consequently pared expectations of Federal Reserve rate increase, leading Treasury yields to decline. 

Corporate earnings also provided support. Financial stocks remained firm following better-than-expected quarterly numbers from major Wall Street banks, while investors awaited results from additional large-cap companies to gauge the health of corporate America. 

Dow Jones was up 0.29%, S&P 500 0.38%, and Nasdaq 0.62%. 

European shares remain subdued 

European markets closed largely subdued on Wednesday despite an upbeat revenue outlook from Dutch semiconductor equipment giant ASML. 

Although ASML’s forecast highlighted resilient demand for artificial intelligence-related chipmaking equipment, broader regional indices struggled as investors remained cautious over escalating geopolitical risks and their potential impact on inflation and economic growth. 

The continuing rise in crude oil prices overshadowed company-specific optimism, with energy security concerns once again dominating investor sentiment across European markets.  

Oil extends gains for fourth session 

Crude oil prices remained firmly higher, extending gains for a fourth straight day after US strikes on Iranian targets intensified concerns over possible disruptions to supplies from the Middle East. 

Brent crude traded above $85 a barrel, while West Texas Intermediate remained around $80, with traders closely monitoring developments around the Strait of Hormuz, one of the world’s most critical oil shipping routes. 

Higher crude prices have revived concerns that inflationary pressures could return globally, complicating the outlook for central banks that had recently begun seeing signs of easing price pressures. 

For India, sustained strength in crude remains a key headwind given the country’s dependence on imported oil. Higher energy prices can widen the current account deficit, pressure the rupee and increase inflationary risks, potentially weighing on market sentiment.  

Lower start likely for Indian markets 

Against this backdrop, Indian equities are expected to witness a lower opening. 

Domestic investors are likely to closely monitor crude oil prices, geopolitical developments in the Middle East, foreign institutional investor activity and the ongoing corporate earnings season for fresh direction. 

Stock-specific action could remain elevated as more companies announce June quarter earnings, while global developments are expected to keep overall market volatility elevated. 

Source

• Exchanges