Asia Advances, South Korea Soars After Softer US Inflation; India May Get Positive Start Despite Oil, Iran

Mumbai, July 15: Indian equity benchmarks are likely to open on a positive note on Wednesday, tracking a stronger Asian market after softer-than-expected US inflation data. However, the rise in crude oil prices amid renewed US-Iran hostilities is expected to cap gains for domestic equities.  

Asian markets advance as US inflation cools 

Asian equities traded firmly higher after US consumer inflation declined in June, marking the first monthly fall since the pandemic. The data eased fears of a Federal Reserve rate hike, leading to a decline in US Treasury yields and boosting risk assets across the region.  

Japan’s Nikkei 225 rose 0.9%, while South Korea’s Kospi outperformed with gains of 7.4%. MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.2%. 

The softer inflation print offered relief to technology and growth-oriented stocks globally. 

Wall Street ends higher despite geopolitical worries 

US equities closed higher overnight, with the S&P 500 and Nasdaq posting gains after encouraging inflation data and stronger-than-expected earnings from major Wall Street banks. 

Investors welcomed results from JPMorgan Chase and Goldman Sachs which helped kick off the second-quarter earnings season on a positive note. The banking sector’s performance reinforced confidence in the resilience of the US economy despite ongoing geopolitical risks. 

But IBM tumbled after disappointing with its outlook.  

The cooler inflation reading also pushed Treasury yields lower and weakened the US dollar against most major currencies. 

European shares recover from early losses 

European markets finished higher on Tuesday after falling as escalating tensions between the US and Iran shook sentiment. 

The pan-European STOXX 600 index recovered from intraday losses to end around 0.2% higher as investors drew comfort from softer US inflation data. 

Oil remains the biggest risk for emerging markets 

While equities found support from easing inflation, crude oil continued to trade at elevated levels after fresh attacks involving US and Iranian energy infrastructure intensified concerns over supply disruptions. 

Brent crude hovered around one-month highs near $85 per barrel after renewed hostilities revived fears that supplies from the Gulf region could be disrupted. Reports suggested the US had paused certain measures involving shipping through the Strait of Hormuz.  

Higher crude prices remain a key concern for India, which imports the majority of its oil requirements. A sustained rise in energy prices could stoke domestic inflation, pressure the rupee and weigh on corporate margins, particularly for oil marketing companies, aviation stocks and other fuel-intensive sectors. 

Cautious optimism for Indian markets 

For Indian markets, the global backdrop presents a mixed picture. Softer US inflation and the resulting improvement in global risk sentiment are supportive for equities, particularly information technology and export-oriented companies that benefit from expectations of lower US interest rates. 

However, persistent geopolitical tensions and elevated oil prices could keep investors cautious. Market participants will also track foreign institutional investor flows, currency movements and domestic earnings announcements for fresh direction.

Overall, Indian benchmarks are expected to witness a mildly positive opening, though gains may remain capped as investors continue to balance optimism over easing US inflation against concerns surrounding the Middle East conflict and its implications for global energy markets.  

Source

• Exchanges