Asian Shares Trade Lower After Strong Wall Street Show; Cautious Start Seen For Indian Benchmarks 

Mumbai, August 4: Indian equity benchmarks are likely to open on a cautious note on Tuesday as Asian equities trade lower after a strong Wall Street performance and crude prices rebound on the back of uncertainty around the latest US-Iran developments. 

While US and European equities benefited from optimism over a possible diplomatic resolution to the conflict, Asian markets traded lower.  

Asian Markets Trade Lower 

Asian stocks traded lower on Tuesday on uncertainty around the latest US-Iran developments and a rise in crude oil prices. 

Japan’s Nikkei declined 0.7% while South Korea’s Kospi went down 0.5%. MSCI’s broadest index ‌of Asia-Pacific shares outside Japan edged down 0.3%. 

Wall Street Rallies To Record Highs 

US stocks kicked off August on a strong note, with the Dow Jones Industrial Average closing at a record high as optimism over de-escalating tensions between the US and Iran boosted investor sentiment. 

The Dow gained 1.32%, while the S&P 500 advanced 1.48% and the Nasdaq Composite jumped 2.13%. The rally was supported by expectations of diplomatic progress, which also helped push Treasury yields lower. 

Communication services stocks led gains on Wall Street, with shares of Meta Platforms and Alphabet among the major contributors. Investors also continued to focus on corporate earnings. 

However, concerns around lofty technology valuations, artificial intelligence-led growth expectations and the Federal Reserve’s interest-rate outlook remain in focus. 

European Markets Start August On Stronger Footing 

European equities also started August on a positive note, with the pan-European STOXX 600 gaining 0.5% and closing near a record high. The rally was supported by a sharp fall in oil prices as hopes of diplomatic progress between the US and Iran eased concerns over potential disruptions to energy supplies. 

Travel and leisure stocks benefited from the decline in crude prices, while defence stocks also gained amid shifting geopolitical expectations. However, the FTSE 100 bucked the broader trend and slipped 0.1%. 

Healthcare stocks came under pressure after AstraZeneca shares fell sharply amid reports of a potential $400 billion merger with Bristol Myers Squibb. The healthcare sector declined 1.7%, while France’s Ipsen also fell after a broker downgrade. 

Oil Prices Rebound After Sharp Sell-Off 

Crude oil prices recovered modestly on Tuesday after plunging in the previous session as markets assessed the possibility of a diplomatic breakthrough to end the US-Iran conflict. 

Brent crude rose 1.2% as investors remained uncertain about the prospects for talks and the potential impact on global energy supplies. 

The sharp fall in oil prices in the previous session had offered relief to oil-importing economies such as India, helping ease concerns around inflation, the import bill and the current account deficit. A sustained decline in crude could therefore be positive for Indian equities, particularly sectors sensitive to energy costs. 

However, the rebound in oil prices highlights the continuing uncertainty surrounding the geopolitical situation. Any setback in US-Iran negotiations or renewed concerns over supply disruptions could trigger another sharp move in crude and weigh on global risk sentiment. 

Indian Markets May See Cautious Start 

The combination of lower Asian markets and rising crude point to a cautious opening for Indian benchmarks.  

Investors are also likely to monitor foreign institutional investor flows. 

Overall, Indian equities could start Tuesday’s session on a cautiously note. 

Market participants are likely to closely track developments in the Middle East, oil prices and global bond yields through the session. 

Source

• Exchanges