Trade deals to buoy market sentiments

Trump announced a trade deal with Japan, stating that it will result in Japan investing $550 billion in the United States and paying a 15% reciprocal tariff. This announcement followed an agreement with the Philippines, which will see the U.S. collect a 19% tariff rate on imports. The Japanese announcement triggered a broad rally across Asian equity markets on Wednesday, with Japanese shares leading the advance. Investors welcomed the development as a harbinger of additional trade agreements, which helped counterbalance mixed U.S. corporate earnings that underscored the economic headwinds from elevated tariffs.

U.S. and Chinese officials are scheduled to convene in Stockholm next week to discuss extending the August 12 deadline for ongoing trade negotiations between the world’s two largest economies. Asian markets opened strongly today and maintained their momentum throughout the session, with Japan’s benchmark Nikkei index spearheading the gains following the formal signing of the U.S.-Japan trade pact.

U.S. stock index futures registered modest advances after Trump’s announcement. Earlier weakness on Wall Street reflected profit-taking activity after both the Nasdaq and S&P 500 closed at record highs in the previous session. Some investors reacted negatively to recent earnings releases, though sustained optimism surrounding artificial intelligence investments continues to support valuations among the market’s largest companies, keeping the S&P 500 near all-time peaks.

India and Britain will sign a free trade agreement tomorrow during Prime Minister Narendra Modi’s visit to the UK. As part of the agreement, India will ease tariffs on British whisky, cars, and certain food items, while the UK will offer duty-free access to Indian textiles and electric vehicles.

After opening with gains yesterday, the Nifty succumbed to profit booking yesterday, shedding over 100 points from its intraday high to close with a minor loss of 29 points at 25060. Nifty’s 5-day DEMA resistance, positioned at 25093, is the short-term resistance. The positional support of the 50-Day DEMA remains well intact at 24943. Looking ahead, 25255 could offer resistance in Nifty.

Indian markets are expected to open with a flourish on the back of improving sentiments on the trade agreements.

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Source: HDFC Securities Prime Research