### Summary
India's retail inflation in July rose to 7.44%, higher than market expectations, and is expected to remain elevated in Q3. The global currency market is experiencing significant turbulence, with the USD appreciating despite economic weaknesses. Heightened inflation and volatility in the currency market pose risks to the Indian market.
### Facts
- India's retail inflation in July was 7.44%, exceeding market expectations.
- Elevated inflation is expected to continue in Q3.
- The global currency market is experiencing turmoil, with the USD appreciating despite economic frailty.
- FII outflows have increased, but India's equity market is performing better than other emerging markets.
- The RBI has revised its inflation forecast upward and expects inflation to decrease to 5.7% in Q3.
- High interest rates and inflation are expected to impact corporate earnings growth and valuation.
- India's one-year forward P/E valuation has decreased from 20x to 18.5x.
- Bond yields have increased, leading to a divestment of equities and acquisition of bonds.
- The domestic market is supported by restrained FII divestment, robust purchasing by DIIs and retail participants, and outperformance compared to other emerging markets.
- Selling in global equities has increased due to concerns of deflation and defaults in China's realty and finance sectors.
- The author expects the selling from FIIs to continue in the short-term due to elevated global bond yields, US credit downgrade, and slowdown in emerging markets, but India will continue to outperform.
- In the last month, the MSCI World index was down 4.2% compared to MSCI India's 1.85% decrease.
The S&P 500 and other major indices are showing bearish signals, with potential for a significant drop, while the dollar is expected to maintain its upward trajectory and strong economic data could lead to a breakout in interest rates. Additionally, Meta's stock is on a downward trend and the KBW NASDAQ BANK Index is at risk of further decline.
The US dollar experienced a major technical reversal due to a weaker JOLTs report, leading to a drop in US interest rates, while market positioning played a role in the price action; the focus now shifts to personal consumption figures and US jobs data, with the euro and sterling firm but most other G10 currencies softer, and emerging market currencies mixed. In Asia, most large bourses advanced, but Europe's Stoxx 600 fell after rallying in previous sessions, while US index futures traded softer; European bonds are selling up, gold is consolidating, and oil prices are firm. Australia's CPI slowed more than expected, China is expected to release the August PMI, and Japan reports July retail sales. The US dollar has seen no follow-through selling against the yen, yuan, or Australian dollar, while the euro and sterling staged impressive price action. The JOLTS report saw the dollar and US rates reverse lower, and today the US reports advanced merchandise trade figures for July, with the Canadian dollar as the worst performing G10 currency yesterday.
Gold and silver prices are slightly lower in midday trading due to a correction after this week's gains and a strong rally in the US dollar index, while the busy US data week is highlighted by Friday's employment situation report for August from the Labor Department.
Gold and silver prices are higher and hit daily highs in early U.S. trading on the back of a dovish U.S. economic report and expectations of no further interest rate hikes from the Federal Reserve.
Gold and silver prices are lower due to technical selling and a lack of fresh fundamental news, while rising crude oil prices have potential economic and marketplace effects.
Gold prices in Pakistan continued to decline for the fourth consecutive day, in line with international rates, as the domestic price of 24 karat gold fell by Rs5,800 per tola and Rs4,972 per 10 grammes to settle at Rs216,500 and Rs185,614 respectively, while the price of silver 24 karat dropped by Rs50 per tola and Rs42.87 per 10 grammes to settle at Rs2,650 and Rs2,271.94 respectively; meanwhile, the rupee gained Rs2.03 against the US dollar in the interbank trading, closing at Rs304.94.
The amount of stablecoin USDT on crypto exchanges is increasing, which is seen as a positive sign, while the supply of Bitcoin and Ethereum on exchanges is decreasing, indicating strong holding sentiment and potential future buying interest.
The US Dollar underperformed against major currencies last week, crude oil continued to rally, and gold prices were cautiously higher, while upcoming events like central bank rate decisions and the Bank of England rate hike are expected to impact the market.
Gold and silver prices are slightly down as U.S. Treasury yields rise, the U.S. dollar index remains high, and traders and investors anticipate a potential U.S. government shutdown.
The strength of the US dollar and rising bond yields are causing gold prices to fall to their lowest level since March, with some analysts predicting that the bearish momentum could push prices down further to their 2023 lows at $1,810 in the spot market.
Stock markets ended mixed as investors processed the effects of the U.S. inflation report on the Federal Reserve's interest rate policy, with the S&P 500 declining by 0.27% and the Nasdaq Composite gaining 0.14%; in Asian markets, Japan's Nikkei 225 settled lower by 0.31% while Australia's S&P/ASX 200 slid 0.22%; in Europe, the STOXX 600 index was down 0.42% with Germany's DAX declining 0.25%, France's CAC 40 sliding 0.36%, and the U.K.'s FTSE 100 trading lower by 0.45%; and in commodities, Crude Oil WTI and Brent gained 0.82% and 0.89% respectively, while Gold traded lower by 0.88%.
European and global markets are experiencing relief as bond yields and the dollar decrease while stock markets stabilize and gold prices rise, thanks to a cooler-than-expected U.S. private payrolls report and a significant drop in crude oil prices.
The dollar is trading lower for the third consecutive day, reaching its highest value in almost a year before experiencing a doji candlestick, a pattern that can indicate a trend reversal or market consolidation, with implications for gold futures.
Gold and silver prices are weaker in early trading as a result of downside corrections and rising U.S. Treasury yields, while risk aversion and uncertainty in the Middle East and China's economic situation also contribute to the market's bearish sentiment.
