Asian stock markets started off on a downward trend due to reports indicating a slowdown in China’s economy and news of US President Joe Biden’s intentions to increase tariffs on certain Chinese goods. Australia and Japan’s stock benchmarks dropped, along with Hong Kong futures. US stock futures also dipped after the S&P 500 struggled last week, influenced by lower consumer sentiment and rising short-term inflation expectations. The dollar strengthened against most major currencies.
On Friday, the Indian stock market wrapped up with gains, as both the Sensex and Nifty 50 closed higher. The Sensex ended up by 260.30 points at 72,664.47, while the Nifty 50 settled at 22,055.20, up by 97.70 points or 0.44%. Looking at the Nifty 50 chart, it formed a small positive candle with slight shadows on both ends.
According to Nagaraj Shetti, a Senior Technical Research Analyst at HDFC Securities, this pattern suggests a temporary break in the market’s momentum following a recent decline. The Nifty is currently sitting around a significant support level of 21,900, but there are no clear signs of a reversal pattern indicating a sustained upward movement yet.
Biden is reportedly planning to significantly increase tariffs on certain Chinese imports, possibly even doubling, tripling, or quadrupling them. For example, tariffs on Chinese electric vehicles could soar from 27.5% to 102.5%. Recent data from China showed a continued decline in industrial prices and a contraction in credit for the first time in April, partly due to reduced government bond sales.
While these developments are concerning, some analysts like Larry Hu from Macquarie Group believe there’s no need to panic. He attributes the weak credit data in April to temporary technical factors rather than a sharp downturn in the economy.
Investors are closely watching statements from US officials to gauge how long the Federal Reserve will maintain high interest rates. While some Fed officials like Lorie Logan and Michelle Bowman have indicated that it’s premature to consider rate cuts, the upcoming April inflation report is expected to provide further direction for the markets.
Market attention also turns to commodities like gold and oil, especially after Russian President Vladimir Putin replaced his defense minister amidst ongoing conflict with Ukraine. Oil prices dipped slightly, and gold remained relatively stable. These developments come ahead of Putin’s upcoming visit to China and a NATO meeting in Brussels.