Sensex Recovers To Gain Over 100 Points, But Risks Remain

Indian equity benchmarks recovered to post gains on Friday after falling sharpy in the previous session, but risks point to downside for global stocks after warnings from Federal Reserve policymakers on interest rates.

The BSE Sensex index rose 106.58 points to 61,857.18, and the broader NSE Nifty index gained nearly 0.2 per cent in early trade.

Both benchmarks had crashed in the previous session.

Fed speakers in recent days have highlighted that they need to go further to extinguish pricing pressures despite the fact that inflation is only just beginning to fall and a barometer of US retail sales are rising at their quickest rate in eight months.

Treasury yields retained gains across the curve during morning trading in Asia after the previous day’s spike when St. Louis Fed President James Bullard stated higher rate peak is warranted to deter inflation and warned of future financial strain.

The recession warning from bond markets left S&P 500 futures flat on Friday, while Nasdaq futures edged up 0.1 per cent.

Mr Bullard’s remarks come a day after Mary Daly, President of the San Francisco Fed, stated that a pause in rate hikes was “off the table.” Neel Kashkari, President of the Minneapolis Fed, repeated their hawkish sentiment on Thursday afternoon.

Following those warnings, Asian shares were on edge on Friday.

“The market believes that inflation is on the down trend. We also believe that, but the fact of inflation having peaked is not a reason for the Fed to turn and cut rates,” Paul Christopher, Head of Global Market Strategy at Wells Fargo Investment Institute, said on Bloomberg Radio.

“That’s the fundamental disconnect that still exists between the Fed and the market,” he added.

Rising coronavirus cases in China and liquidity issues in its bond market also contributed to the apprehension.

Chinese blue-chip stocks fell 0.1 per cent amid news that Beijing has urged banks to monitor bond market liquidity after sky-high yields resulted in losses for certain investors.

A rise in COVID-19 cases in China raised worries that attempts to relax severe mobility restrictions that had stifled the economy may be in jeopardy.