Indian equity benchmarks ended nearly flat, tracking weak global stocks as investors mostly stayed on the sidelines ahead of the US inflation data release that would indicate the Federal Reserve policy tightening path.
The trading pattern was a nervous calm as markets waited for signs that inflation eased in July despite last week’s unexpectedly strong US jobs numbers.
For now, though, the market is pricing in a near 70 per cent chance of a 75 bps rate increase at the Fed’s next meeting.
“I don’t think that we are through the bear market woods yet – recession risks loom and I don’t think the Fed is done with its aggressive belt tightening,” David Chao, a global market strategist for Asia Pacific ex-Japan at Invesco, told Reuters.
“I don’t think markets have fully discounted these variables. This week’s inflation data will certainly give us more clarity of the Fed’s near-term policy outlook.”
Europe’s benchmark STOXX index fell 0.43 per cent, following a bigger fall of 1.2 per cent in the MSCI’s broadest index of Asia-Pacific shares outside Japan, while Japan’s Nikkei closed down 0.65 per cent.
US markets looked set to open broadly flat, with S&P 500 futures down 0.06 per cent.
The dollar was steady, having paused from a retreat that began in the middle of July. The dollar index, which measures the safe-haven greenback against six major peers, was at 106.3
Analysts noted the US inflation data due Wednesday represent a lagging indicator that might not yet show inflation softening, and yield curves could flatten or invert further.