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Increasing Cases and United States ‘Carousel Retaliation’ spooks risk sentiment

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The risk sentiment was souring as US trade representatives had proposed imposing tariffs on USD 3.1bn of imports from France, Germany, Spain, and the UK. The proposal has been put out to seek public opinion until 26th July.

The sticking point for both sides is the subsidies given to their respective aircraft manufacturing companies. The European equities sold off around 2% on this news and the Euro gave up its post-PMI gains.

Florida and California witnessed a record spike in cases giving rise to fears that reopening would have to slow down to contain the virus. The Dow sold off, the US Dollar strengthened and US treasuries gained on a flight to safety.

The IMF has revised its lower projections for world economic growth that it had released barely a couple of months ago. It now sees an even deeper recession and an even slower recovery than earlier.

The Competition Commission of India has given clearance to Facebook’s acquisition of a stake in Jio. The markets are expecting the flows to come in the next month. Positioning in anticipation of these inflows and month-end export selling could limit the upside in USDINR.

The rupee is likely to open around 75.75 and trade in the 75.55-75.85 range. Asian currencies are trading weak against the USD.

The Nifty saw a dramatic intraday reversal to end 165pts lower at 10305. Bank stocks underperformed. We can witness similar volatility today given the June series F&O expiry.

US Durable Goods and Weekly Jobless claims data is due today along with the final US Q1 GDP print.

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