Federal Reserve will ease up on its aggressive plan for interest-rate hikes

USDINR: 78.34 ▼ 0.01%.

EURUSD: 1.0577 ▲ 0.22%.

GBPUSD: 1.2271 ▲ 0.08%.

India 10-Year Bond Yield: 7.409 ▼ 0.47%.

US 10-Year Bond Yield:  3.168 ▲ 1.40%.

Sensex: 53,161.28 ▲ 0.82%.

Nifty: 15,832.05 ▲ 0.85%.

Key highlights

Profits at China's industrial firms shrank at a slower pace in May following a sharp fall in April, as activity in major manufacturing hubs resumed, but COVID-19 restrictions still weighed on factory production and squeezed factory margins. Profits fell 6.5% from a year earlier, less than the 8.5% decline in April, according to data released by the National Bureau of Statistics.

British Prime Minister Boris Johnson said that the parliament could pass legislation this year to scrap some of the rules on post-Brexit trade with Northern Ireland that his government agreed in 2020 with the European Union. The legislation, which would unilaterally replace parts of that bilateral deal is due to be sent back to parliament's lower house for a second reading.

USD/INR movement

The USDINR pair made a gap-down opening at 78.23 and traded within the range of 78.23-78.3575. The pair closed the day at 78.34 levels. The USDINR pair started the day lower, however, closed near its day high due to persistent FII outflow from the domestic market. The elevated crude oil prices too kept the Indian rupee under pressure. However, the drop in the US dollar index capped any major gains in the USDINR pair.

Global currency updates

The EURUSD pair has regathered bullish momentum and climbed higher toward 1.0600. Improving market mood seems to be helping the shared currency find demand at the start of the week. Risk flows dominate the financial markets as investors reassess major central banks' tightening prospects amid growing signs of a slowdown. The GBPUSD pair gained some positive traction and shot to over a one-week high during the early part of the European session. Spot prices, however, struggled to capitalize on the move or find acceptance above the 1.2300 mark and have now surrendered a major part of the intraday gains. Traders turned cautious around the USDJPY pair amid speculations that any further depreciation of the Japanese yen might force some form of practical intervention.

Bond market

U.S. Treasury yields were higher to start the week as market players assessed the prospect of central banks implementing more interest rate hikes to curb soaring inflation. The yield on the benchmark 10-year Treasury note was trading higher by 4 basis points at 3.17%. The domestic bond yields traded slightly lower today as there was the risk-on sentiment in the market after the global market assessed the Federal Reserve rate hike prospects with the recession fear gaining momentum. The overall movement registered across the sovereign curve remained within 5 basis points. The 10-year G-Sec benchmark closed the day at 7.409% as compared to 7.444% of the previous close.

Equity market

Indian equity benchmarks Sensex and Nifty 50 saw sharp gains amid buying across sectors, tracking a rebound across global markets as easing commodity rates boosted investors' risk appetite. Financial, IT, metals, and auto shares were the biggest contributors to the gains in the main indices. Broader markets mirrored the gain in headline gauges, with the Nifty midcap 100 and the Nifty small cap 100 rising 1% and 2% respectively.

Evening sunshine

Focus to be on the US pending home sales and core durable goods orders data.

Global stocks rose today as investors bought into the idea that the Federal Reserve will ease up on its aggressive plan for interest-rate hikes, if necessary to avoid a recession. US stocks looked set to press on with last week's gains. According to reports, Russia has slipped into default on its foreign debt for the first time in over a century. The focus will be on the US pending home sales and core durable goods orders data due later today.