FX.co ★ Sensex, Nifty Seen Higher At Open As US Inflation Cools

Indian markets are expected to start higher on Thursday, influenced by strong global trends and mixed economic data released post-market close on the previous day.

Official figures indicate that India's retail inflation has eased to a 12-month low, standing at 4.75% annually in May, a slight decline from April's 4.83%. Conversely, India's industrial output growth decelerated to a three-month low of 5% in April, down from 5.4% in March, attributed to slower manufacturing growth.

On Wednesday, benchmark indices Sensex and Nifty each rose by approximately 0.2%, and the rupee appreciated by 3 paise, closing at 83.56 against the dollar.

This morning, Asian markets largely advanced; however, Chinese stocks remained subdued following the EU's announcement of new tariffs on Chinese electric vehicles, effective next month.

Meanwhile, the dollar weakened and gold prices fell as investors considered a prolonged higher interest rate scenario by the Federal Reserve. Oil prices also dropped in Asian trading, ending a three-day winning streak due to an unexpected rise in U.S. crude oil inventories.

Overnight, U.S. equities mostly closed higher. Signs of declining inflation have led to speculation that the Federal Reserve may reduce interest rates in the upcoming months. Data showed U.S. consumer prices recording an annual growth of 3.3% by the end of May, a 0.1 percentage point decrease from April. Core prices grew at the slowest annual rate in over three years despite rent costs continuing to strain household budgets.

After maintaining rates unchanged for the seventh straight meeting, Fed Chair Jerome Powell acknowledged that inflation has significantly reduced in recent months but asserted that it remains excessively high. The latest forecasts reveal that officials anticipate only one interest rate cut this year, compared to the three cuts projected in March. The accompanying dot plot illustrated that more participants expect two rate cuts rather than one, with none expecting more than two cuts, and four participants anticipating no cuts at all this year.

The tech-heavy Nasdaq Composite climbed 1.5%, and the S&P 500 increased by 0.9%, both achieving new record closing highs, while the Dow Jones Industrial Average ended slightly lower, conceding early gains.

European markets broke a three-day losing streak on Wednesday, buoyed by the potential for a Federal Reserve rate cut in September. The pan-European STOXX 600 index advanced by 1.1%, the German DAX surged 1.4%, France's CAC 40 rose by 1%, and the U.K.'s FTSE 100 increased by 0.8%.