FX.co ★ Sensex, Nifty To Follow Global Peers Higher After US Inflation Data

Indian shares are likely to follow global trends upward on Thursday, buoyed by signs of slowly cooling U.S. inflation. However, market volatility remains a possibility due to uncertainties surrounding the 2024 Lok Sabha election outcome.

In economic news, India's merchandise trade deficit expanded to a four-month peak of $19.1 billion in April. The deficit was driven by weak global demand in Western countries and a significant increase in gold imports, according to official data.

Attention may turn to oil and related stocks today after the government reduced the windfall tax on crude petroleum from Rs 8400 per ton to Rs 5700 per ton, effective May 16.

Benchmark indices Sensex and Nifty closed slightly lower on Wednesday, after trading within a narrow range throughout the session.

Asian markets saw strong gains, with benchmark indices in Australia and New Zealand leading the charge as government bonds rallied.

The U.S. dollar weakened, which in turn bolstered gold prices, pushing them close to $2,400 per ounce. Additionally, oil prices rose following reports of a larger-than-expected reduction in commercial crude stockpiles.

U.S. stocks experienced sharp gains overnight, with all three major indices achieving record closing highs. This came as April retail sales unexpectedly remained flat, consumer prices rose less than anticipated, and core CPI slowed, fueling optimism for potential interest rate cuts from the Federal Reserve.

Treasury yields declined as data showed a 0.3 percent increase in consumer prices for April, down from a 0.4 percent rise in March. Economists had predicted a 0.4 percent increase. Year-over-year, the CPI decelerated to 3.4 percent, aligning with expectations.

Core inflation fell from 3.8 percent to 3.6 percent, marking its lowest level excluding food and energy since April 2021.

The S&P 500 surged 1.2 percent, surpassing 5,300 for the first time. The Dow rose 0.9 percent, nearing the 40,000 benchmark, while the tech-heavy Nasdaq Composite jumped 1.4 percent.

European stocks also closed higher on Wednesday as investors welcomed the lower-than-expected U.S. inflation figures along with positive Eurozone industrial production and GDP data.

The pan-European STOXX 600 advanced 0.6 percent. Germany's DAX increased by 0.8 percent, while France's CAC 40 and the U.K.'s FTSE 100 each edged up by 0.2 percent.