Asian shares are trading on a negative note today. Asian shares hit a 14-month low on the back of worries that a new round of Sino-US tariffs could come at any moment. The Nikkei 225 is down 1.1% while the Hang Seng is down 0.8%. The Shanghai Composite is trading down by 0.1%.
Back home, India share markets opened the day on a negative note. The BSE Sensex is trading down by 125 points (down 0.3%) while the NSE Nifty is trading down by 27 points (down 0.2%). The BSE Mid Cap index is trading flat, while the BSE Small Cap index has opened the day down by 0.1%.
Sectoral indices have opened the day on a mixed note with healthcare stocks, power stocks and banking stockswitnessing maximum selling pressure.
The rupee is trading at 71.88 to the US dollar.
In the news from commodity markets, crude oil prices are witnessing buying interest today. Gains are seen as data showed that US crude inventories fell to their lowest levels since February 2015.
Note that oil prices have climbed steadily this year, helped by rising demand. This is seen on the back of signs that Iran sanctions may limit global crude oil supply.
As per a leading financial daily, oil customers for Iran have started to drastically wind down purchases of Iranian crude ahead of the US sanctions. This was evident from Iran's exports plunging by 6,00,000 barrels per day (bpd) in August compared with July loadings due to declining flows to India.
On the back of above worries, market participants are worried that Iranian sanctions could severely undersupply the oil market in 2018 and that will mean further rise in crude oil prices.
But rising crude oil prices doesn't bode well for the Indian economy, as it not only affects fuel prices, but also has many other repercussions on the macroeconomic level.
They can be a big worry for the Modi government as well as it has been a big beneficiary of lower crude oil prices.
Apart from that, what does rising crude oil prices mean for stock markets?
Richa Agarwal, editor of Hidden Treasure, tracks the oil and gas sector very closely. She believes the rise in crude oil prices is a bearish sign for stock markets globally. At the same time, any market correction, will throw up interesting buying opportunities in small-cap stocks.
This is what she wrote...
- After hitting a low of US$ 30 per barrel in January 2016, prices have more than doubled this year.
While the Hidden Treasure team looks for long-term wealth creators, such macro situations can help to recommend such stocks at a bargain. The ones who keeps calm, when everyone else is losing their heads, will gain the most when the tide turns.
It would be interesting to see how Iranian sanctions will influence crude oil prices. Meanwhile, we will keep you posted on all the updates from this space.
In the news from global financial markets, emerging-market stocks fell sharply on Thursday amid tighter US monetary policy, worries about global trade, and economic meltdowns in Argentina and Turkey.
Also, tensions between the US and some of its key trade partners added to the woes. The Trump administration is expected to slap tariffs on an additional US$ 200 billion in Chinese goods after midnight, which is the deadline to receive commentary on the proposed levies. China has also threatened to retaliate the above tariffs with additional tariffs of its own.
Note that last month, the Trump administration announced to impose 25% tariffs on imports of 279 items from China amounting to US$ 16 billion.
Both the countries have now slapped tariffs on US$ 50 billion of each other's goods in a tit-for-tat trade war, and Trump is considering imposing tariffs on another US$ 200 billion in Chinese imports.
The trade war, along with the abovementioned factors have led emerging markets trade on a volatile note.
Speaking of emerging markets, the recent woes of emerging nations seem to be a never-ending affair. Every day, a new country joins the 'fragile' list.
The latest to do so is South Africa. South Africa's economy shrank by 0.7% in the second quarter. The nation is now in a recession.
South Africa joins Argentina, Turkey, and Brazil in the list of developing countries to have their currencies crash against the US dollar.
As can be seen from the chart below, India has fared relatively better. Well, at least for now.
These Countries Could Cause Our Market to Fall
But how resilient can the Indian rupee be to the ongoing volatility and economic shocks?
Here's what we wrote about it in a recent edition of The 5 Minute WrapUp...
- The rally in crude oil has also not helped matters. We are seeing similar signs to those seen five years back.
In 2013, India was a part of 'fragile five' emerging markets along with Brazil, South Africa, Indonesia, and Turkey.
Political uncertainty, high inflation, slower growth and large fiscal deficits had dented investor confidence in Indian markets.
While the Indian economy is on a comparatively strong footing, elections next year could be a cause for worry for the market.
Any fractured mandate combined with the weak rupee and rising crude oil prices would be a recipe for pain in the short-term. The next few months could be volatile.
But no matter what happens, dear reader, we'll stay on top of it and recommend safe stocks at the right price.
Consider, Tanushree's recent StockSelect recommendation. As per the company's management, if crude sustains at US$ 60-US$ 65, one of the company's primary segments would receive a big boost.
It's just a matter of buying this stock at the right price.
To know what's moving the Indian stock markets today, check out the most recent share market updates here.
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This article was originally published in English at www.equitymaster.com
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