Indo-China standoff effects: bank, pharma stocks in focus, markets seen on the edge
- Due to dexamethasone reducing deaths by one-third among severely ill COVID-19 patients, investors may watch pharma stocks.
- US retail sales jumped and blew past 8% rise with a record of 17.7% in May and hence, analysts expect the US recession nearing the end.
Markets may stay on the edge due to the clashes between China and India on the border. Indian stocks are likely to be volatile on Wednesday.
On late Monday, a major violent escalation occurred between India and China with 20 Indian Army personnel losing their lives in the face-off in the Galwan area of Ladakh.
Asian stocks were mixed in early deals as the IMF as the global economy is set to witness a more significant contraction.
US retail sales jumped a record 17.7% in May, blowing past the 8% increase analysts expected and supporting views the US recession might be drawing to an end. On Wall Street, the Dow Jones Industrial Average rose 2.0%, the S&P 500 gained 1.9% and the Nasdaq Composite added 1.8%. That followed a broad 3% rally in major European bourses. MSCI’s gauge of stocks across the globe gained 2.2%.
In India, pharma stocks are likely to be in focus as trial results showed dexamethasone, a cheap and widely used steroid, reduced death rate by about one-third among the most severely ill COVID-19 patients.
Investors may watch bank stocks as the Supreme Court (SC) will hear plea on interest waiver during the moratorium period. On 12 June, the SC had asked the finance ministry and Reserve Bank of India (RBI) to meet within three days to decide on the matter and had deferred the hearing to 17 June. The SC said the scope of the hearing is limited to the interest waiver, levied on the accrued interest.
Standard Life Investments Ltd, one of the promoters of HDFC Asset Management Co Ltd said on a stock exchange filing that it will offload a 2.82% stake in the fund house through an offer for sale.
At the same time, the dollar was mostly stronger, with the euro down 0.55% to $1.126 and the Japanese yen up 0.01% at 107.32. The British pound rose on unemployment numbers that were not as bad as feared and friendlier Brexit talks.
The Bank of Japan increased its lending packages for cash-strapped firms to $1 trillion from about $700 billion, while keeping rates steady, sticking to its view that the Japanese economy will gradually cope from the pandemic.
The yield on the benchmark US 10-year Treasury notes rose 4.7 basis points (bps) to 0.7495%. German, French, Dutch, and other core yields also rose. Riskier Italian yields fell to their lowest level since the end of March, and the iTraxx European crossover index, which reflects the cost of insuring against junk-rated corporate bond defaults, fell to its lowest level in six days.