Global Risk-On Mood Lifts Asian Bourses; Indian Markets Eye Fed Pivot

The combination of softer U.S. labor data and underwhelming consumer spending has reignited bets on Federal Reserve rate cuts as early as December, sending waves of optimism across global markets and setting the stage for Indian shares to open firmer on Wednesday.

America’s Economic Weakness, Market’s Strength

Overnight action in the U.S. painted a mixed economic picture that nonetheless pleased risk assets. Retail sales came in below expectations while consumer confidence hit a seven-month low, reflecting growing anxiety over employment and economic resilience. Wholesale inflation ticked up due to energy and food pressures, yet these headwinds paradoxically cleared the path for Fed easing expectations. The Dow surged 1.4 percent, the S&P 500 climbed 0.9 percent, and the Nasdaq Composite gained 0.7 percent—extending the rally to a third consecutive day.

Treasury yields capitulated accordingly, with the 10-year benchmark dipping below 4 percent for the first time in nearly a month. Treasury selling accelerated after Kevin Hassett emerged as the likely next Fed chairman, signaling potential shifts in monetary policy direction.

Asia Capitalizes on the Dollar Decline

The weaker U.S. currency and falling yields acted as a tailwind for Asian equities. Gold inched higher as investors rotated into haven assets, while oil held steady following Tuesday’s month-low close—buoyed by tentative progress on Ukraine peace negotiations. Across the continent, regional bourses extended gains into a third consecutive session, riding the coattails of Wall Street’s optimism.

Indian Markets Poised for a Bounce

Back home, Sensex and Nifty ended slightly lower on Tuesday, weighed down by monthly expiry settlements in Nifty F&O contracts for November series. However, overnight momentum should provide support at Wednesday’s open.

The rupee settled 6 paise weaker at 89.22 against the U.S. dollar—a modest depreciation that reflects the broader currency pressure across emerging markets. Yet foreign investors remained net buyers, purchasing shares worth Rs 785 crore on Tuesday. Domestic institutional investors showed stronger conviction, accumulating Rs 3,912 crore in shares, demonstrating resilience among local players despite rupee headwinds.

The Elephant in the Room: Trade Uncertainty

While external tailwinds look encouraging, traders remain cautious about progress on potential U.S.-India trade negotiations. This uncertainty could introduce volatility throughout the session, creating a tug-of-war between positive global sentiment and domestic concerns.

Europe Joins the Rally

European markets mirrored the bullish tone, with the Stoxx 600 advancing 0.9 percent. Germany’s DAX rallied 1 percent, while France’s CAC 40 and the U.K.'s FTSE 100 both jumped 0.8 percent, cheered by signs of diplomatic progress on the Ukraine conflict.

The consensus is clear: Fed rate-cut hopes are fueling a broad-based risk-on rally that’s lifting all regional boats. For Indian investors, today’s session will likely test whether this optimism can overcome lingering trade deal uncertainties.