US bond selling triggers the global equity markets
Nifty breaks below 23,280 support as global bond selloff dents sentiment, holding 23,150-23,120 now crucial
As of 08:29 IST, 23 Sept
Nifty opened with a sharp gap-down below the 23,280 support, nullifying the positive set-up of the recovery from 23,300.
The trigger is a global bond selloff - US 10-year Treasury yields surged 15 bps to 5.11%, above 5% for the first time since 2007, after a weak bond auction and strong US data revived bets of further Fed rate hikes. Wall Street fell overnight and Asian markets are mixed to weak.
Technically, the breach of 23,280 cancels the hourly reversal set-up that had targets of 23,600-23,750. Next support stands at 23,150-23,120 - a break below the same may drag the market towards 23,000. On the upside, Nifty needs to reclaim 23,280-23,300 quickly for any recovery attempt to regain credibility.
Crude has turned against us again. Brent jumped nearly 4% to settle at $103 after Iran's President struck a defiant tone at the UN and made clear the Strait of Hormuz will not reopen until Iran's conditions are met. Brent trades near $102 this morning - the cooling we saw on Tuesday has reversed for now.
The Yen remains the second key variable. USD/JPY is back above 158, near a three-week low for the Yen, Japan's 10-year yield hit a 30-year high, and the BoJ's rate hike takes effect today. With FIIs continuing to sell, Yen, Crude and now US bond yields are the three macro variables to watch.
The Larger Picture
The market resumed down trend to 23000-22500 level after Nifty completed 61.8% retracement of the entire fall at 24752 during consolidation, and has now made low 23118 against our 1st target of 23000.
The market has already absorbed the immediate Fed and BoJ rate decisions.
The more important variables from here are Yen, crude oil and global liquidity.
The Yen remaining weak is currently helping delay a larger carry-trade unwind. A sharp Yen appreciation, particularly towards the intervention zone, could change this equation quickly.
At the same time, falling crude would remove one of the biggest sources of inflationary pressure currently affecting emerging markets.
For India, this creates a two-sided setup:
01 Weak Yen + cooling Oil = supportive for equities
02 Strong Yen + elevated Oil = risk of renewed selling
Key Macro Risks Ahead
Tips disappears, Tradzo stands with you.
- 1.Probability of US sanction based Tariffs on India upto 500%.
- 2.Crude & Refining capacity around the world translating inflation in downstream crude products, Urea shortage leading food security concerns
- 3.Escalation of US-Iran war to entire West Asia
- 4.US Debt & housing collapse due to unwinding of Yen carry trade.
- 5.AI Bubble burst - AI maybe becoming popular and very successful tools in the right hands but for majority its just new dopamine, with sky high valuations and no signs of profits.
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Tradzo Research
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