It’s A Jittery Day Ahead

Central banks in Europe and UK are to meet on Thursday and the all-eyes-on US employment data is scheduled to be released on Friday. Global markets have been behaving in a rather erratic manner ahead of these key events. Moreover, macroeconomic data released in China has sent out tremors across Asian markets.

Although there is movement on the policy front domestically, we reckon global cues will weigh on the markets.

The Telecom Commission approved to raise foreign direct investment limit for the telecom sector to 100% from the existing 74%. The Department of Telecommunication is likely to soon move a cabinet note for the same. The first 49% FDI can be done through automatic route but for the increased FDI a FIPB approval is required. This is a major move on the policy front and is likely to improve sentiment.

However, global cues have been negative and are likely to overpower the positive sentiment domestically.

In the US, car sales were positive and factory-orders data was encouraging. However, the markets still ended lower as investors anticipated the jobs report due on Friday. Europe too remained at the lower end as the markets expressed their nervousness and uncertainty ahead of the central bank meetings in Europe and UK, scheduled to be held later today.

Although the above points display a level of uncertainty in the markets, the real drag has come in this morning from China. Official data has showed the services sector expanded at a slower rate in June thus adding to worries surrounding the economic slowdown. The index fell from 54.3 in May to 53.9 in June.

This dragged Asian stocks lower in a backdrop that already flashed nervousness. The Nikkei, Hang Seng and Shanghai Composite are trading lower by 0.67%, 1.73% and 1.67% respectively. The Asia Dow and Singapore are trading lower by 1.18% and 1.27%. The SGX Nifty was seen trading lower by 62 points at 08:15 AM earlier today.

Clearly, global cues are going to overpower domestic sentiment and the markets are up for a lower start. The day ahead is likely to be marked by volatility.