On Monday, U.S. stocks closed mostly lower, with the Dow industrials suffering their fifth consecutive day of losses, as investors remained concerned about contagion risks, despite regulators taking steps to protect the banking system from further runs on vulnerable financial institutions.
Investors re-evaluated their outlook for interest rates after the collapse of Silicon Valley Bank in California and Signature Bank in New York, which put regional bank shares under heavy pressure.
US treasury yields fell significantly as investors reduced their expectations for future Federal Reserve rate increases. The bank rout was seen as potentially crimping lending activity, which could slow down the economy. The US 2-year Treasury yield, which was trading at 15-year highs above 5% last week, fell 55.8 basis points to 4.03% on Monday. That was the largest one-day decline since October 20, 1987.
In India, the headline retail inflation rate edged down to 6.44% in February from January’s three-month high of 6.52%. This latest Consumer Price Index (CPI) inflation print is in line with consensus estimates. Economists surveyed by Moneycontrol expected inflation to ease to 6.4% in February. Retail inflation has now been above the Reserve Bank of India’s (RBI) medium-term target of 4% for 41 months in a row.
Gold rose by 2.4%, bringing its gains this month to 4.8%, the most since January, as the fallout from SVB’s collapse combined with a decline in the dollar index to drive up prices.
On Tuesday, Asia-Pacific markets experienced a sharp decline, following concerns about failed banks in the U.S., including Silicon Valley Bank. The risk of a banking crisis highlights the tension between Fed efforts to cool the economy and tame inflation with increasing concerns that 4.5 percentage points of rate hikes in the space of a year will trigger a recession and a collapse in riskier assets.
Nifty fell for the third consecutive session on March 13, pulled down by banking issues in the U.S. At close, Nifty was down 1.49% or 258.6 points at 17154.3. Nifty ended at the lowest level since mid-October. If the Nifty breaches the 17087 level, it could result in a fall towards 16747. Upmoves could face resistance at 17325.