On Tuesday, the US stock market experienced a significant rebound from the recent losses caused by the Silicon Valley Bank failure. This was in response to the release of February’s inflation data, which met expectations and indicated that pressure on prices may be easing.
The consumer-price index for February was largely as predicted, with the cost of living showing a year-over-year increase of 6%, down from 6.4% in the previous month. Excluding food and energy prices, the core CPI increased by 5.5% year over year, which was a slight decrease from the January print of 5.6%. The headline number of 6% is the lowest since September 2021. The stocks of regional US banks, which have been struggling, rebounded on Tuesday.
There is some optimism that the February data, combined with the interest rate pressures on banks, may convince the Fed to halt rate hikes altogether. However, some market observers believe that a 25 basis point increase is a more likely result.
Moody’s Investors Service recently downgraded its outlook on the US banking sector to negative following a series of bank collapses in the past few days.
After the US inflation report and the recent banking failures, oil prices fell over 4% to a three-month low. This sparked concerns about a potential new financial crisis that could reduce future oil demand.
Official data revealed that China’s industrial output rose 2.4% in the January to February period, which was slightly lower than the 2.6% rise that economists had anticipated. Retail sales for the same period increased by 3.5%, in line with expectations, and fixed asset investment saw a rise of 5.5%, exceeding the predicted growth of 4.4%.
On Wednesday, Asian equities rose as investors bet that the worst of the global fallout from the US banking sector had passed.
The Nifty index fell for the fourth consecutive session on March 14, driven down by the ongoing banking crisis in the US. However, the rebound in global markets suggests that systemic issues may be subsiding. While the Nifty is still falling as expected, the pace of the fall and the breadth of the decline has reduced, indicating that a near-term bottom formation or reversal may be on the horizon. The Nifty is expected to remain within the 16788-17160 range in the near term.