Indian Shares Seen Lower On Heightened Inflation And Interest-rate Concerns

(RTTNews) - Indian shares look set to open on a sluggish note on Wednesday as oil prices continued to rise and bonds fell, fueling concerns about inflation and Fed rate hike bets.

Oil prices continued to surge and a global bond rout deepened, stoking fresh worries about inflation and interest-rate hikes.

Brent crude futures rose toward $96 a barrel, extending gains for a third consecutive session to the highest level in nearly six weeks as escalating fighting between the U.S. and Iran heightened concerns over further disruptions to energy flows through the Strait of Hormuz.

Rising oil prices pressured bonds, pushing global bond yields to the highest since 2008 and increasing the prospect of a Federal Reserve rate hike.

Federal Reserve Governor Michael Barr said he would back a rate hike if inflation doesn't cool quickly.

With inflation still running above the Fed's 2 percent target, Friday's U.S. payrolls report may offer additional clues on the Fed's rate trajectory.

Benchmark indexes Sensex and Nifty ended marginally lower on Tuesday as escalating Middle East tensions as well as concerns over monetary tightening in the U.S. offset upbeat domestic GDP data for the first quarter.

The rupee rose by 28 paise to close at 94.94 against the dollar, hitting a nearly two-month high after the latest MSCI-rejig and the resultant inflows. The upside was also driven by RBI intervention bolstered by the record forex reserves, which crossed $729.4 billion as of last week.

Foreign institutional investors returned to buying Indian equities and net bought shares worth Rs. 1,143.38 crore on Tuesday, while domestic institutional investors net bought shares to the extent of Rs. 1,846.94 crore, according to provisional exchange data.

Asian markets were moving lower this morning, with tech-heavy Kospi and Nikkei leading regional declines after U.S. chipmaker Nvidia reportedly struck a deal to buy open-source AI company Hugging Face for $12.9 billion.

The dollar held firm in early Asian trade while gold prices fell toward $4,300 an ounce.

U.S. stocks closed lower for the third straight day overnight while the yield on the benchmark ten-year note hit a 20-month high amid increased tensions in the Middle East.

Brent crude futures rose 4 percent above $94 a barrel after U.S. Central Command announced a fresh wave of attacks against IRGC targets, citing Tehran's attempts to lay mines in the Strait of Hormuz and an earlier attack on a U.S. military base.

Tehran warned it would prevent oil exports from the Gulf, adding to uncertainty around energy supplies.

Economic data offered little relief, with U.S. manufacturing activity easing in August, job openings in July coming in soften than expected, and residential construction spending declining in the month.

The tech-heavy Nasdaq Composite lost 1 percent, the Dow shed 0.8 percent and the S&P 500 declined 0.7 percent.

European stocks closed lower on Tuesday, pressured by a fresh rise in government bond yields as tensions in the Middle East escalated and data showed Eurozone inflation climbed to a three-year high of 3.3 percent in August on higher energy costs.

The pan-European STOXX 600 fell 0.6 percent to a more than one-month low. The German DAX lost 1.1 percent, France's CAC 40 dipped 0.4 percent and the U.K.'s FTSE 100 eased 0.3 percent.