Just when the global markets were coming to terms with Trump’s disruptive trade policies, the US President announced his paln to impose reciprocal tariffs on countries, instead of a blanket tariff. This has further muddied the trade waters and increased volatility in markets.
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The Dow Jones Industrial Average, S&P 500 and the Nasdaq closed the week down by 0.5%, 0.2% and 0.5%, respectively.
Trump is skating on thin ice here as one can’t predict what will be the outcome of these yet-to-be-announced trade tariffs. Countries impacted could announce retaliatory measures, either by design or by sheer miscalculation, leading to the possibility of a trade war. China, for instance, has slapped similar duties on US imports.
However, sanity would prevail in the longer run as countries are proactively taking steps to reduce duties on imports from the US.
The EU has said it is prepared to cut its 10% import tax on cars to get closer to the 2.5% levy charged by the US. India, too, has lowered tariffs on some imports from the US in the Budget.
Our reactions to the US action will be measured and carefully crafted, rather than as a knee jerk reaction, but we will defend our turf where we must.
In the US, the January non-farm payrolls rose by 143,000, which was less than what economists had pencilled in, and which were way lower than the revised numbers for December at 307,000. However, month-on-month wage growth of 0.5% was hotter than the expected 0.3% growth. The next meeting of the FOMC is on March 18-19, which will give the wise men of the Fed to also take into consideration the February non-farm payroll data that will come on March 7. If the weak job trend holds, the FOMC may revisit its hawkish stance.
Coming to our markets, despite falling for three consecutive sessions, the Nifty gained 0.33% last week. A week before, in the extended one ended on the Budget day, the Nifty had gained 1.69%. More importantly, it had completely engulfed the trading of the week ended January 24, which is bullish.
Have a look at the trendline number 42, which has been drawn by joining the all-time high mark of 26277 registered on September 26, 2024, and the high of 24,781 on December 16. This trendline was breached in intraday terms on February 5 and 6, but the Nifty slipped to close lower. Since this is a downward sloping trendline, the asking rate for a breach will keep falling each day. For Monday, the resistance is at 23,700. A close above the 23807 mark could make it a decisive move up.
Support is seen first at 23443, then at 23222 and finally at 22,786, the lowest level seen in the current slide.
Though Q3 results are weaker than expected, the rate cut on Friday and the carefully-curated liquidity provide a good backdrop for the markets to absorb any shocks that Trump-led US may have in store for us.
