Fed Eyes Data Before Rate Decision; Trump’s 50% Tariff on India in effect

GLOBAL MOOD: Risk-Off
Drivers: Crude Draw, Trump India Tariff, Fed Rate Uncertainty

Markets leaned risk-off as investors weighed Trump’s 50% tariffs on India and uncertainty over Fed policy, despite supportive crude inventory data and tech earnings optimism. Safe-haven flows supported Treasuries and the US dollar, while equities showed cautious gains.

TODAY’S WATCHLIST
 - India Jul Industrial Production Data
 - US Jobless Claims Data
 - US Apr-Jun GDP 

THE BIG STORY
New York Federal Reserve Bank President John Williams indicated on Wednesday that interest rates could be lowered at some point, but policymakers will first assess upcoming economic data, including jobs and consumer price inflation reports, to determine whether a cut is appropriate at the September 16-17 meeting. “Every meeting is, from my perspective, live for a change in the benchmark policy rate,” Williams told CNBC, adding that risks are balanced and decisions will depend on incoming data. The Fed currently maintains the policy rate in the 4.25%-4.5% range, unchanged since December.

Meanwhile, US President Donald Trump’s doubling of tariffs on imports from India to as much as 50% came into effect on Wednesday, escalating tensions between the two democracies. The punitive tariffs, imposed over India’s purchases of Russian oil, now apply to garments, gems and jewellery, footwear, sporting goods, furniture, and chemicals, threatening thousands of small exporters and jobs in India. Despite five rounds of talks aimed at reducing the duties to 15%, no breakthrough has emerged, leaving trade relations strained and posing risks to India’s economic growth.

Data Spotlight
Crude oil inventories in the US dropped by 2.392 million barrels to 418.3 million barrels in the week ending August 22, surpassing market expectations of a 2-million-barrel decline. Stocks at the Cushing, Oklahoma delivery hub also fell by 838,000 barrels over the week. Gasoline inventories decreased by 1.2 million barrels to 222.3 million barrels, below forecasts of a 2.5-million-barrel draw. 

Takeaway: The larger-than-expected draw in crude inventories indicates tighter supply conditions, supporting oil prices despite mixed signals from gasoline stock levels.

WHAT HAPPENED OVERNIGHT

• US Stocks rises; S&P 500 hits record ahead of Nvidia earnings
  
  • Nvidia shares ended down 0.1% ahead of quarterly earnings report
  • Tech and AI stocks were mixed with Microsoft rising 0.9% and Meta Platforms fell 0.9%. Alphabet and Amazon also impacted as major Nvidia customers.
    
    

• US Treasury yields under pressure amid Fed independence concerns
  
  • The 10-year US Treasury yield hovered around 4.27%, while 2-year US Treasury yield fell to near four-month low.
  • Yield curve steepened as traders priced in potential dovish Fed appointments.
    
    

• US dollar holds gains amid Fed watch
  
  • US dollar Index was up 0.02% at 98.227 against major currencies.
  • Investors focused on upcoming US economic data for policy cues
  • Concerns linger over Federal Reserve independence and political developments.
    
    

• Crude oil prices rebound on inventory drop
  
  • Brent crude oil futures rose 1.2% to $68.05 a barrel, while WTI crude futures were up 1.4% to $64.15 per barrel.
  • Gains supported by larger-than-expected drop in US crude inventories.
  • Investors also weighed potential impact of new US tariffs on India.

Day’s Ledger
Economic Data

• India Jul Industrial Production Data
• US Jobless Claims Data
• US Apr-Jun  Core PCE Prices
• US Apr-Jun GDP 

Corporate Actions

• Delphi World Money to consider fund raising
• Mufin Green Finance to consider fund raising

Policy Events

• BoJ Board Member Nakagawa Speaks
• ECB Publishes Account of Monetary Policy Meeting

Tickers to Watch

• ADANI GROUP firms win CCI nod for Jaiprakash Associates acquisition
• DR REDDY’S secures HC stay on tax reassessment linked to merger case
• E2E NETWORKS wins ₹0.88 billion IndiaAI order for 1,024 H200 GPUs.
• ESCORTS KUBOTA launches Kubota MU4201, debuts in new horsepower range
• GRAPHITE INDIA lifts stake in Godi India through rights issue
• HCL TECH teams up with UK’s Thought Machine to modernise banking systems
• LEMON TREE HOTELS signs license pact for new resort in Pench, Maharashtra.
• NEWGEN SOFTWARE wins order for scanning and digitisation services
• OIL INDIA AND BPCL sign pact for gas distribution project in Arunachal
• ONGC sets up internal team to explore crude and refined fuels trading unit
• POWER GRID bags Karnataka interstate transmission project under BOOT model.
• RVNL forms JV with Texmaco Rail to pursue railway infra projects.
• SAIL supplies critical-grade steel for two Indian Navy warships
• SBI CARDS partners Flipkart to launch co-branded SBI Credit Card.
• SMS PHARMA gets US FDA EIR with “No Action Indicated” for Hyderabad lab.
• UNITED BREWERIES to add canning line at Telangana brewery

MUST READ: 

• What’s at Stake as Trump Tests India’s Ties With Russia
  
• India’s Air Force Chief Questions Modi’s Military Overhaul Push
  
• PM Modi's Diwali sparkle faces tough test amid Trump’s tariff sting
  
• Why farmers can’t find enough fertilisers this kharif season
  
• India EU FTA talks to enter final lap in next round of talks
  
• US tariffs a wake-up call for India to push bold reforms: Amitabh Kant
  
• Auto body knocks on finmin door for faster GST reforms, compensation cess
  
• India, US will 'come together' despite 50% tariffs: Treasury Secretary
  
• What if Trump Runs the Federal Reserve?

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

Open Mouths, Open Markets, and RBI’s Signalling Gap

RBI’s June frontloaded easing and abrupt neutral stance backfired, spiking yields and unsettling markets.

BasisPoint Groupthink writes, Governor Malhotra now needs credible communication and open market actions to restore confidence and steady borrowing costs.