Markets bounce back, rupee rebounds as Trump rules out tariffs on Europe

Stock market benchmark indices Sensex and Nifty jumped 1 per cent in early trade, the rupee rebounded from its all-time low levels, and Asian shares mostly advanced on Thursday (January 22) tracking Wall Street, after US President Donald Trump walked back from imposing tariffs on eight European countries over Greenland and ruled out using military force to take control of the territory.

Trump, attending the World Economic Forum in Davos, Switzerland, backed down on Wednesday (January 21) and said he would not use force to acquire Greenland. The US president also said in a post on his social media site that he had agreed with the head of NATO on a “framework of a future deal” on Greenland and on Arctic security.

Lift in investor sentiment

India’s stock market recovery was led by advances in PSU banks, Services and Auto stocks as global sentiment improved after easing geopolitical trade tensions, lifting the investor sentiment.

On Thursday, the 30-share BSE Sensex climbed 774.04 points, or 0.94 per cent, to 82,683.67 in early trade. The 50-share NSE Nifty rose 233.85 points, or 0.93 per cent, to 25,391.35.

From the 30-Sensex firms, Tata Steel, Adani Ports, Asian Paints, Bharat Electronics Ltd, State Bank of India, Sun Pharmaceuticals, Kotak Mahindra Bank, Eternal, Trent, Mahindra & Mahindra, and Bajaj Finserv were among the gainers.

Also Read: Trump says framework reached for Greenland deal, cancels EU tariff threat

"President Donald Trump has withdrawn from his threat to 'annex Greenland by force, if necessary’. Instead, in Davos on Wednesday, he said 'we have reached a framework of a future deal on Greenland’. More importantly, the message that the US would 'refrain from imposing tariffs on Europe' takes away the threat of a US- Europe trade war which was dragging the markets down. The consequent relief rally in the market on Thursday can be significant since there are about 2 lakh short contracts in the market and the market construct is right for short-covering," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, said.

Global markets see gains

The easing tensions drove Wall Street optimism. On Wednesday, the S&P 500 climbed 1.2 per cent to 6,875. The Dow Jones Industrial Average gained 1.2 per cent to 49,077.23, while the Nasdaq composite also rose 1.2 per cent, to 23,224.82.

Tokyo's Nikkei 225 climbed 1.9 per cent to 53,760.85, with technology stocks among those leading the gain.

South Korea's Kospi was up 2 per cent to 5,008.08, crossing the 5,000 mark for the first time after hitting records earlier this month. Technology-related stocks drove the rally.

Also Read: How Trump has taken the US-EU ties to a breaking point

In Australia, the S&P/ASX 200 traded 0.7 per cent higher to 8,841.70, while Taiwan's Taiex jumped 2 per cent.

In the bond market, US Treasury yields also eased following lessened fear among investors as well as a calming of Japan's bond market turmoil. The yield on the 10-year Treasury eased to 4.25 per cent from 4.30 per cent late Tuesday.

Rupee rebounds

The rupee rebounded from its all-time low levels and gained 15 paise to trade at 91.50 against the US dollar in early deals on Thursday, on improved risk appetite after Donald Trump said that he had no intention of applying tariffs on Europe for Greenland acquisition.

Moreover, a positive trend in domestic equities also helped in the rebound.

At the interbank foreign exchange, the rupee opened at 91.54 then gained ground to trade at 91.50 against the greenback, up 15 paise from its previous close.

Also Read: Canadian PM at Davos: Old order not coming back, middle powers must unite

On Wednesday (January 21), the rupee plunged 68 paise to close at an all-time low of 91.65 against the American currency.

Forex traders, however, said the currency remains under severe pressure from heightening global geopolitical uncertainties. The pending trade agreement with the US remains a key stabilising factor. Until the geopolitical risk eases and the trade deal materialises, the rupee is likely to remain vulnerable to external shocks, they said.

Meanwhile, the dollar index, which measures the greenback's strength against a basket of six currencies, was trading 0.02 per cent higher at 98.78.

Gold and silver fall, crude oil rises

In other dealings early Thursday, US benchmark crude oil gained 0.3 per cent to USD 60.79 per barrel. Brent crude, the international standard, rose 0.2 per cent to USD 65.35 per barrel.

Also Read: WEF: European leaders warn Trump over Greenland, tariffs; California Guv mouths expletives

The price of 24 karat gold in Delhi fell from Rs 15,675 per gram on Wednesday to Rs 15,446 per gram on Thursday, reflecting investors' reduced worries. The price of 22 karat gold was Rs 14,160 per gram and Rs 11,588 per gram for 18 karat gold on January 22.

The price of silver in Delhi fell from Rs 330 per gram on Wednesday to Rs 325 per gram on Thursday.

(With agency inputs)