Premarket: Stocks, dollar sag as data point to flagging U.S. economy

Global shares eased on Tuesday with investors considering the prospect that the U.S. economy’s “exceptionalism” may be starting to unwind as manufacturing activityIn India, share markets sold off sharply after early vote counting showed Prime Minister Narendra Modi’s Bharatiya Janata Party-led alliance was not headed for a landslide win as predicted.

“Most people would have assumed that where the fed funds rate is right now is in restrictive territory. That is bearing down on underlying inflation and bearing down on some of the dynamism in spending,” he said. In Asia, Japan’s Nikkei closed down 0.22 per cent at 38,837.46, while Hong Kong’s Hang Seng rose 0.22 per cent to 18,444.11.

A Modi victory had been expected to be positive for the country’s financial markets, according to analysts, on the hope India will undertake further economic reform.The Nifty index dropped as much as 8.5 per cent before recovering some of those losses, while BSE index dropped was down 5 per cent. Both indexes had touched all-time highs on Monday.

“What does that mean for the Fed? I think all data points to one interest rate cut later in the year, potentially in December. If the data moves quicker in a different direction than expected that cut could be moved forward to September.” “The sharper move at the long-end is a sign that weaker manufacturing data is unlikely to shift the dial on Fed rate cuts near term, but is perhaps a signal of the market’s view of neutral interest rates as US economic exceptionalism fades,” Westpac economist Jameson Coombs said in a note on Tuesday.

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