Sensex, Nifty May Recover On Tariff Reprieves

(RTTNews) - Indian shares look set to open on a positive note Tuesday as investors react to the latest tariff developments and monitor foreign fund flows.

The dollar index fell from its strongest in more than two years after U.S. President Donald Trump delayed tariffs on Mexico and Canada for a month, and said he'd hold further talks with China.

With Trump using tariffs as a negotiating tool, there is considerable uncertainty about how this may affect corporate earnings, the U.S. dollar, inflation and global growth.

Analysts at J.P. Morgan Asset Management have warned that a trade war has the potential to impart a stagflationary impulse to the investment environment, boosting inflation and interest rates while dragging on growth and profits.

Benchmark indexes Sensex and Nifty ended down around half a percent each on Monday, closing off their day's lows amid strong gains in the financial sector.

The Indian rupee fell past 87 to a dollar for the first time and closed at 87.18 per dollar, sparking concerns about the possibility of a surge in imported inflation and the country's import bill, days before the RBI's monetary policy review.

Asian markets rebounded from steep losses in the previous session on tariff reprieves.

Gold edged up after scaling a record high in the previous session on dollar weakness. Oil prices fell, with WTI crude futures falling nearly 1 percent following Trump's decision to delay the start of tariffs against the U.S.'s two biggest foreign suppliers of crude by a month.

U.S. stocks recovered earlier steep losses but still ended notably lower overnight after Trump said tariffs against Mexico would be paused for one month following an agreement on border security to stop the flow of fentanyl and illegal migrants into the U.S.

Investors also digested data showing that U.S. manufacturing grew for the first time in more than two years in January.

The tech-heavy Nasdaq Composite lost 1.2 percent, the S&P 500 shed 0.8 percent and the Dow dipped 0.3 percent.

After the markets closed, Canadian Prime Minister Justin Trudeau announced that proposed U.S. tariffs will be paused for at least 30 days.

European stocks ended sharply lower on Monday after Trump imposed levies on imports from Canada, Mexico and China, and warned tariffs on the European Union will "definitely happen."

The pan European STOXX 600 dipped 0.9 percent. The German DAX tumbled 1.4 percent, France's CAC 40 declined 1.2 percent and the U.K.'s FTSE 100 gave up 1 percent.