We learn something every day, and lots of times it's that what we learned the day before was wrong.
We have some good news. We have some bad news. The learnings of recent times make us worry though. The good news first (though we know you'll hurry to see what the bad news is). At the very outset, it looks like a better day for global equity markets, notwithstanding the grim US unemployment data released on Friday. In fact, one can trace the seemingly all-pervasive feel-good to that day's trading on Wall Street. US shares rallied in the face of the ugly jobs report and GM's big quarterly loss. The Dow Jones Industrial Average advanced 2.9%, while the Standard & Poor's 500 index gained 2.9% and the Nasdaq Composite rose 2.4%. Major European indices also gained between 2-2.5%. This morning, Asian markets are in a really cheerful mood, boosted partly by China's big-bang economic stimulus package and Taiwan's rate cut. Group of 20 (G 20) nations have also signaled that they will keep lowering borrowing costs and increase public spending, in a bid to arrest the economic slump across the globe.
All these measures have lifted the spirits of Asian markets. Japan's Nikkei ended the morning session up 5.5% at 9,053.90 while the Hang Seng in Hong Kong jumped 6.1% in early trading and the Shanghai Composite index was up 6.5%. Given the bullish sentiment across Asia, we expect a gap-up opening for Indian stocks as well. In fact, the Nifty futures contract for November settlement was up 2% in Singapore. So, the bulls can look forward to a bright day ahead.
Having said that, the good times may not last too long, as the overall trend still remains negative due to the global economic gloom. There is no dearth of bad news. US employers cut 240,000 jobs from their payrolls in October, marking the 10th straight month of cuts. That brought the number of job losses in 2008 to nearly 1.2mn. The unemployment rate surged to 6.5%. Both figures were worse than expected. Japanese machinery orders tumbled 10.4% last quarter, matching the biggest drop on record. China's exports are likely to have grown at the slowest pace since March 2007. Rio Tinto will cut output at its iron ore mines in Western Australia by 10% because of reduced demand from steelmakers in China. Already, Brazilian rival Vale has taken the lead in cutting iron ore output.
Back home, we have seen a slew of companies cutting production, capex plans and even jobs to tide over the sharp slowdown in the Indian economy. India Inc. has also postponed plans for new investments and ventures as it struggles to cope with the rising headwinds. Talking of the Indian economy, the Government will release the IIP data for September on Wednesday. The core sector, comprising six key industries and forming a quarter of the IIP, has shown improvement over August. So, one can expect a bounce from August's dismal IIP figures. However, in the past we have seen lot of fluctuations in the IIP numbers. So, one should not get carried away if there is indeed a big jump in it in September.
FIIs were net sellers of Rs192.7mn (provisional) in the cash segment on Friday while local institutions too pulled out Rs1.47bn. In the F&O segment, the foreign funds were net sellers at Rs819mn. On Thursday, FIIs were net sellers of Rs4.14bn in the cash segment.
US stocks rallied on Friday, with investors using Wall Street's record-breaking slide over the last two sessions as a reason to scoop up battered shares, despite a brutal October jobs report and GM's massive quarterly loss.
The Dow climbed 248 points to close at 8,943 while the S&P 500 gained 26 points to end at 930 and the Nasdaq rose 38 points to finish at 1,647.
All three major stock gauges fell for the week, after the previous week's big rally. The Dow and the Nasdaq both lost 4.2% in the week, while the S&P 500 fell 3.8%.
US stocks had been in the positive zone throughout Friday's session, losing some steam after the late-morning release of General Motors' big loss, before rebounding again. Stocks again lost some ground ahead of President-elect Barack Obama's afternoon press conference.
However, they managed gains as investors took advantage of a big selloff in the two sessions following Obama's historic victory, with recession fears sparking a retreat after a sharp rally through Election Day. The Dow had lost 929 points, its biggest two-day point loss ever.
The Wall Street Journal reported that part of this massive selloff was as a result of selling on the part of Citadel Investment Group. The $16bn hedge fund has reportedly been asked by several banks to post additional collateral to cover big losses, the WSJ reported.
Obama said that the US economy is facing the greatest economic challenge of its lifetime, and said he will take all necessary steps to confront the crisis. He said if a second stimulus package is not passed by the lame-duck Congress that it will be his first priority once he takes office on January 20.
GM posted a third-quarter operating loss of $4.2bn, or $7.35 per share, far worse than expected. GM said it burned through $6.9bn in the quarter and is running out of cash. The company also indicated that merger talks with Chrysler have ended. GM shares plunged 9%.
Ford reported a $3bn operating loss in its latest quarter and said it would cut staff and capital spending in order to hang on to capital. Its shares rose 2%. Along with Chrysler, the heads of Ford and GM had met with Congressional leaders on Thursday to discuss a potential bailout.
In the day's other economic news, pending home sales fell 4.6% in September, after rising 7.5% in the previous month. Another report showed wholesale inventories fell 0.1% in September after rising 0.6% in the previous month.
A third report showed borrowing by consumers increased in September by more than had been expected.
The dollar fell against the euro and gained versus the yen. COMEX gold for December delivery rose $2 to settle at $734.20 an ounce.
US light crude oil for December delivery settled up 27 cents to $61.04 a barrel on the New York Mercantile Exchange, after ending the previous session at a 19-month low. Gasoline prices fell another 2.6 cents to a national average of $2.314 a gallon.
Treasury prices slumped, raising the yield on the benchmark 10-year note to 3.78% from 3.69% late on Thursday.
The credit market continued to improve. The 3-month Libor fell to 2.29% from 2.39% on Thursday, a nearly four-year low, according to Dow Jones. Overnight Libor held steady at 0.33%, after falling to an all-time low of 0.32% earlier this week. Libor is a key interbank lending rate.
Europe stocks closed higher on Friday. After two days of big losses, the pan-European Dow Jones Stoxx 600 index climbed 1.8% to 219.26. For the year, however, the Stoxx 600 is down close to 40%.
The UK's FTSE 100 , a day after a 1.5% point rate cut from the Bank of England, advanced 2.7% to 4,387.14. Germany's DAX 30 jumped 2.6% to 4,938.46, and the French CAC 40 rose 2.4% to 3,469.12.
In the emerging markets, the Bovespa in Brazil was up 0.8% at 36,665 while the Bolsa in Mexico rose 1% to 19,865. The RTS index in Russia was down 2.2% to 760 and the ISE National 30 index in Turkey fell 3% to 34,013.
The BSE benchmark Sensex started off the day lower on the back of negative cues from the US markets and mixed cues from the Asian markets. The index, however, after trading in a narrow range broke from its range bounced back into the positive zone led by gains in the Power, PSU, oil & gas and metal stocks.
Finally, the BSE benchmark Sensex surged 230 points or 2.3% to close 9,964 and the NSE Nifty index was up 80 points to close at 2,973.
Among the 30-components of Sensex, 25 stocks were in the positive terrain and 5 stocks ended in the red. Reliance Industries, ITC, HDFC, SBI and RCom were among the major gainers. On the other hand, ICICI Bank, M&M and ONGC were among the major laggards.
Shares of Tata Motors slipped by a percent to Rs159. Tata Motors clarified that in its course of operation, adjusts its production to meet the demand for its products, like working on single shift basis or three shift basis instead of normal / double shift operations as also temporary shut down.
This shut down at Pune is one such measure taken by the Co. to avoid unnecessary inventory build up. The scrip touched an intra-day high of Rs162 and a low of Rs148 and recorded volumes of over 9,00,000 shares on BSE.
Shares of Roman Tarmat rallied by over 9% to Rs25.80 after the company announced that got new work orders amounting to Rs442mn from Cochin International Airport Ltd. for re-carpeting of runways along with related pavment up gradation work at Cochin International Airport, Nedumbassery. The contract period is for 9 months.
The scrip touched an intra-day high of Rs25.85 and a low of Rs23 and recorded volumes of over 2,000 shares on BSE.
Shares of JSW Steel plunged by over 5% to Rs285 after the company announced that it would cut total production by about 20% from November.
The company’s October flat product output also dropped 2% to 247,000 tons. However, steel production for the month of October rose 5%. The scrip touched an intra-day high of Rs297 and a low of Rs273 and recorded volumes of over 4,00,000 shares on BSE.
Shares of Bharat Forge gained by 0.5% to Rs101 after 2.4% of equity shares changed hands in a single transaction. The scrip touched an intra-day high of Rs109.5 and a low of Rs100 and recorded volumes of over 2,00,000 shares on BSE.
Shares of Alembic rallied by over 12% to Rs34.7 after the board of directors of the company announced that they would consider buyback of equity shares on November 14, 2008. The scrip touched an intra-day high of Rs36 and a low of Rs29.2 and recorded volumes of over 1,00,000 shares on BSE.
Market may continue to witness high level of volatility in the coming week, as it struggles to find a bottom after rebounding last week from the recent lows. As usual, the Indian indices will continue to be at the mercy of global cues, as the result season is over and there are hardly any local factors to drive the market.