Thursday, October 30, 2008
FIIs, who have been in a savage selling spree for quite sometime now, sold a net Rs 69 crore even in the one-hour Muhurat trading on Tuesday.
So far this month, FIIs have been net sellers for Rs 16,890 crore, bringing their total net sales to $12.65 billion this year.
Dow slips back below the 9,000 mark
US Market reversed all its gains in the final minutes of trading today, Wednesday, 29 October, 2008. Though the market started on a negative note, it pared almost all of its losses within first couple of hours of trading following a stronger than expected durable goods order. But then, again in the post lunch hours, the Dow has slipped back in the red.
But then, there was a big rally post Federal Reserve’s decision about cutting fed fund rate by half percentage point. Dow was up by more than 200 points. But in the final few minutes of trading, sellers came to the forefront and the Dow slipped back to the red. The main reason for this sell-off was after traders became concerned about financial health of GE. Seven out of ten sectors ended in the red today.
The Dow Jones Industrial Average ended the day down by 74 points, to 8,990. The Nasdaq Composite Index, finished higher by 7 points at 1,557. S&P 500 finished lower by 10 points at 930.
Chevron and GM were main Dow winners today while P&G was a main Dow laggard.
The FOMC cut the fed funds rate by 50 basis points to 1% today, which was widely expected. The discount rate was cut 50 basis points to 1.25%. The action was unanimously approved, with the Fed citing increased economic risks and improving inflation expectations.
The Fed said today that the pace of economic activity has "markedly" slowed as consumer expenditures declined, while inflation pressures are expected to moderate due to the drop in commodity prices and weaker economic prospects. The FOMC believes that over time this action, along with the Fed's other measures, will help promote moderate economic growth.
Separately, the Fed established temporary currency swap lines with the central banks of Brazil, Mexico, South Korea and Singapore. The move is meant to improve liquidity and complement the Fed's current swap lines with 10 other central banks.
The Commerce Department at US reported on Wednesday, 29 October, 2008 that demand for US made durable goods registered a stronger than expected 0.8% gain in September. Market was expecting a 0.1% decline in orders.
It was mainly the demand for airplanes that lifted orders for U.S. A 6.3% increase in orders for transportation goods offset weak demand in other sectors in September. Excluding transportation, orders fell 1.1%. Excluding civilian aircraft, orders fell 0.3%.
However, orders in August were revised down sharply to a 5.5% decline from a 4.5% decline earlier. Durable-goods orders have risen in four of the past five months, but are still down 2.7% from April's level.
Among major earning reports for the day, Procter & Gamble reported a 9% rise in first-quarter profit but also lowered the bottom end of its earnings forecast for fiscal 2009.
In the currency market on Wednesday, the dollar index, a measure of dollar against a basket of six major currencies, tumbled as much as 2.8%. Expectations about an interest rate cut by Fed weakened the dollar today. The weak dollar helped commodity prices rise. Gold and crude prices rose today after a long time.
Crude prices rose today and closed above the $67/barrel. The weak dollar and energy department’s weekly inventory report were the main reasons for the rise in crude prices. There were also reports in the market that OPEC was thinking about another production cut. Crude-oil futures for light sweet crude for December delivery closed at $67.5/barrel (higher by $4.77 or 7.6%) on the New York Mercantile Exchange. Prices earlier touched a high of $68.2.
More than 1.6 billion shares traded on the New York Stock Exchange and 1.2 billion traded on the Nasdaq. Advancers topped decliners nearly 2 to 1on the NYSE, and by roughly 4 to 3 on the Nasdaq
The advance third quarter GDP report and weekly initial jobless claims data are the main economic reports due before Thursday's opening bell. Other than that, earning reports will dominate the day.
NTPC, SBI, ICICI Bank, Tata Power, Sun Pharma, Asian Paints, Tata Tea, Tata Communications, M&M Finance, Nagarjuna Constructions, United Breweries
NTPC, SBI, ICICI Bank, Tata Power, Sun Pharma, Asian Paints, Tata Tea, Tata Communications, M&M Finance, Nagarjuna Constructions, United Breweries, GSPL, Union Bank of India
The Federal Reserve on Wednesday, October 29, cut a key interest rate by 50 basis points (bps) in an attempt to revive an economy ailing from the most severe financial crisis in recent times.
The central bank slashed its target for the federal funds rate, the interest banks charge on overnight loans, to 1%, a low last seen in 2003-2004. The cut marked the second half-point reduction in the funds rate this month. The Fed slashed the rate by that amount in a coordinated move with foreign central banks on Oct. 8.
Further rate cuts would make it very inexpensive for banks to borrow from one another. The Fed is hoping that low rates, along with efforts to increase liquidity, will spur greater lending and borrowing, unfreezing credit markets thereby boosting its economy.
RIL, L&T November 2008 futures at premium
Nifty November 2008 futures were at 2738, at a premium of 40.95 points as compared to spot closing of 2697.05. NSE's futures & options (F&O) segment turnover was Rs 54223.24 crore, which was higher than Rs 46002.30 crore on Monday, 27 October 2008.
Reliance Industries (RIL) November 2008 futures were at premium at 1216.50 compared to the spot closing of 1215.
Larsen & Toubro (L&T) November 2008 futures were at premium at 756 compared to the spot closing of 752.
Infosys Technologies November 2008 futures were at discount at 1318.95 compared to the spot closing of 1324.
In the cash market, the S&P CNX Nifty gained 12.45 points or 0.46% at 2697.05.
Rate cut pressures dollar down thereby making bullion metals shine
Gold prices ended higher on Wednesday, 29 October, 2008. This was due to the dollar that remained relatively weak. Silver prices also rose today. A weak dollar increases the appeal of precious metals as a hedge against inflation.
Earlier last week, gold prices had slipped to lowest levels in thirteen months as it fell below $700 level. A strong dollar was the main reason behind this. Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies. Losses in equity markets had also forced traders to sell gold. Since past couple of weeks, precious metals, mainly gold, had dropped as traders tried to gain back some of the money that had lost in other markets.
On Wednesday, Comex Gold for December delivery rose $13.5 (1.8%) to close at $755 an ounce on the New York Mercantile Exchange. Prices rose to a high of $775.3 earlier during the day. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (27%) since then. Last week, gold prices ended lower by 7.3%.
This year, gold prices have lost 9.1% till date. The dollar index has gained 10.2% this year. For the third quarter ended September, 2008, gold prices ended lower by 5.1%. It was the first quarterly loss for the yellow metal since the second quarter in FY 2007. Prior to that, the yellow metal ended second quarter with a marginal gain of 0.7%. For first quarter prices gained 10.7%.
On Wednesday, Comex silver futures for December delivery rose $1.1015 cents (12%) to $9.805 an ounce. Last week, silver fell 0.4%. Till date, silver has lost 30% this year. Silver had ended month and quarter of September 2008 with a loss of 10%. For the second quarter, it had gained a paltry 1.4%. Silver had gained 16% in Q1. The metal also had gained for seven straight years.
Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies. On the other hand, a lower dollar pushes up precious metal prices as their demand lessens as it becomes cheaper for traders holding other currencies. Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices and vice versa.
In the currency market on Wednesday, the dollar index, a measure of dollar against a basket of six major currencies, tumbled as much as 2.8%. Expectations about an interest rate cut by Fed weakened the dollar today.
In the crude market on Wednesday, crude for December delivery rose by almost $5 to end at $67.5 a barrel on the New York Mercantile Exchange.
Earlier this year, the weakening dollar and higher global demand for raw materials had led to records this year for commodities including gold. Gold reached a record in March as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. In the latest move, the Federal Reserve has cuts its target bank lending rate to 1% from 5.25% in September, 2007. The Fed did it in eight steps.
Gold had witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Silver had climbed 16% in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.
At the MCX, gold prices for December delivery closed higher by Rs 212 (1.8%) at Rs 12,177 per 10 grams. Prices rose to a high of Rs 12,370 per 10 grams and fell to a low of Rs 11,931 per 10 grams during the day’s trading.
At the MCX, silver prices for December delivery closed Rs 849 (5.2%) higher at Rs 17,135/Kg. Prices opened at Rs 16,350/kg and rose to a high of Rs 17,315/Kg during the day’s trading.
Prices rise by almost $5 on inventory report and weak dollar
Crude prices rose today on Wednesday, 29 October, 2008 and closed above the $67/barrel. The weak dollar and energy department’s weekly inventory report were the main reasons for the rise in crude prices. There were also reports in the market that OPEC was thinking about another production cut. Last week, OPEC had decided on a production cut. The decision, however, failed to perk up crude prices as traders still remained extremely worried that an ongoing recession will curtail demand for energy in the coming months.
On Wednesday, crude-oil futures for light sweet crude for December delivery closed at $67.5/barrel (higher by $4.77 or 7.6%) on the New York Mercantile Exchange. Prices earlier touched a high of $68.2. Prices reached a high of $147 on 11 July but have dropped almost 51% since then. Last week, prices dropped by 11% after shedding 7.5% in the week prior to that. On a yearly basis, crude price is lower by 30%. For this year in 2008, crude prices have dropped 31%.
The U.S. Energy Information Administration reported that crude supplies climbed 500,000 barrels to 311.9 million for the week ended 24 October, 2008. They've climbed 21.7 million barrels in five weeks.
EIA also reported that motor gasoline supplies unexpectedly fell for the first time in five weeks, down 1.5 million barrels for the week ended Oct. 24 to total 195 million barrels. Supplies of the fuel had climbed 17.8 million barrels is the past four weeks. But they are still 2% below the year-ago level. And distillate stocks, which include heating oil, rose 2.3 million barrels to 126.6 million.
The report also stated that demand for petroleum products was down 7.8% over the last four-week period, compared with the same time a year ago. It averaged almost 18.9 million barrels per day during the period. Of that, motor gasoline demand averaged 8.9 million barrels per day, down 3.4% from the same time a year ago.
OPEC officials decided last Friday at its meeting at Vienna that OPEC will pare production by 1.5 million barrels a day w.e.f 1 November, 2008. The official production quota is currently 28.8 million barrels, and it will be cut by 1.5 million in November.
Last week, the Centre for Global Energy Studies said that global oil demand may fall for the first time in 15 years in 2008 and stagnate next year.
Earlier this month, in the latest monthly prediction, the Organization of the Petroleum Exporting Countries said that global oil consumption will grow 550,000 barrels a day this year compared with a year ago, down 330,000 barrels from last month's forecast. Total consumption will stand at 86.5 million barrels a day. For the next year, demand will grow 800,000 barrels a day, down 100,000 barrels from OPEC's September prediction.
The Energy Information Administration, the statistics arm of the U.S. Energy Department, also lowered its growth outlook for this year's global oil consumption by 350,000 barrels from a month ago.
For the third quarter of the year crude prices ended lower by 28%. This was the biggest quarterly drop since 1991. Before that, crude prices had gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years. For the month of September, prices registered drop of 13%.
Against this background, November reformulated gasoline rose 3.7% to end at $1.533 per gallon, while November heating oil climbed 2.8% to close at $2.001 per gallon on Nymex.
Prices for natural gas rallied along with their energy peers. November natural-gas futures gained 4.6% to close at $6.469 per million British thermal units.
At the MCX, crude oil for November delivery closed at Rs 3,408/barrel, higher by Rs 158 (4.8%) against previous day’s close. Natural gas for November delivery closed at Rs 339/mmbtu, higher by Rs 22.3/mmbtu (7.4%).
The U.S. Energy Information Administration will offer its weekly update on natural gas tomorrow, Wednesday, at 10. am E.T.