Down Under in a blink!

There can be as much value in the blink of an eye as in months of rational analysis.

Thursday’s last hour tumble took most players by surprise, barring of course those who probably engineered the fall. Some term it a ‘trading strategy’ while reports suggest an Australian institution (Down Under did we say!) initiated short positions in Nifty futures after 2 pm causing a cascading effect.

Some cooling was only to be expected after hitting multi-month highs. Support is likely to come in at around 4400. On the upside, 4720 is the level to keep an eye on. Today, we expect a flat to slightly lower start. Key Asian markets are in the red. US stock benchmarks were nervous to say the least ahead of Friday’s monthly jobs report. The overall bias remains positive from medium- to long-term point of view.

Concerns, however, seem to be escalating on the monsoon deficit and its wider fallout on the economy, especially on food prices. Rumors are the ‘drought’ word could cause some heartburn. Interest rates are also expected to head higher in a few months. On the global front too, the recovery appears to be fragile.

FIIs were net sellers of Rs3.7bn in the cash segment on Thursday on a provisional basis while the local funds pumped in Rs2.57bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net sellers at Rs3.12bn.

On Wednesday, the foreign funds were net sellers at Rs4.8bn in the cash segment. Their net purchases of Indian stocks have crossed $7.5bn year-to-date. Mutual Funds were also net sellers of Rs2.09bn on Wednesday.

The US recession that started in December 2007 is done, says economist Dennis Gartman. "We saw it happen two weeks ago - it is over," he adds. He had told subscribers to his newsletter in the fall of 2007 that the US was entering a recession, the Dow was at 13,500 then. The official confirmation from the US government came a year later.

Quite a few economists and market experts have recently been saying that US recession is winding down. NYU economics professor Nouriel Roubini, who predicted the worldwide meltdown, says the US recession will end later this year. However, some private economists are still debating whether US growth will cool in 2010 after a widely expected recovery later this year. If pessimists are right, stocks and employers will be at risk again.

Friday brings the week's biggest economic report, the July jobs report. Employers are expected to have cut 328,000 jobs from their payrolls after slashing 467,000 jobs in the previous month. The unemployment report, generated by a separate survey, is expected to have inched up to 9.7% from 9.5% last month.

On the positive side, fund flows into EPFR Global-tracked equity funds hit a one year high for the second week running. Investors showed an increased appetite for diversified exposure and for exposure to developed rather than emerging markets.

Meanwhile, US stocks fell on Thursday as investors chose to stay on the sidelines ahead of the eagerly awaited July jobs report. Investors booked profit in technology, financial and commodity shares.

The Dow Jones Industrial Average lost 25 points, or 0.3%. The S&P 500 index fell 5 points, or 0.6%. The Nasdaq Composite shed 20 points, or 1%.

Friday brings the week's biggest economic report, the July jobs report. Employers are expected to have cut 328,000 jobs from their payrolls after slashing 467,000 jobs in the previous month. The unemployment report, generated by a separate survey, is expected to have inched up to 9.7% from 9.5% last month.

A worse-than-expected report could cause a big selloff on Wall Street, especially after the recent run up stocks have had. The June numbers were worse than expected and stocks reacted badly. The labor market is generally a lagging indicator for the economy, but nonetheless, the rising unemployment rate is alarming.

Stocks surged in July and touched multi-month highs earlier this week, on relief that the economy and corporate profits seem to be close to stabilizing. But after hitting those levels on Tuesday, stocks have slipped. But, on the whole, stocks have been rising since the S&P 500 closed at 12-year lows on March 9. Since then, the S&P 500 has gained nearly 48%.

The number of Americans filing new claims for unemployment to 550,000 last week from 588,000 in the previous week. Economists thought claims would rise to 580,000. The report was the latest lead-in to the monthly figures.

On Wednesday, the monthly report from payroll-services firm ADP showed that private-sector employers cut 371,000 in July, worse than expected, but the smallest monthly total since October. A tepid batch of July retail sales from the nation's chains showed the impact of the sluggish labor market.

Late on Wednesday, Cisco Systems reported lower revenue that met estimates and lower earnings that topped estimates. Looking forward, the company cut its current-quarter revenue outlook and CEO John Chambers said it was too soon to call a recovery. Shares of the Dow component were little changed.

AIG continued to rise as investors piled in ahead of its quarterly results, due out on Friday. The troubled insurer, 80% owned by the government, has nearly doubled its value this week, despite remaining mired in debt.

Other troubled financials rallied too, including mortgage lenders Fannie Mae and Freddie Mac, which were taken over by the government last year. The rest of the financial sector was mixed, with Dow component American Express up 3% and JPMorgan Chase down 2.5%.

Procter & Gamble slumped after the Dow component reported weaker quarterly results on Wednesday and warned that it would post lower profit in the current quarter as well.

US light crude oil for September delivery fell 3 cents to settle at $71.94 a barrel on the New York Mercantile Exchange, erasing bigger morning losses. Oil prices have been gaining over the last few weeks on bets that the global economy is close to turning a corner.

Big oil stocks slipped, including Dow components Chevron and Exxon Mobil.

COMEX gold for December delivery fell $3.40 to settle at $962.90 an ounce.

Treasury prices fell, raising the yield on the benchmark 10-year note to 3.75% from 3.74% late on Wednesday.

In currency trading, the dollar gained versus the euro and the Japanese yen.

After a decline on Wednesday following disappointing US services data, the pan-European Dow Jones Stoxx 600 index rose 0.5% to 227.97. Merrill Lynch reiterated a target that the Stoxx 600 will hit 300 by the end of 2010.

UK's FTSE 100 index was up 0.9% to 4,690.53. Germany's DAX index gained 0.2% to 5,369.98 and the French CAC 40 index added 0.6% to 3,477.83. The Bank of England and the European Central Bank both decided to keep interest rates unchanged.

Indian markets registered their biggest fall of the month on Thursday with the NSE Nifty index breaking below the crucial 4,600 levels. Markets witnessed heavy offloading in the last hour of trade on account of profit booking.

Key indices exhibited some signs of fatigue after touching new highs for the year after reports stated that monsoon rains were ~60% lower than normal putting a question mark on the economic growth.

Sentiments on Dalal-Street were further hit after the Shanghai index in China ended lower on concerns about the health of Chinese banks and possible building of bubbles in that country's stock and property markets.

Coming back to domestic issues, banking operations across the nation were paralized as nearly 10 lakh employees of nationalised banks, led by SBI, and select private banks began their two-day strike to demand higher salaries and pension benefits. Staff from about 26 public sector banks, 10 private banks and eight foreign banks participated in the strike.

Another indicator the Instanex index (index that tracks the performance of investments made by FIIs. ) suggets that, FII were also sellers in the Indian markets, the Instanex FII Index was down 1.85% at 327.92 and the Instanex DII 15 portfolio was down 2.23%. Sensex was down 2.45% and Nifty was down 2.31%.

The other Instanex Owner Indexes were also down – the Instanex Retail 15 portfolio was down 2.13%, the Instanex Top 15 portfolio was down 1.93% and the Instanex Promoter 15 portfolio was down 1.74%.

Finally, the BSE Sensex slipped 390 points or 2.4% at 15,514 after touching a high of 15,970 and a low of 15,443. The index opened at 15,881 against the previous close of 15,904. The NSE Nifty ended lower by 109 points to shut shop at 4,585.

In Asia, the Nikkei in Japan ended higher by 1.3% at 10,388 while Australia's S&P/ASX ended higher by 1.5% at 4,326. The Hang Seng index in Hong Kong ended higher by 2% at 20,899. Shanghai index in China slipped by 2.1% at 3,356.

In Europe, stocks were trading higher. The FTSE in the UK was up 0.8%. The DAX was up 0.5% and the CAC 40 index in France was up 0.7%.

Coming back to India, among the BSE sectoral indices, the Auto index was the top loser, losing 4.4%, followed by the Realty index that was down 3.6%. The BSE FMCG index down 3.2% and the BSE Metal index was down 3%.

The BSE Mid-Cap index ended lower by 2.3% and the BSE Small-Cap index ended lower by 1.2%.

Within the Sensex, the major gainers were Tata Motors, Hindalco, JP Associates, Maruti, Hero Honda and ACC. Among the major gainers were Sun Pharma and Wipro.

Outside the frontline indices, the big losers in the broader market were Indiabulls Real Estate, Sterling Biotech, Pantaloon, Moser Baer and Aditya Birla. On the other hand, gainers included Shriran Transport, Corp Bank, OBC, Nestle and Glaxo.

Shares of NTPC also erased gains and lost 2% to Rs210. According to reports, the public sector power generation giant submitted a proposal for a follow-on public offering (FPO) to the Finance Ministry. The Government is likely to sell a 5% stake in NTPC through this FPO, according to reports.

The stock opened at Rs215 and made an intra-day high of Rs218.55 and a low of Rs209. Total traded volumes stood at 1.8mn shares.

National Aluminium saw a 9% drop in metal production in the previous month after rains disrupted coal supplies, Chairman C.R. Pradhan was quoted as saying. Aluminium production will also be affected this month, he added.

Aluminum prices on the London Metal Exchange are expected to range between US$1,800 and US$2,000 a ton in the near term, Pradhan said.

The stock erased gains and ended lower by 2% to end at Rs318 after hitting an intra-day high of Rs334 and a low of Rs316. Total traded volumes stood at 72,000 mn shares.

Hindustan Zinc announced that it has raised prices of zinc and lead after the metals jumped on the London Metal Exchange. Zinc prices were raised by Rs5,500 per metric ton while, lead prices were raised by Rs5,900 per metric ton.

The stock erased gained and ended lower by 1.5% to Rs726, it had opened at Rs739 and made an intra-day high of Rs751 and a low of Rs721. Total traded volumes stood at 36,000 shares.

Shares of DCB rallied by over 11% to Rs38.6 after reports stated that the bank plans to raise at least Rs750mn through sale of lower Tier-II bonds. The bonds have a maturity of five years and eight months and carry a coupon rate of 11.25%, reports added.

The stock opened at Rs35 and made an intra-day high of Rs41 and a low of Rs34.7. Total traded volumes stood at 1.1mn shares.

Shares of Austral Coke gained by 1.5% to Rs437 after the company acquired 1,82,000 square meters of land at Vizag, Andhra Pradesh to set up a Lam Coke Manufacturing Plant, which will have a capacity of 6,00,000 MTPA. The location is strategic and logistically ideal for lam coke business as it is situated between Gangavaram and Vizag ports. Overall logistic cost will also go down.