When a man is in love or in debt, someone else has the advantage -Bill Balance.
The bears seem to be at an advantage with the European debt crisis continuing to cast a shadow over global economic recovery. News of the Bank of Spain bailing out savings bank CajaSur is a stark reminder that not all is well with European banks.
The euro erased some of last week’s gains to slip over 1.5% against the dollar. US stocks too closed in the red after a choppy session. Asian markets are down sharply, led by the Nikkei in Japan. Stocks in China have turned lower after Monday’s big rally.
We expect our market to start lower amid weak global cues. Lesser the risk, lesser the loss seems to be the mantra for now as major world markets are trading below key technical support levels.
The whole of Europe is on an austerity overdrive. The UK too has unveiled spending cuts to rein in budget deficit. This will further delay a return to pre-Lehman era. Overall trend remains down but some pull-back is bound to come at lower levels. On Monday, the market opened higher but closed nearly flat.
Today being a Tuesday, a turnaround at the end of the day is not ruled out completely. The key is not to get carried away by any short-covering led bounce as the equity markets remain hostage to headline risk. Volatility will spurt this week owing to Thursday's F&O expiry.
Meanwhile, the South Korean won declined as much as 4.3% after the nation’s Yonhap news agency reported that North Korean leader Kim Jong II ordered military bodies to prepare for battles.
Four Spanish savings banks have unveiled a merger deal that may give the combined entity access to a large government fund that is being used to shore up part of the struggling financial sector.
In the US, federally-funded unemployment insurance benefits and a slew of tax breaks would be extended through the end of the year by legislation the House of Representatives may vote on as early as Tuesday.
Across the Atlantic, the EU countries will be required to impose an upfront levy on banks, with the proceeds to be paid into national funds to insure against future financial failures, under proposals to be unveiled on Wednesday.
A report out on Monday that Spain is moving closer to a general strike over spending cuts highlighted that euro-zone governments face difficulties in implementing tough austerity measures in setting their finances houses in order.
Results Today: Aban Offshore, Apar Industries, BOB, Deepak Fertilizers, Gujarat Industries Power, Hindustan Unilever, IL&FS Transportation, Jai Corp, JK Tyre, JM Financial, Jyothy Labs, Mercator Lines, NCC, NHPC, Power Grid Corp, Provogue, TN Newsprint, Tata Tea and Time Technoplast.
FIIs were net sellers of Rs9.95bn in the cash segment on Monday on a provisional basis, according to the NSE data. The local institutions were net buyers at Rs11.07bn on the same day. In the F&O segment, the foreign funds were net buyers of Rs18.15bn. On Friday, FIIs were net sellers of Rs14.77bn in the cash segment, according to the SEBI data. Mutual funds were net buyers of Rs2.87bn in the cash segment on the same day.
US stocks tumbled on Monday, with the Dow Jones Industrial Average ending at a three-month low, as concerns lingered over the health of the European banking system, overshadowing a bigger-than-expected rise in existing home sales.
Investors' fears about Europe's credit crisis and tighter rules on Wall Street are still running high.
US stocks had fallen in the early going, turned mixed through the afternoon and then turned lower near the close. Monday's choppy trading reflected the market's uncertainty over the eurozone situation.
Financials led a decline that spread across every sector, and volumes declined considerably. Those conditions paved the way for additional volatility late in the day. The KBW Bank index lost 3.3%.
The Dow slid 126.82 points, just barely erasing Friday's 125-point rally. The blue-chip measure was off 1.2% on the day to 10066.57. The Nasdaq Composite Index slipped 0.7%.
The S&P 500 index fell 1.3%, with its financial sector its weakest category, off 2.9%. All its other sectors were lower as well.
Worries about the euro-zone's banking system held the market in check all day after the Bank of Spain seized regional savings bank CajaSur, stoking fresh worries that sovereign-debt woes could spread.
Banking stocks bore the brunt of those concerns, along with lingering uncertainty over how the US House might put its stamp on regulatory reforms recently passed in the Senate.
The three-month US dollar London interbank offered rate (LIBOR), a key benchmark, reached its highest level since July, at 0.50969%, above its 0.49688% level on Friday.
The euro fell to $1.2370, compared to $1.2574 late on Friday. That helped to push the US Dollar Index up 1.2%. The euro fell to a four-year low of $1.2234 earlier in the month.
The dollar was little changed against the yen.
US light crude oil for July delivery rose 17 cents to settle at $70.21 a barrel on the New York Mercantile Exchange.
COMEX gold for July delivery rose $17.90 to settle at $1,194.70 an ounce.
Treasury prices slipped, lifting the yield on the 10-year note to 3.22% from 3.20% where it stood late on Friday.
Composite trading activity in New York Stock-Exchange listed companies hit 5.3 billion shares, almost 25% below the daily average so far this month.
Since hitting rally highs in late April, the Dow has lost 10.2%, the S&P 500 has slipped 11.8% and the Nasdaq has dropped 12.5% through Monday's close.
A few technology bellwethers like Google and Apple did manage to rebound slightly from last week's drubbing.
Yahoo shares rose 0.4% after unveiling a partnership with Nokia to combine forces in email-, chat- and navigation-services for mobile phones.
Citigroup shares rose 0.8% after it was upgraded by Goldman Sachs, which said that the recent spike in market volatility "makes us more optimistic about capital markets activity like trading."
Goldman also boosted its investment rating on Sprint Nextel to "buy" from "neutral," prompting the wireless carrier's stock to jump 8.6%.
American depositary shares of BP tumbled 2.6% as the Gulf of Mexico oil spill faces continued scrutiny. The oil giant has spent $760 million so far on containment costs, the company said on Monday.
AIG will not face criminal charges, with the Justice Department opting not to pursue the case due to insufficient evidence.
In deal news, IBM is reportedly buying AT&T's business software unit Sterling Commerce for $1.6 billion in cash.
Separately, global investors took heart in a pledge from Chinese President Hu Jintao that China would continue to work toward reforming its currency system in remarks opening a visit by Treasury Secretary Timothy Geithner in Beijing.
Geithner said he welcomed the move.
Concerns over an aggressive monetary tightening by China have ebbed a little due to the euro-zone debt problems. The Shanghai Composite climbed 3.48% on Monday.
In the day's economic report, April existing home sales rose 7.6% to a seasonally adjusted 5.77 million annual unit rate from a 5.36 million unit rate in March, the National Association of Realtors reported shortly after the start of trading.
Economists expected a smaller rise to 5.65 million units.
The rise was due largely to the expiration of the homebuyer tax credit at the end of April.
Its going to be busy week for economic news in the US. More housing reports are due later in the week. Readings are also due on durable goods orders, personal income and spending, and consumer sentiment.
European shares rose, as strength in mining space offset losses in the banking sector. After a 4.6% downturn last week to a 2010 low, the Stoxx Europe 600 index rose 0.4% to 237.97 in a choppy session.
The UK's FTSE 100 index closed up 0.1% to 5,069.61, the French CAC-40 index finished roughly unchanged at 3,430.93 and the German DAX index lost 0.4% to 5,805.68.
The euro dropped 1.6% to $1.2385.
The common currency recorded a rare advance last week when the German parliament approved the country's participation in the European Union-International Monetary Fund's 750 billion euro ($937 billion) loan package for countries struggling to reduce budget deficits.
But, reports that Spain is moving closer to a general strike over government cutbacks underscored difficulties that the governments in the region face in implementing spending cuts and other tough austerity measures.
Recent steps from Greece, Portugal and Spain are encouraging but represent only the beginning of what is set to be a tough adjustment, noted analysts at Deutsche Bank.
Also, the UK kicked off its own fiscal-deficit-reduction efforts, detailing 6.2 billion pounds ($8.9 billion) of budget cuts. Sterling lost 0.6% to $1.4393.
BP shares fell 2.7% as the oil giant faces continued pressure over the Gulf of Mexico oil spill.
BP said that the cost of the spill response to date amounts to about $760 million, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid and federal costs.
British Airways is facing a five-day walkout of cabin crew. Shares rose 0.9% with around 70% of the airline's flights running.
The euphoria of the Ambani brothers entering into a new simpler, Non Compete Agreement was short-lived for the overall market. The Sensex, which zoomed to a high of 16,758 in the morning trade slipped to a low of 16,413 finally ending flat at 16,470. The NSE Nifty ended flat at 4,944 after hitting a day’s high of 5,030. Among the 30 components of Sensex, 18 ended in the negative terrain and 12 ended in the green.
The Sensex ended flat at 16,428 and NSE Nifty ended flat at 4,944. Among the 30 components of Sensex, 18 ended in the negative terrain and 12 ended in the green.
Markets in Asia ended mixed; the Nikkei in Japan ended lower by 0.3%, Australia's S&P/ASX gained by 2%, while the Hang Seng index in Hong Kong marginally rose 0.6% and Shanghai SE Composite rose 3.4%.
European indices were trading with a negative bias, the DAX in Germany was down 1.8%, the CAC 40 index in France was down 0.2% and the FTSE in the UK was down 0.5%.
Among the BSE sectoral indices BSE Realty index was the top loser down 2%, followed by BSE Metal index down 1% and BSE Auto index down 0.8%. On the other hand, major gainers were, BSE Oil & Gas index up 1.6%, BSE Power index 1.2% and BSE Capital Goods index 1.1%. The BSE Mid-Cap index ended flat while the Small-Cap index added 0.6%.
Outside the frontline indices, the big losers in the broader market were Marico, EKC, Godrej Cons, P&G and Ashok Leyland. On the other hand, gainers included Renuka Sugar, Jai Corp, Balrampur Chini and Divi’s Labs.