A strong conviction that something must be done is the parent of many bad measures - Daniel Webster.
Looks like the bulls have indeed run out of luck for now, though we reckon the overall sentiment remains positive. Given the subdued global backdrop, we expect a soft opening for Indian bourses. The NSE Nifty might start the day below 5300. Expect heightened volatility ahead of the F&O expiry on Thursday. The near-term trading band for Nifty is seen between 5200 and 5400.
Equity markets worldwide retreated, snapping the recent sequence of gains. Fresh bad news from the debt-plagued euro-zone soured the mood. Excitement over the Chinese move on its currency has faded. Separately, the UK announced spending cuts and tax increases to curb high budget gap, sending British shares lower. Major US indexes reversed earlier gains on the back of some disappointing housing data. The S&P 500 Index seems to be struggling to break above its 200-DMA.
Asian markets are shaky this morning, with Japan's Nikkei ending the morning session down 1.7%. FOMC will announce the outcome of its two-day meet later today. No major surprise is in the offing from the Fed policymakers.
FIIs were net buyers of Rs9.76bn in the cash segment on Tuesday on a provisional basis, according to the NSE data. The local institutions were net sellers at Rs1.97bn on the same day. In the F&O segment, the foreign funds were net buyers of Rs5.99bn. On Monday, FIIs were net buyers of Rs17.99bn in the cash segment, as per SEBI data.
Flows into EPFR Global-tracked emerging markets equity funds hit a 10-week high during the second week of June, as a string of encouraging macroeconomic data offset concerns over the euro-zone sovereign credit issues, according to the EPFR. Over $37 billion flowed out of Money Market Funds during the week, as investors sought to put their money to work, although much of that money ended cup in short-term vehicles such as exchange traded funds (ETFs).
High Yield Bond Funds witnessed the first weekly inflows since the first week of May, while $659 million were committed to Emerging Markets Bond Funds. Separately, the Japan Equity Funds snapped a five-week outflow streak and there was a sharp rebound in flows into Global Equity Funds.
Major US stock indexes reversed earlier gains on the heels of some disappointing housing data in a very choppy session. Earlier, a report showing strength in regional manufacturing had lent some support to the market.
With just over one week remaining in the second quarter, the Standard & Poor's 500 Index is struggling to holds the 200-day moving average, a level that has served as a magnet over the past five sessions.
Latest bad news from the debt-strapped European nations offset the euphoria generated by China's announcement on its currency.
The Dow Jones industrial average fell 149 points, or 1.4%, to end at 10,293. Out of the blue-chip average's 30 components, 27 ended lower. The S&P 500 index lost 18 points, or 1.6%, to close at 1,095. The tech-fueled Nasdaq Composite index shed 27 points, or 1.2%, to finish at 2,262.
The euro traded at $1.2268, down from $1.2318 late on Monday in New York but remained well above the four-year low of $1.188 it hit last week. The dollar fell 0.5% versus the yen.
The US dollar index, which tracks the US currency against a basket of six others, edged up.
US light crude oil for July delivery fell 61 cents to settle at $77.21 a barrel on the expiration date of New York Mercantile Exchange trading. The August contract, which begins active trading Wednesday, settled down 76 cents at $77.85 a barrel.
COMEX gold for August delivery fell 20 cents to settle at $1,240.80 an ounce after closing at a record $1,258.30 on Friday.
Treasury prices rallied, lowering the yield on the 10-year note to 3.17% from 3.24% late on Monday.
Trading was volatile throughout the session, with an early advance petering out after the release of the housing report. But the tone turned decidedly negative in the last hour.
Worries that the European economy could be heading into a so-called double-dip recession pummeled US stocks for six weeks through early June, with the major indexes all losing close to 14%.
Since then, US stocks have bounced back about 6%. But trading volume has been weak, reflecting both light summer activity and a lack of conviction on the part of buyers.
In the day's main economic report, existing home sales fell to a seasonally adjusted annual unit rate of 5.66 million in May, the National Association of Realtors reported. That was down from a 5.77 million unit rate in April and short of forecasts for a rise to 6.1 million units.
In other news, White House budget director Peter Orszag is planning to resign, an administration official told CNN. He'll leave in July.
Central bank policy makers kicked off a two-day meeting and with an announcement expected on Wednesday afternoon regarding interest rates and the economy.
The Fed policymakers are widely expected to hold the fed funds rate, a key overnight bank lending rate, steady at historic lows near zero and to indicate that they will continue to do so for the foreseeable future.
Of more interest will be the statement and what the Fed says about the economic outlook.
Oil company shares tumbled in the afternoon amid the continued fallout from the BP oil spill. A judge ruled to lift the six-month ban on deep water drilling instigated in the wake of the spill, but the Obama administration has vowed to appeal the lifting of the ban.
BP, Transocean, Anadarko Petroleum, Halliburton and Schlumberger were among the big decliners.
New Orleans US District Judge Martin Feldman ruled in favor of Hornbeck Offshore, the company that challenged the May 28 government moratorium on new deepwater drilling projects put in place by the White House in response to the Gulf oil spill.
The Obama administration vowed to appeal the decision, fueling expectations that long protracted legal battles lay ahead.
Anxiety remained high over the health of European banks, after French bank Crédit Agricole said it now forecasts its Emporiki Bank of Greece SA unit will return to profit in 2012 instead of 2011 because of higher-than-expected loan losses.
That came a day after Fitch downgraded French bank BNP Paribas's credit rating.
Last week, European leaders agreed to publish the results of stress tests showing the financial health of individual lenders by the end of July, in a bid to improve market confidence.
Apple shares gained after confirming that it sold 3 million iPads in less than three months. Amazon.com also bounced after sliding Monday on news that it was cutting the price of its Kindle e-reader to keep up with a competitive marketplace.
Home Depot shares fell 2.6% after the release of the existing home sales data.
Merck held onto slight gains, along with Johnson & Johnson. The latter agreed to pay $45 million upfront to develop and commercialize a type-1 diabetes treatment-and-prevention drug from Swedish drug maker Diamyd Medical AB.
Drugstore chain Walgreen tumbled 6.5 % after its fiscal third-quarter earnings fell 11% as sales growth was more than offset by increased overhead costs.
Carnival shares ended 4.5% lower after the cruise-ship company said its fiscal second-quarter earnings fell as higher fuel costs offset its first improvement in the firms' revenue yields since late 2008.
Doubts about the momentum from China’s move to let the renminbi float bring an end to the nine-session rally on the FTSE Eurofirst 300 index.
British shares were lower after the UK government set out its emergency budget, but an advance from lenders Royal Bank of Scotland and Lloyds Banking Group and retailers helped the index off session lows.
Concerns about the exposure of French banks to Greece and other troubled euro-zone nations weighed even as the UK took action to get its own budget deficit under control.
The Stoxx Europe 600 index lost 0.4% to 257.14, after closing Monday at its highest level since May 3.
BNP Paribas shares fell 1.9% in the sector after Fitch late on Monday downgraded its rating on the lender by one notch to AA-. The ratings firm said it made the move due to structural issues related to the bank's business mix, which relies heavily on corporate and investment banking. Fitch also cited asset-quality deterioration in 2009 for the downgrade.
Credit Agricole shares dropped 4.7% after it said that its Greek unit won't return to profit until 2012, a year later than it provisionally forecast, due to rising loan losses.
Greek banks were trading lower across the board, with Alpha Bank down 4.6% and EFG Eurobank Ergasias losing 4.1%.
Among the major regional equity markets, the French CAC-40 index dropped 0.8% to 3,705.32 and German DAX index declined 0.4% to 6,269.04.
The UK FTSE 100 index fell 1% to 5,246.98 but moved off early lows after UK Chancellor George Osborne announced spending cuts and tax increases that will total 40 billion pounds ($59 billion) a year by 2015.
The budget will eliminate the country's structural deficit by the end of the current parliament, Osborne said.
Sterling rose 0.6% to $1.4848 and bond markets also reacted well, with the yield on two-year gilts falling 9 basis points to 0.77%.