"My downfall raises me to infinite heights." Napoleon Bonaparte.
Downgrades be dammed! That’s perhaps what the bulls might have said as they went about their business despite Moody’s pruning Greece’s bond rating. What is even better news is that European markets recovered to rise for a fifth consecutive session. The euro has held above $1.23, signaling growing confidence with Europe's ability to deal with its debt crisis. US shares on Wall Street posted stronger gains with the S&P 500 moving past the 200-day moving average. This morning stock benchmarks in Asia have continued the momentum, with the Nikkei in Japan leading the advance. Markets are shut in Hong Kong, China and Taiwan for a public holiday.
The current rally appears to have the legs to last a bit longer given the resilient mood across global equity markets. We expect a positive start though concerns of a possible inter-meeting rate hike by the RBI and the revised Direct Tax Code could keep a lid on gains. The key indices may meet with some resistance as they try to scale new heights but the overall undertone remains positive. The near-term sentiment will continue to be driven by newsflow before quarterly results start kicking in next month. Watch out for any surprise RBI announcement on interest rate hike. But even that may not be able to temper the ongoing euphoria.
FIIs were net buyers of Rs5.90bn in the cash segment on Tuesday on a provisional basis, according to the NSE data. The local institutions were net sellers at Rs3.51bn on the same day. In the F&O segment, the foreign funds were net buyers of just Rs148mn. On Monday, FIIs were net buyers of Rs3.8bn in the cash segment, as per SEBI data. Mutual Funds were net buyers at Rs1.11bn in the cash segment on the same day.
US stocks ended sharply higher on Tuesday, pushing the Dow Jones Industrial Average up over 200 points, as worries about Europe's debt woes hurting the American economic recovery eased and the euro rallied.
The S&P 500 Index broke through its 200-day moving average and the euro held above $1.23.
The Dow gained 214 points, or 2.1%, to 10,404.77. The S&P 500 index rose 26 points, or 2.4%, to 1,115.23 and the Nasdaq Composite advanced 62 points or 2.8%, to 2,305.88.
The S&P 500 index finished above its 200-day moving average at 1,107, a clear signal that things have gotten better. The next level to watch for is 1,121, which is the 50% retracement of the 2007-09 bear market.
The Dow and Nasdaq were also at key technical milestones. Closing above these so-called "resistance levels" may put the market in a better position to extend the recent advance.
US stocks began to stabilize in the middle of last week. The advance continued through most of Monday after a report showed that European industrial production surged in April, but stocks lost some steam in the afternoon after Moody's downgraded Greece's debt.
Solid demand for government debt auctioned in Spain, Belgium and Ireland helped take the edge off euro-zone growth worries on Tuesday.
For every stock on the decline, about six advanced on the New York Stock Exchange, where 1.16 billion shares traded.
Commodities stocks surged as the dollar fell, boosting dollar-traded commodity shares. Chip stocks rallied on reports that Taiwan Semiconductor Manufacturing and United Microelectronics, two of the world's biggest chip makers, said global chip demand will grow in the second half of the year.
The euro was last traded at $1.2331 as the shared European currency continued to recover after touching a four-year low of $1.188 last week.
The worries about what is ahead for the euro and European stocks may have peaked, according to Bank of America's Merrill Lynch monthly fund-manager survey.
US light crude oil for July delivery rose $1.95 to settle at $76.94 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery rose $11.70 to settle at $1,234.40 an ounce.
Treasury prices fell, raising the yield on the 10-year note to 3.31% from 3.28% late on Monday.
In the day's economic news, the New York Federal Reserve's Empire State Index climbed to 19.6 in June versus 19.1 in May, while U.S. import prices fell 0.6% in May.
A measure of sentiment among home builders fell 5 points to 17 in June from 22 in May, with the drop worse than anticipated.
Import prices fell 0.6%, the Labor Department reported, the lowest drop in nearly a year, with inflation likely to stay mild. Export prices also rose 0.6%.
BP shares gained 2.4%, even as investors await to see whether there would be a dividend suspension amid the devastating oil spill in the Gulf of Mexico. Executives from BP and four other major oil companies testified before a House committee in the wake of the spill that has ravaged the Gulf. On Capitol Hill, BP CEOs Tony Hayward is scheduled to meet President Barack Obama on Wednesday, one day before he's slated to testify before a congressional panel.
Earlier, Fitch downgraded BP's debt rating for the second time this month, leaving it at a level just above junk status.
Boeing shares rose 4% after the company said that it was increasing production on its popular narrow-body 737 planes for the second time in two months, citing improved demand in a recovering economy. Starting in 2012, the Dow component will produce 35 planes per month, rather than 34.
News Corp. shares rallied 8% in active Nasdaq trading as investors bet it will eventually win in its battle to take full control of BSkyB, the British satellite broadcaster. Earlier, BSkyB rejected News Corp's $12 billion bid to buy the 61% of the company that it doesn't already own, saying that the offer is too low.
Best Buy reported higher sales and earnings that missed expectations, as stronger sales of cell phones and computers were offset by weaker sales of music and movies. Best Buy shares fell 6%.
European shares ended higher for the fifth consecutive session optimism generated by a takeover bid for BSkyB and a key vote in the Swiss parliament on the fate of UBS offset ratings downgrade for Greece. The Stoxx Europe 600 index rose 0.7% to close at 254.28.
In the UK annual consumer price inflation slowed more than expected to 3.4% from 3.7% in April although it remains well above the Bank of England's 2% target. The UK FTSE 100 index rose 0.3% to end at 5,217.82.
The French CAC-40 index traded up 1% to finish at 3,661.51. The German DAX index closed 0.8% higher at 6,175.05.
Swiss law makers voted to approve a deal allowing the names of thousands of UBS customers and suspected tax evaders to be handed to US authorities. UBS agreed to hand over that information early last year.