Altering market

Life is like an ever-shifting kaleidoscope - a slight change, and all patterns alter. - Sharon Salzberg.

With the US market managing to stretch its winning streak to three sessions, and European stocks smiling again we expect another positive start back home. However, the pattern seems to be changing for the Asian markets which don’t seem to be too excited. This may just hold back the bulls unless global cues are supportive.



The NSE Nifty failed to close above 5300. It would be interesting to see if it manages to crack 5350 today. Even if it does breach that level there is likely to be stiff resistance around these levels.

Good thing for India is that its fundamentals are pretty solid. Inflation, which remains a big worry, is expected to moderate with a good monsoon. Fund flows have been encouraging after May’s big outflow though there is always a risk on this front if the global picture turns ugly again. The results of European bank’s stress tests on July 23 will be a key event to keep an eye on. We also have the RBI quarterly review on July 27.

Gujarat NRE coke and IndusInd Bank will announce their results today.

AstraZeneca Pharma India's Board of Directors will meet today to consider seeking approval of shareholders through a postal ballot in connection with the delisting proposal initiated by AstraZeneca Pharmaceuticals AB, Sweden, promoter of the Company.

FIIs were net buyers of Rs9.57bn in the cash segment on Thursday (provisionally), according to the NSE web site. Local funds were net sellers of Rs2.7bn. In the F&O segment, they were net buyers at Rs19.76bn. On Wednesday, the FIIs were net buyers of just Rs352mn in the cash segment.

The Bank of Korea has unexpectedly hiked its policy rate by a quarter percentage point, catching markets and economists by surprise. Earlier this week, the central banks in Australia, the UK and EU have left key rates unchanged while Malaysia’s central bank raised interest rates, marking a third increase this year.

Growing hopes that European banks are poised to pass the so-called 'stress tests' has cheered the bulls across the globe. Bank stocks, particularly in the troubled euro-zone, have been doing well this week. The euro's relative strength against the US dollar has also spurred buying in risky assets.

The European Central Bank (ECB) President Jean- Claude Trichet said yesterday that Europe’s economy is stronger than some investors think and signaled the bank doesn’t intend to do more to fight the sovereign debt crisis for now.

Meanwhile, Germany's exports surged by more than 9% in May as the country’s industry-led recovery gained momentum, countering the gloom caused by the crisis over Europe’s public finances. Also, German seasonally adjusted industrial production expanded 2.6% in May from the previous month, ahead of a forecast for a 1% rise.

The US has once again stopped short of calling China a 'currency manipulator', reducing concerns over a possible dispute between two of the world's biggest economies. A Treasury Department report says it is not yet clear whether China's policy shift last month on its currency will correct the yuan’s undervaluation. The report says the yuan "remains undervalued".

US retailers reported sales gains in June as record-high temperatures on the East Coast pushed more shoppers into air-conditioned malls. US stocks advanced after weekly jobless claims declined.

A late session bounce helped US stocks end higher for a third consecutive session on Thursday, with the Dow Jones Industrial Average managing another triple-digit gain. A bigger-than-expected drop in jobless claims, coupled with encouraging retail sales from the chain stores and a firm euro were among the factors that drove the sentiment.

The Dow Jones Industrial Average finished up 121 points, or 1.2%, to 10,139, rebounding after a bruising pre-July 4 week. Since Tuesday, the Dow has gained 4.7%, putting the blue chip benchmark back around where it was at the beginning of last week.

The S&P 500 Index rose 10 points, or 0.9%, to finish at 1,070. The Nasdaq Composite Index closed up 16 points, or 0.7%, to 2,175.

Gains were broad based, with 27 of 30 Dow issues rising.

The euro rose to a two-month high versus the dollar, on some optimism about the results of European bank stress tests, also gave stocks some support. But, the euro failed to garner any new direction from comments made by European Central Bank (ECB) President Jean-Claude Trichet.

The ECB kept its benchmark interest rate unchanged, as did the Bank of England at its monthly meeting.

US light crude oil for August delivery rose 37 cents to $75.81 a barrel on the New York Mercantile Exchange.

COMEX gold for August delivery rose $2.30 to $1,198.40 an ounce.

Treasury prices fell, raising the yield on the 10-year note to 3.02% from 2.98% late on Wednesday.

US stocks surged on Wednesday after State Street's improved earnings forecast boosted financial shares. The positive mood continued on Thursday, after a shaky start to the session. Through the end of last week, the major US stock indexes had dropped more than 15% off the rally highs of late April.

The Labor Department said that initial claims for jobless benefits declined by 21,000 to 454,000 in the week ended July 3, more than the 12,000 drop expected by economists, though the previous week's level was revised upward, to 475,000 from 472,000. But, some analysts say the numbers are misleading, since many longer-term unemployed workers have opted out of the rolls. There are still millions of Americans out of work.

Continuing claims, a measure of Americans who have been receiving benefits for a week or more, fell to 4,413,000 from 4,637,000 in the previous week. Economists expected 4,600,000 continuing claims.

The June jobs report, released a week ago, showed a rise in private-sector hiring that was smaller than expected, and a drop in the overall number of jobs.

Sales at American retailers rose for a tenth consecutive month in June, but the pace of consumer spending continues to slow after a burst in the early part of the year.

June same-store sales rose 3.1% versus forecasts for 3.2%, according to Thomson Reuters. Sales rose 2.5% in May and dropped 4.9% in the same month a year ago. The term 'same-store sales' is an industry metric that refers to stores open a year or more.

Department stores such as JC Penney, Nordstrom and Macy's all reported better-than-expected results, while Gap and BJ's Wholesale were among the losers.

In a late-day release, the Federal Reserve said that consumer credit fell in May for the fourth consecutive month. Consumer credit outstanding decreased at a seasonally adjusted annual rate of 4.5%, down $9.1 billion to $2.415 trillion, according to the report, far outstripping the $2.0 billion decline that economists had been expecting.

Long-term rates fell to the lowest point since the 1950s, dropping for a second-straight week. The average rate on a 30-year fixed mortgage fell to 4.57% from 4.58% in the previous week, Freddie Mac reported. Its the lowest rate since Freddie Mac started tracking rates in 1971 and the lowest since the 1950s.

Merck said it was closing eight research and eight manufacturing plants as part of its restructuring following its merger with Schering-Plough.

Banks once again led the advance in European markets on reports that the results of the financial sector's stress tests may not turn out to be as horrible as initially thought. After ending 1.4% higher on Wednesday, the Stoxx Europe 600 index rose 1% to 248.60 on Thursday, bringing weekly gains to 4.8%.

The UK's FTSE 100 index gained 1.8% to 5,105.45, the French CAC-40 index rose 1.6% to 3,538.25 and the German DAX index added 0.7% to 6,035.66.

Details still remain sketchy about the methodology for bank stress tests in Europe. Reports out on Wednesday pointed to a 17% haircut on Greek government bond holdings.

Separately, Credit Suisse lifted its view on European banks to market weight from underweight, saying that, among other factors, it believes that, outside of Greece, the risk of a European sovereign default or debt rescheduling has been overstated.

Both the ECB and the Bank of England kept interest rates on hold. At the press conference after the decision, ECB President Jean-Claude Trichet suggested that banks may have to recapitalize after the stress test publication. He also said markets have been too pessimistic regarding Europe.

German seasonally adjusted industrial production expanded 2.6% in May from the previous month, ahead of a forecast for a 1% rise and the euro climbed 0.5% to $1.2696 against the dollar.

BP shares were up 1.4%. The oil major's working to fix its leaking Gulf of Mexico oil well by July 27, possibly weeks ahead of the deadline it is discussing publicly, to control its rising liabilities.