The love of economy is the root of all virtue. George Bernard Shaw.
It’s the economy, stupid! September will mark two years since the collapse of Lehman Bros. But despite the swift recovery from that point, concerns still linger about the strength of the global rebound.
US government will release Q2 GDP data and revise data for the past three years. It will throw up some clues on where the US economy stands right now. So, naturally all eyes are on this report.
The start today will be slightly soft as has been the case lately. The US and European stocks closed in red. Asian markets are mostly down. But, F&O rollover points to a better August for bulls following a lackluster July. The NSE Nifty may finally test 5500 in August but we are not ruling out a minor correction either. The Nifty may remain rangebound between 5370-5430 today.
Talking of economic data, the latest Japanese reports are mixed. A couple of reports from Europe are encouraging but UK consumer confidence is down. Back home, the overall picture looks good and could get brighter with improved monsoon showers. Food inflation slipped below 10% mid-July but we have to see whether it stays there or climbs back into double digits. Core sector growth softened in June, which is a bit of a worry as the previous IIP report was also disappointing.
Results Today: ABB, Aditya Birla Nuvo, BEL, BPCL, DB Corp., Edelweiss, Emami, Gujarat Alkalies, Himatsingka Seide, HCC, IBN18 Broadcast, India Infoline, Indian Hotels, Inox, Jubilant Foodworks, Kansai Nerolac, Karnataka Bank, KEC International, Max India, Network 18, PVR, Raymond, REI Agro, Reliance Infra, RNRL, Reliance Power, Religare, S. Kumars, SCI, SJVN, Tata Chemicals, Torrent Pharma, TV18 and Voltamp.
FIIs were net buyers of Rs5.78bn in the cash segment on Thursday (provisionally), according to the NSE web site. Local funds were net sellers of Rs9.2bn. In the F&O segment, they were net buyers of Rs20bn. On Wednesday, the FIIs were net buyers of Rs6.53bn in the cash segment. Mutual Funds were net sellers at Rs5.78bn on the same day.
US stocks finished lower, but managed to claw their way back from session lows following a few disappointing corporate results and a regional Federal Reserve president's warning on deflation.
St. Louis Federal Reserve Bank President James Bullard said that the risk of deflation in the US has risen compared with the beginning of this year, a Japanese newspaper has reported.
Bullard, a voter on the Fed's policy-setting panel this year, said while there was no imminent need to ease monetary policy, the central bank would need to act if the US economy worsens significantly.
Bullard warned against a Japanese-style deflationary trap stemming from the Fed's extended period of low interest rates. Bullard has previously been an inflation hawk, more focused on the threat of higher prices and costs.
The mood on Wall Street was also slightly jittery ahead of the release of the second-quarter GDP growth data on Friday. The GDP report is expected to show second-quarter growth at a 2.5% annualized rate, down from the 2.7% rate reported for the quarter.
After an early boost from Exxon Mobil and a drop in weekly jobless claims, the market's tone turned negative. US stocks have been doing well as most of the earnings and forecasts have been pretty good.
But investors are still nervous because of persistent uncertainty over the state of the economy. Though consumer spending has recovered slightly and corporates are in a better shape the labor and housing markets remain sluggish.
Low summer trading volume have exacerbated the market moves lately.
US stocks were also vulnerable near the end of a strong month in which all three major indexes have risen just short of 7%, as of Thursday's close. On Wednesday, the markets finished lower on a worse-than-expected durable goods orders report and weaker quarterly results from Boeing.
After snapping a four-day win streak Wednesday, the Dow Jones Industrial Average fell 30.72 points, or 0.3%, to end at 10,467.16. That was well off an earlier low of 10,387. The Dow still remains up 7% for July so far, with one trading session left in the month.
The S&P 500 Index dropped 4.60 points, or 0.4%, to 2,251.69. The utilities and consumer staples sectors weighed the most on the broad index, losing 1.6% and 1.1% respectively, while financials rose the most.
The Nasdaq Composite Index shed 12.87 points to 2,251.69.
Market breadth was mixed. Advancers edged past decliners by an 8-7 ratio on the New York Stock Exchange, where nearly 1.2 billion shares traded.
The euro fell against the dollar, while the US currency gained versus the Japanese yen.
US light crude oil for September delivery rose $1.27 to $78.26 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery climbed $7.60 to $1,168.50 per ounce.
Treasury prices were little changed, with the yield on the 10-year note at 3%, roughly where it stood late on Wednesday.
The number of Americans filing for first-time unemployment benefits fell by 11,000 to 457,000 last week, the Department of Labor reported in the morning. Claims were expected to dip to 464,000.
Continuing claims, a measure of Americans who have been receiving benefits for a week or more, rose to 4,565,000 from 4,484,000 in the previous week. Economists expected 4,550,000 claims on average.
Dow component Exxon Mobil reported higher quarterly earnings and revenue thanks to an increase in oil prices versus a year ago. Earnings results topped estimates, but analysts expected higher year--over-year revenue growth. Shares fell 0.9%.
Colgate-Palmolive tumbled 6.8% after the maker of toothpaste and pet food products reported second-quarter sales that were shy of forecasts. The company said that weaker consumer spending accounted for slower sales, as well as the impact of devaluation of the Venezuelan currency. Colgate cut its full-year profit outlook.
A number of consumer stocks tumbled as well, including Dow components Procter & Gamble and Kraft Foods.
On the upside, consumer products maker Avon Products reported higher quarterly revenue and earnings that topped expectations. The company said increased sales of beauty products and strength in its Latin American market helped to offset weakness on home products and the impact of currency fluctuations. Shares gained 2.5%.
Trading in Cisco Systems was briefly halted in the late morning after it triggered a circuit breaker by jumping at least 10% in a five-minute period. NYSE Amex, where the trade occurred has said it will stand, following examination. Cisco shares ended down 0.8%.
Circuit breakers were instituted in the wake of the May 6 "flash crash" in which the Dow lost nearly 1000 points in a matter of minutes before recovering due to faulty trades.
Amazon released the Kindle 3 on Wednesday, the newest version of its e-reader. Due to the ongoing e-reader price war, the company also released a cheaper model that sells for $139. Shares ended little changed.
European shares declined in line with the weakness on Wall Street as worries about economic growth overshadowed mostly positive earnings reports.
The Stoxx Europe 600 index fell 0.4% to 256.26, after hitting an intraday high of 259.57. Volumes are thin in the summer months and trading could become more volatile.
Germany's DAX index fell 0.7% to 6,134.70.
Deutsche Lufthansa shares dropped 4.5%. The airline reported a first-half net loss of 104 million euros, as a pilots' strike and the regional airspace lockdown after a volcano erupted in Iceland and spewed clouds of ash took their toll.
Shares of Siemens fell 3.2%, as investors shrugged off the German conglomerate's strong profit growth and a surge in orders.
Merck KGaA shares climbed 4.4%. The German pharmaceutical and chemical firm announced a better-than-forecast 69% rise in second-quarter net profit and also lifted its outlook.
Shares of Volkswagen rose 2.6%. The automotive giant said first-half profit surged on strong demand for its models as well as cost cutting and favorable exchange rates.
In France, the CAC-40 index fell 0.5% to 3,651.91.
Shares of France Telecom shot up 5.5%. The firm's first-half net income climbed to €3.7 billion from €2.6 billion.
Telefonica shares gained 3.2%. The Spanish carrier reported second-quarter net income rose 16% to €2.12 billion.
Anglo-Swedish drug maker AstraZeneca jumped 2.7% as second-quarter net income rose 23% to $2.1 billion. It also lifted its fiscal-year earnings per share target and said that a Food and Drug Advisory panel has recommended U.S. approval of its Brilinta drug for acute coronary syndromes.
Royal Dutch Shell said second-quarter net profit rose 15% to $4.39 billion as revenue jumped 42% to $90.57 billion. Shares ended down 0.2%.
Repsol shares gained 0.2% after the Spanish oil giant posted a 60% rise in net profit for the second quarter, excluding inventory effects, topping forecasts.
The Spanish Ibex 35 index edged up 0.2%. Shares of Banco Santander fell 1.6% after it reported a decline in profit for the second quarter.
Austria's ATX stock index ended up 0.8%.
In Italy, the FTSE MIB index ended up 0.4%, as the lower house of parliament approved a fiscal consolidation package totaling 25 billion euros ($32.7 billion) for 2011 and 2012.
Standard & Poor's Ratings Services said that Italy's sovereign credit ratings are supported by the austerity program, which includes spending cuts and measures to reduce tax avoidance.