Life may not be the party we hoped for, but while we're here we should dance. - Anonymous.
The market may have tumbled but it was not as bad as it appeared; the market breadth did not collapse and the decline came on lower volume. Also, outflows from the foreign funds were only marginal in the cash segment. Given that backdrop, we expect the market to resume its ascent today after a slow start. Most Asian markets, barring Hong Kong, are trading in the green. Markets in Hong Kong were shut on Thursday.
Australian shares are up, led by gains in resource stocks after the announcement of a compromise tax deal between miners and the government.
US stocks managed to pare their losses despite a trio of weak economic reports. All eyes will be on Friday’s payroll data. Analysts are forecasting a drop of over 100,000 in June after strong May addition, though some of this is census-related.
The Nifty may cross 5300 again, but it has to sustain above 5350 for a meaningfully longer period if we are to see 5400 and 5500 in the short term. On the way down, the Nifty has good support at 5200 and 5100. Chances of it cracking below 5000 appear slim right now but that may happen if world equity markets collapse again.
FII flows are critical for India. In May when they pulled out $2bn the market fell 3.5%. In June the market gained 4.5% as foreign funds pumped in $2bn. The global picture is rather grim with fears of growth slowdown looming large in key economies like the US, Europe and China. Also, the sovereign debt crisis in the euro-zone is yet unresolved.
The FIIs were net sellers of Rs1.6bn in the cash segment on Thursday (provisionally), according to the NSE web site. Local funds were net sellers of just Rs67mn. In the F&O segment, they were net sellers at Rs12.13bn.
US stocks slipped on Thursday, but managed to pull back from session lows, after worse-than-expected readings on manufacturing, housing and the labor market fueled concerns about the health of the world's largest economy ahead of the key monthly employment report.
Recovering from a 150-point drop, the Dow Jones Industrial Average registered a sixth consecutive session of losses to finish down 41.49 points, or 0.4%, to 9,732.53.
Down more than 16% from its 2010 high at the end of April, the S&P 500 Index fell to its lowest level since early September 2009. The broad market gauge ended down 3.34 points, or 0.3%, to 1,027.37. But, the S&P 500 was able to touch and then bounce off a key technical support level.
The Nasdaq Composite Index dropped 7.88 points, or 0.4%, to 2,101.36.
Declines were broad based, with 23 of the Dow's 30 components lower.
Market breadth was negative.
Stocks slumped in the second quarter with the Dow losing 10%, the Nasdaq down 12% and the S&P down just shy of 12%. However, the S&P 500 is off more than 15% from its rally highs in April, a threshold that could set the stage for a bigger sell-off in the weeks ahead. In the same period, the Nasdaq lost 16.6%.
US light crude oil for August delivery fell $2.68 to settle at $72.95 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery fell $39.20 to settle at $1,206.70 an ounce.
Treasury prices climbed, lowering the yield on the 10-year note to 2.93% from 2.95% late on Wednesday.
The weekly jobless claims report showed a rise in new claims. The number of Americans filing new claims for unemployment last week rose to 472,000 from a revised 459,000 in the previous week. Economists had expected 458,000 new claims. Continuing claims, a measure of Americans who have been receiving benefits for a week or more, rose to 4,616,000 from a revised 4,573,000 in the previous week. Economists expected a drop to 4,510,000.
Separately, the National Association of Realtors said that its count of pending home sales declined to a new low in May after a flurry of buying to take advantage of a tax credit that expired at the end of April. The National Association of Realtors said its pending home sales index plunged 30% in May, reflecting the end of the tax rebates for home buyers. Economists expected the index to fall 10.5%. The index rose 6% in April.
The Institute for Supply Management (ISM) reported its manufacturing index declined in June, though the industry trade group said that the sector seemed to still be expanding. The Institute for Supply Management's ISM index for June fell to 56.2 from 59.7 in May. Economists expected it to dip to 59. While any level over 50 indicates expansion in the sector, the slowing pace of activity was nonetheless a worry to market participants.
In other news, construction spending fell 0.2% in May, the government reported, after rising 2.3% in April. Economists thought it would fall 0.9%.
The soft economic data came in the wake of a downbeat second quarter for investors, and one day before the government's June employment report.
Car and truck makers released June sales figures. General Motors said sales rose 36% from a year earlier, but dipped 12.5% from May. That month-over-month decline was bigger than what economists were expecting, providing another indication that the economy is weakening.
Ford Motor said that June sales climbed 15% versus a year earlier, but down 13% from May, short of expectations.
European shares slid on the first day of the third quarter, as weaker-than-expected manufacturing data from China to the United States reinforced growing worries over the global economic recovery.
The Stoxx Europe 600 index dropped 2.5% to close at 237.30. A small decline meant that the index ended the second quarter with a loss of 7.7%.
The UK FTSE 100 index dropped 2.3% to close at 4,805.75, the German DAX index lost 1.8% to settle at 5,857.43 and the French CAC-40 index ended 3% lower at 3,339.90.
The euro jumped 2.1% to $1.2481.