Trend is friend

When in doubt, predict that the present trend will continue. - Merkin's Maxim.

Paul the psychic octopus was bang on in its prediction and the world has a new soccer champion in Spain. Off the field, the focus will be on the stress tests of the European banks; the results will be out on July 23. With reports indicating that the outcome may not be as grim as feared earlier coupled with encouraging US retail sales data, global equities got a lift last week. Hopefully, that positive trend will continue this week as well, as markets world over brace for corporate earnings.



The start back home is likely to be rather subdued. Most Asian markets are flat to slightly positive. The key event to watch out for today is the IIP data for May. There could be some softening but the overall reading should still be pretty robust. June’s inflation numbers will be out on Wednesday and is likely to witness some increase. The two economic indicators will have some bearing on the outcome of the RBI policy meeting later this month. In between the two data points we will have Infosys results on Tuesday.

On the whole, we expect the market to maintain the positive bias and head higher gradually. The rise from here may not be swift and the key indices might turn rangebound before taking out the previous intermediate tops. Meanwhile, action will continue in the non-index counters as has been the case in the recent past. But, one needs to do proper due diligence before taking a call on the small- and mid-cap stocks. The good thing is that volatility has subsided and fund flows too remain healthy.

FIIs were net buyers of Rs11bn in the cash segment on Friday (provisionally), according to the NSE web site. Local funds were also net buyers of Rs387.2mn. In the F&O segment, they were net buyers at Rs16.33bn. On Thursday, the FIIs were net buyers of Rs11.9bn in the cash segment. Mutual Funds were net buyers at Rs14mn in the cash segment on the same day.

Results Today: Aurionpro Solutions, CMC, Jaypee Infratech, Moser Baer, Pfizer, Sintex and Wyeth.

US stocks rose for a fourth consecutive session on Friday, capping their best week in nearly 12 months, as investors braced for what is seen as another quarter of solid corporate earnings.

The Dow Jones Industrial Average closed up 58.73 points, or 0.6%, to end at 10,187.72. The Standard & Poor's 500 stock index added 7.68 points, or 0.7%, to close at 1,077.93. The Nasdaq Composite index rose 1%, or 21.05 points, to 2,196.45, bolstered by a 2.4% jump in Google.

The Dow jumped 5.3% during the week, while the S&P 500 rose 5.4% and the Nasdaq was up 5%.

It was the best week in nearly a year for the US markets, with all three major gauges seeing their biggest results since the week ended July17, 2009. in that week, the three majors all gained between 7% and 7.4%. The Dow sank in the previous week to its lowest point since October in its worst five-day performance leading up to July 4 since 1896.

Alcoa rose 2.1% ahead of its second-quarter report due on Monday, and put in the best performance of a Dow component this week. The earnings are expected to beat expectations as they have done in the past couple quarters. What the market is looking for is the guidance given by companies for the coming quarters.

All three major indexes were pretty volatile through the session on Friday before managing to turn things around in the last hour.

Google renewed its license with the Chinese government to operate its site in that country, following a four-month dispute over censorship.

Financials were among the other big gainers, with the KBW Bank index up 2.4%. The materials sector led the gains in the S&P 500, while consumer-discretionary stocks were also strong. Consumer staples were the only category in the red.

Market breadth was positive and volume was very light.

Fewer than 6.7 billion shares changed hands on US stock exchanges, the lowest single-day level of the year.

US light crude oil for August delivery rose $1.01 to $76.09a barrel on the New York Mercantile Exchange.

COMEX gold for August delivery gained $16.30 to $1,209.80 a ounce.

Treasury prices fell, raising the yield on the 10-year note to 3.06% from 3.02% late on Thursday.

Data released during the day showed inventories of US wholesalers rose 0.5% in May, in line with expectations, as warehouses were restocked with machinery and other durable goods. However, sales of US wholesalers registered their first decline in 14 months with a 0.3% slip.

The Chicago Board Options Exchange Volatility Index or VIX dropped 17% to 24.98 last week. The index, which measures the cost of using options as insurance against declines in the S&P 500, is down from this year’s closing high of 45.79 on May 20.

European shares closed higher on Friday for the fourth straight session, marking their best week in a year. The Stoxx 600 Europe index rose 0.6% to 250.09, bringing its weekly gain to 5.4%, the best week since the 6.8% jump in the week ending July17, 2009.

The regional benchmark rallied 5.4% last week, the biggest gain since July last year, after the International Monetary Fund (IMF) raised its global growth forecast.

Some details about the so-called stress test of the debt-plagued euro-zone's banking sector, coupled with soothing words from central bankers helped shares recover after a two-week decline.

The UK's FTSE 100 index rose 0.5% to 5,132.94, the German DAX index added 0.5% to 6,065.24 and the French CAC-40 index rose 0.5% to3,553.48.

National benchmark indexes rose in all 18 western European markets after the European Central Bank and Bank of England maintained interest rates at record lows.

Germany’s DAX gained 5% last week and France’s CAC 40 rose6.2%. The UK’s FTSE 100 advanced 6.1%, while Spain’s IBEX 35 surged 9.5%.

BT Group shares rose 2.9% in London after the telecom carrier reached an agreement with union leadership on a new pay package.

Bodycote shares shot up 14.1%. The UK engineering group said that it expects operating profit for the year to be significantly above the top end of market expectations.

Shares of GlaxoSmithKline finished flat after the European Medicines Agency said it was starting a review of diabetes drug Avandia over the potential for heart-related risks.

During the week, shares of Antofagasta and Xstrata rallied, as base metals advanced in London.

Societe Generale and Banco Santander led an advance among the region's banking shares on optimism that European stress tests will turnout to be less gloomy than previously expected.

BP shares jumped amid speculation that sovereign funds in the Middle East may invest in the beleaguered UK energy company as it works to contain the worst oil spill in US history.