Luck runs out but safety is good for life. Anonymous.
With fresh concerns surfacing over the health of the global economy, investors have turned to the relative safety of US Treasuries, yen and gold. The overall margin of safety looks dicey with risk-reward ratio not too compelling. We remain at the mercy of global market trends although on the domestic front all seems to be relatively well (sans inflation). The uncertain external environment will continue to counter a healthy domestic outlook in the near term. The market may consolidate for some more time before we see a decisive change in the current lackluster pattern.
Today, we are in for a cautious start due to mixed global markets. Stocks finished nearly unchanged in the US as well as in Europe. Asian markets are mixed, with Nikkei in Japan extending losses and China managing slim gains. Keep expectations low and you won’t be disappointed. Monday’s mid-day correction caught many by surprise. Be on the guard lest you lose your way (and your money) in case of wild swings. The close will hinge on world markets as most local companies have finished announcing their quarterly earnings and no big economic report is due from the Government.
Technically, the Nifty is likely to find support at 5400 and at 5370 while the near-term resistance zone is around 5480. The Nifty has been struggling to cross 5500 but will need a big help from global market if it is to breach that milestone in this month. If it does manage to cross 5500 we could see some short covering that may take the index up to 5600. However, it will find it tough to maintain the tempo as the global situation remains precarious.
While yield on two-year US note is at record low the yield on benchmark 10-year note has hit 16-month low. Trouble continues for Japan. The yen is gaining in strength amid a spike in risk aversion (or fall in risk tolerance). Lots of global data points are due to be released today and throughout the week and will have some bearing on the global sentiment.
UK will release this week data on consumer price inflation and retail sales. The latest US industrial production and capacity utilisation statistics are due to be published by the Federal Reserve. Data on CPI, along with a couple of housing reports are also due this week in the US. The latest monthly balance of payments figures for the eurozone are due to be announced by the European Central Bank. Australia will go to the polls on August 21.
Results from several big companies in the US, Europe and elsewhere will also be announced this week. Consumer spending in the US will be in focus as some of the biggest US retailers, including Wal-Mart and Home Depot, deliver their most recent quarterly results. Technology giants Hewlett-Packard and Dell will also release their results this week.
Shares of Cairn India, Sterlite and Sesa Goa could continue to remain in the spotlight after Vedanta struck a deal to buy up to 60% in Cairn India. Also, watch out for Biocon. The stock hit a 52-week high yesterday amid speculation of a deal with Pfizer.
FIIs were net buyers of Rs4bn in the cash segment on Monday (provisionally), according to the NSE web site. Local funds were net sellers of Rs4.33bn. In the F&O segment, they were net buyers at Rs1.5bn. Foreign funds were net buyers of Rs7.17bn in the cash segment on Friday, according to SEBI's web site. Mutual Funds were net sellers at Rs98mn on the same day.
The yen traded near a six-week high today against the euro as concerns that the global economic recovery is losing momentum boosted demand for safer assets. The yen was near a 15-year high against the dollar after 10-year Treasury yields slid yesterday to the lowest level since March 2009, reducing the appeal of US assets.
US stocks closed mixed on Monday, with the technology space finding a few buyers even as the blue chips and the broader market struggled for direction amid another round of disappointing economic reports.
Negative sentiment about global growth was enough to push the Dow Jones Industrial Average to its fifth day of losses. Wall Street staged an early retreat after a regional manufacturing report came in short of estimates and Japan joined the list of countries with slowing economic growth.
Indecision about the near-term trend led to stocks swinging between modest gains and losses for much of the low-volume session.
The Dow closed flat at 10,302.01. Over the last five days, it has lost nearly 400 points. The other benchmark indexes quit their losing streak, however, to end with modest gains. The S&P 500 Index finished static at 1,079.38, led by gains in natural resource and tech stocks.
The S&P 500 has been stuck between roughly 1,150 on the high side and 1,025 on the low side for 11 months, barring the six-week foray in late March through April to the yearly highs.
The Nasdaq Composite Index gained 8.4 points, or 0.4%, to 2,181.87.
Market breadth was positive. Advancers edged past decliners on the New York Stock Exchange, where volume totaled 789 million, or 74% of the 30-day moving average.
The dollar fell against the euro, the Japanese yen and the British pound.
Oil futures for September delivery slipped 15 cents to settle at $75.24 a barrel.
Gold futures for December delivery rose $6.60 to settle at $1,226.20 an ounce.
Prices for Treasurys rose. The yield on the 10-year note fell to a 17-month low of 2.58% from 2.68% Friday. The 2-year yield hovered near its record intraday low of 0.48%.
Investors remained cautious following four straight losing sessions. The Federal Reserve's bearish outlook coupled with a raft of downbeat economic reports and some tepid earnings have pressured equities lately.
Wall Street will be bracing for key reports on housing, building permits, prices and quarterly results from retail giants Wal-Mart and Home Depot on Tuesday before the bell.
Japan's benchmark Nikkei index slipped 0.6% on Monday following reports that Japan's economic growth slowed sharply to 0.4% in the second quarter - putting China another step closer to becoming the world's second-largest economy.
Japan's GDP totaled $1.29 trillion for the three months ending in June, while China's official figure for the same period was $1.34 trillion.
China is forecast to overtake Japan by the end of the year to become the world's No. 2 economy after the United States. Official annual figures won't come until early 2011.
Among the day's economic reports, the Empire Manufacturing survey index jumped to 7.1 in August from 5.08 in July, showing growth in the New York region. Economists had expected a jump to 7.5.
A report from the National Association of Home Builders showed builder confidence for newly built single-family homes edged down for a third consecutive month in August.
The NAHB's Housing Market Index declined one point to 13, its lowest level since March of 2009. Economists had expected the index to hold steady from July's 14 points.
Shares of Cisco Systems rose and shares of Intel advanced after acquisition announcements from Intel and Dell sparked excitement about other possible takeover deals in the tech sector.
Intel is buying Texas Instruments' cable modem product line. It did not disclose the cost of the deal.
Meanwhile, Dell said it will acquire data-storage company 3PAR for $1.15 billion, a deal the company said could cut its data management costs by 50%. Shares of Dell fell 0.4% after the announcement, but 3PAR rose 86%.
Lowe's stock edged higher after the home improvement retailer posted higher fiscal second-quarter profit and revenue - although the company missed forecasts and lowered its outlook.
Lowe's reported a profit of $832 million, or 58 cents per share, for the quarter ended July 30. That was below the 59 cents per share analysts were forecasting. But earnings rose 9.6% from $759 million, or 51 cents a share, a year earlier, thanks to cost-cutting measures.
European stocks finished flat, while deal news boosted shares of Vedanta Resources and Cairn Energy. The Stoxx 600 Europe index closed virtually unchanged at 255.61. The index lost 1.2% last week.
The French CAC-40 index lost 0.4% to 3,597.60, while the UK's FTSE 100 index ended flat at 5,276.10 and the German DAX index also finished unchanged at 6,110.57.
Vedanta Resources shares gained 4.9%, paring recent losses in the mining company's shares. The company said that it will directly and indirectly acquire 51% to 60% of Cairn India, owned by Cairn Energy, for $8.5 billion to $9.6 billion in cash.
Cairn Energy's shares added 5.3%. The Scottish-headquartered oil-exploration firm will sell a maximum of 51% of Cairn India to Vedanta for $8.48 billion, and it intends to return a substantial proportion of the proceeds to its shareholders.
Shares of Hennes & Mauritz rallied after the Swedish fashion retailer's comparable sales rose 10% in July, as total sales climbed 21%.