An inspiring start!

To succeed you need to find something to hold on to, something to motivate you, something to inspire you - Tony Dorsett.

A slightly better than expected US GDP data and some inspiring talk by Federal Reserve chairman Ben S. Bernanke lifted the sagging spirits on Wall Street and elsewhere. Not surprisingly, Asian markets are all up smartly. News that Bank of Japan is holding an emergency meeting to check unbridled gains in the yen has also buoyed sentiment.



Given the positive backdrop, we are set for a gap-up opening. Some shorts may be covered as well. The big question is whether one should buy into this rally or sell? We would urge some caution as the global situation, especially in the US, looks precarious. At best what we will see is a relief rally. Things may soon turn choppy and range-bound.

A lot of uncertainty still prevails in global markets. Don’t get too inspired to jump the gun and take big directional calls. Keep reviewing your strategy each day as volatility is here to stay.

For the Indian markets, key events in the near term include Q1 GDP data (on Tuesday), Auto sales, IIP, inflation and the RBI meeting later in the month.

Throughout the week, we will get a slew of economic reports from across the globe that will have a bearing on sentiment. Key among these data points are the manufacturing PMI reports (especially for China, US and EU) and the data on US unemployment.

Although the main indices are likely to rally today, the large caps have are generally not finding many takers due to rich valuations. On the other hand, the broader market has done better. So, the interest in small- and mid-cap stocks will remain in tact. Technically, the Nifty is likely to face resistance between 5500-5500. On the way down the crucial support level to watch out for is 5350.

FIIs were net sellers of Rs1.08bn in the cash segment on Friday (provisionally), according to the NSE web site. Local funds were net buyers of Rs2.39bn. In the F&O segment, the foreign funds were net buyers at Rs24.84bn. FIIs were net sellers of Rs1.56bn in the cash segment on Thursday. Mutual funds were net sellers at Rs232mn on the same day.

US stocks rallied on Friday after Federal Reserve Chairman Ben S. Bernanke pledged to fight any deflationary pressures and to prevent the economy from returning to recession. Also, government's downward revision in second-quarter GDP data turned out to be slightly better than anticipated.

The Dow Jones Industrial Average ended up 165 points, or 1.7%, at 10,150.65. The S&P 500 Index rose 17 points, or 1.7%, to 1,064.59, and the Nasdaq Composite index gained 35 points, or 1.7%, to close at 2,153.63.

But the week was littered with disappointing economic reports, leaving the benchmarks down for the week.

The Dow posted a weekly loss of 0.6% and the S&P 500 fell 0.7%, with each marking its third straight week of declines. The Nasdaq dropped 1.2% for the week, its second weekly loss in three.

The dollar fell against the euro but rose versus the British pound and Japanese yen.

Crude oil futures for October delivery gained $1.81 to settle at $75.17 a barrel.

Gold for December delivery gained 20 cents, settling at $1,237.90 an ounce.

The yield on the 10-year Treasury note rose to 2.6% from 2.5% late on Thursday.

On Thursday, the major US indexes were unable to hold early gains despite a better-than-expected report on initial jobless claims. Trading has been choppy this week as investors remain wary about the economic outlook.

Bernanke said he is ready to do what it takes to support an economic recovery that has been losing steam. He also said he expects the US economy to continue growing in 2011 and subsequent years, signaling further Fed action may not be needed.

Speaking at an annual meeting of central bankers in Jackson Hole, Wyo., the Fed Chairman said the US economic recovery is "less vigorous" than expected but said the Fed has the tools needed to help the nation maintain growth.

Second-quarter GDP, the broadest measure of economic activity, was revised sharply lower, but was less drastic than forecast. Second-quarter GDP was revised to an annual growth rate of 1.6%, according to new government estimates.

The figure dropped significantly from the initial reading of 2.4%, but topped expectations of a slide to 1.4%.

Separately, the Reuters/University of Michigan index of consumer sentiment for August was unchanged from a preliminary reading earlier this month and edged up to 68.9 from 67.8 in July. The figure bounced off the eight-month low hit in July but just missed economists' forecasts.

Stocks tumbled briefly earlier after Intel said its third-quarter revenue would come in lower than it previously forecast, unnerving already frazzled investors. Intel said its third-quarter sales will fall below the company's previous expectations.

Intel shares, which were halted for 15 minutes, gained more than 1% after they resumed trading.

The bidding war for 3PAR continued, as Dell increased its offer for the storage company to match HP's bid made on Thursday, at $27 per share. 3PAR accepted Dell's offer, but HP upped its bid again early Friday, topping Dell's latest offer.

Shares of 3PAR jumped 25%, while Dell's stock rose 1%. Shares of HP edged down less than 1%.

Boeing gained 3% even as the company announced a new delay that will push first delivery of the 787 Dreamliner plane into the middle of the first quarter 2011. Jefferies said the move doesn't affect its guidance.

Tiffany slipped 3.2%. The jewelry retailer's fiscal second-quarter earnings climbed 19%, though revenue fell short of analysts' expectations.

European stocks ended up on Friday at the end of a volatile session on the back of better-than-expected US growth data and Bernanke's comments.

The Stoxx Europe 600 index rose 0.6% to finish at 251.24 after dipping in and out of positive territory several times during the session. The index has fallen 1.6% so far this month.

European markets reacted positively after the revised US estimate for second-quarter GDP growth came in higher than forecast.

The markets witnessed some selling after Intel cut its third-quarter sales forecast but rebounded soon as Bernanke said that the Fed would not let the US economy sink into a period of deflation.

In the UK, the FTSE 100 index rose 0.9% to 5,201.56 and the French CAC 40 index advanced 0.9% to end at 3,507.44. The German DAX 30 index gained 0.7% to 5,951.17.

Shares of German retailer Metro AG rose 2.4%, as French rival Carrefour advanced 3.3% in Paris after reportedly being upgraded to buy from hold at Citigroup.

Following the news from Intel, some European technology stocks like STMicroelectronics and Infineon Technologies came under pressure.

EADS was another big loser after French newspaper Les Echos reported the group's Airbus unit has cut production forecasts for its A350 airliner to far below the targets set in 2007.

US rival Boeing was also in the news after it said it will delay the delivery of the first 787 Dreamliner aircraft until the middle of the first quarter of 2011. The company cited delays in the availability of engines from UK supplier Rolls-Royce Group, whose shares dropped 0.6% in London.

Some oil stocks came under pressure, with BP falling 1.5% and Tullow Oil dropping 3.8% after further reports of problems for the company in Uganda. The country's government has repossessed the Kingfisher oil field after exploration licenses expired.

Tullow said that it had faced delays in Uganda because of a tax dispute between the government and its partner Heritage Oil.

In Spain, the IBEX-35 stock index ended up 1.4%, as shares of Ferrovial SA gained 2.9%.

Shares of Iberia Lineas Aereas de Espana fell after the airline swung to a higher-than-expected profit in the second quarter, but warned that the key risk it faces is the pace of the global economic rebound.