In the field of observation, chance favors only the prepared mind. - Louis Pasteur.
Market observers and participants may sigh at the thought of Nifty failing to kiss the 5500 mark. Unless the global sentiment improves substantially, the psychological mark may prove elusive even today. All eyes are on the monthly payroll report, to be released in the US later today. A surprising increase in weekly jobless claims pulled Wall Street lower overnight. Stock benchmarks in Europe finished mixed. Asian markets too are flat to slightly negative.
Given this backdrop, we expect another sluggish start and perhaps another dull session. Traded volumes have been tepid and may remain so today as well. Much of the action has shifted lately to the non-index counters. But, beware of illiquid stocks with questionable background. The Nifty may consolidate further in a tight range. Stay light and have a relaxed weekend.
Results Today: Dlink, Edserve, ENIL, Fortis Healthcare, Gammon Infra, HMT, ICSA, NALCO and Power Grid Corp.
FIIs were net buyers of Rs730.2mn in the cash segment on Thursday (provisionally), according to the NSE web site. Local funds were net sellers of Rs1.87bn. In the F&O segment, they were net buyers at Rs21.89bn.
In key developments, the ECB and the BOE have left key rates unchanged besides keeping stimulus in place. Though ECB president Jean-Claude Trichet has noted progress in the economy and stability in markets he says it is too early to declare victory. The Fed and BOJ policymakers will meet next week while back home we will get the latest IIP data. Separately, Russia has announced a temporary export ban on grains after a severe drought decimated the country’s crops. Wheat prices rallied sharply on that news.
India remains in a sweet spot due to its relatively sound economic fundamentals. A good monsoon has only added to the confidence levels though inflation and rising interest rates could post a few hiccups going ahead. Liquidity is unlikely to be an issue for our markets given that matured economies are yet to make an exit from their ultra-loose monetary policy. Since earnings this time have been mixed investors will be a bit reluctant in committing fresh money given the rich valuations, especially in large caps.
Globally, the situation remains precarious, and several headwinds remain to be conquered. US may need another round of stimulus even as it leaves rates steady near zero. Japan may also announce fresh monetary easing. Though ECB may go ahead with a gradual exit, rates will stay at record low. The UK too is likely to keep rates at all-time low for an extended period.
US stocks finished marginally lower as an unexpected increase in weekly jobless claims spooked investors, ahead of the government's monthly payrolls report on Friday.
The Dow Jones Industrial Average lost 5.52 points, or 0.05%, to close at 10674.91, after being in the red for much of the trading day. The Nasdaq Composite index declined 0.5% to 2293.06, and the Standard & Poor's 500 index dropped 0.1% to 1125.81.
Volume was relatively weak, but in line with this week's lighter trend. Decliners outnumbered advancers by a ratio of two to one.
July non-farm payrolls report is unlikely to show any material improvement in the crucial labour market. It is expected to reveal sluggish hiring and subdued job growth. But, the stock market sentiment foundation continues to be strong enough to support at least a moderate rise.
Reports on the job market this week have been mixed. Also, America's top retailers reported July sales growth that largely missed analysts' expectations.
Guarded optimism about the job market helped support stocks on Wednesday. The Dow added 0.4% and the broader S&P 500 increased 0.6%.
The US market rallied 7% in July, marking the best month in a year for stocks, as investors cheered better-than-expected corporate earnings even as concerns about the debt crisis in Europe eased.
Investors sought safety in Treasurys, which rose broadly. The increase in Treasurys pushed the yield on the 10-year note down to 2.90%.
Information technology shares led the laggards. The financial sector also dragged on the markets.
In the day's main economic news, the number of Americans filing for initial unemployment claims climbed 19,000 to 479,000 in latest week. It marked the highest figure in three months and compared with an upwardly revised 460,000 the previous week, the Labor Department said.
Economists had expected 455,000 Americans to have filed for first-time jobless claims last week.
On Friday, the Labor Department is expected to report that the economy lost 87,000 jobs in July, according to a survey of economists. The unemployment rate is forecast to rise to 9.6% from 9.5%.
In June, payrolls declined for the first time this year, with the economy suffering a net loss of 125,000 jobs. The drop was primarily due to the end of 225,000 temporary Census jobs that had swelled payrolls in May.
The job market is an important economic indicator for the US economy, which appears to be losing steam. Consumer spending, the main driver of US economic activity, is closely linked to employment.
The Federal Reserve will hold a meeting next week where officials are expected to consider a fresh round of stimulus, including buying new mortgage or Treasury bonds instead of allowing its portfolio to shrink gradually.
Amongst the Fed governors and the chairman, the primary concern is deflation.
The euro fluctuated between small gains and losses after ECB President Jean-Claude Trichet said that while the euro-zone economy is strengthening, current expansion rates are unlikely to be sustained after the summer.
The ECB kept its benchmark interest rate unchanged at 1%, as widely expected.
European shares ended mostly lower, tracking losses on Wall Street, following the downbeat US data on weekly jobless claims. However, markets in Germany and France managed to eke out marginal gains.
The Stoxx Europe 600 index fell 0.3% to 261.48.
Losses accelerated after US data showed that the number of people applying for initial unemployment benefits jumped. The data came ahead of Friday's eagerly awaited US non-farm payrolls report for July.
In London, the FTSE 100 index dropped 0.4% to 5,365.78 while in France, the CAC-40 index ended up 0.1% at 3,764.19. Germany's DAX index edged up 0.04% to 6,333.58.
In Greece, the ASE Composite stock index fell 1.8%, even as officials from the International Monetary Fund (IMF) and the European Union said that the Greek economic reform program has made a strong start.
In Frankfurt, ECB President Jean-Claude Trichet said that it was too early to declare victory in the economic crisis. The comments followed decisions from the ECB and the Bank of England to leave interest rates on hold, as widely expected.
Shares of Barclays fell after the British bank reported a 29% rise in first-half net profit largely thanks to a number of one-off gains.
Shares of Unilever declined after it warned that the economic environment is challenging, even as it reported a 39% jump in second-quarter net profit.
On the positive side, shares of Aviva surged after the insurance group reported a forecast-beating 21% rise in first-half operating profit.
Rio Tinto gained after its first-half net profit soared to $5.85 billion, underpinned by rising metals prices.
Deutsche Telekom AG fell after it reported a decline in quarterly profit.