Indecision is the seedling of fear - Napoleon Hill.
While caution and optimism go hand in hand, they don’t seem to be traveling much far. Improved PMI data for the US and China has temporarily soothed frayed nerves but economic statistics have been inconsistent (not to mention GDP errors) as the world recovers from the ‘Great Recession’. We may continue to see intermittent bouts of declines and bounce backs for some time to come.
We expect another day of sideways consolidation for India. The start will be higher but lackluster as global cues are indecisive. Individual stocks will continue to fly even as the main indices witness tepid movement.
Meanwhile, there are no major threats to India’s bright and beautiful story. The only worry is rich valuations, especially for large caps. At the same time opportunities abound outside the main indices. We expect the out-performance of the small- and mid-cap indices to sustain a bit longer.
US data on Thursday was mixed. Global markets are looking forward to today’s non-farm payroll numbers to get a better sense of the ground reality in the US.
FIIs were net buyers of Rs823.1mn in the cash segment on Thursday (provisionally), according to the NSE web site. Local funds were net sellers of Rs1.18bn. In the F&O segment, the foreign funds were net buyers at Rs20.65bn. FIIs were net buyers of Rs5.27bn in the cash segment on Wednesday, as per SEBI's web site. Mutual Funds were net sellers at Rs3.52bn on the same day.
Jindal Poly has doubled in recent times and the company's Board will meet today to consider a bonus.
Allied Digital, Apar Industries, Jindal Photo, Jindal Poly, Kalindi Rail and Raj Oil Mills will announce their results.
DLF will be in focus as reports suggest it has put off sale of its non-core assets. Airlines could gain as reports indicate that the RBI has cleared restructuring of their debt by banks. PNB might attract attention following an international acquisition.
IndusInd Bank is reportedly doing a QIP worth Rs7.5bn. Sugar stocks may extend gains amid hope of sector deregulation. NTPC could rise amid reports of higher targets being set by the new CMD. Petronet plans Rs23bn expansion of its LNG terminal.
US stocks ended marginally higher on Thursday after a late spurt, as investors focused on an encouraging report on weekly jobless claims and pending home sales ahead of Friday's crucial non-farm payroll report.
The Dow Jones Industrial Average finished up 50.33 points, or 0.49%, at 10319.80. The Nasdaq Composite index rose 1.06% to finish at 2200.01 while the Standard & Poor's 500-stock index gained 0.91% to 1090.08.
Meanwhile, trading volumes continued to be light as many market participants are on vacation this week. Just over 3.8 billion shares changed hands in NYSE Composite trading. The 2010 daily average is about 5 billion shares, although the August average was just over 4 billion shares.
The dollar slipped against the euro and the Japanese yen, but edged higher versus the British pound.
Oil futures for October delivery rose $1.03 to $74.94 a barrel.
Gold for December delivery added $5.30 to $1,253.40 an ounce.
The yield on the 10-year Treasury note rose to 2.63% from 2.58% late on Wednesday.
Wall Street was also ably supported by better-than-expected sales from major retailers but the general undertone was cautious after Wednesday's big gains. After closing out a dismal August, stocks rallied more than 2% on Wednesday to start September on a strong note.
The US indices are still down between 1% and 3% year to date.
US stocks could rally after Labor Day if the monthly jobs report is within expectations. On the flip side, the market might fall if the government's jobs report falls short of already guarded expectations.
Investors are eager to see signs that private sector employers could begin hiring again as public sector jobs related to the Census have disappeared.
On Wednesday, payroll processing firm ADP said private sector employers cut 10,000 jobs in August - a drop from the downwardly revised 37,000 jobs they added the month before. Economists had expected the report to show an increase in private sector payrolls.
Friday's report is expected to show that employers cut a total of 120,000 jobs in August after payrolls fell by 131,000 in July, according to economists. The unemployment rate currently stands at 9.5%, and that figure is expected to creep up to 9.6%.
The Dow traded in a tight range of just over 50 points for most of the day before breaking higher in the final hour of trading, led by consumer discretionary and industrial stocks. More defensive sectors, including utilities, telecommunications and health-care stocks, were the three worst performers of the day.
The European Central Bank (ECB) kept its benchmark interest rate unchanged at a record low 1%, as expected. ECB President Jean-Claude Trichet said that the ECB would extend its tool box of additional bank funding on a full allotment basis, citing continued uncertainties in the economy.
A majority of retailers reported surprisingly strong August same-store sales, as consumers responded to back-to-school deals and tax holidays. Same-store sales, an important gauge of a retailer's health, measure sales at stores open at least a year.
Sales tracker Thomson Reuters said that 65% of the retailers in its index, that have reported sales so far, have beat expectations.
Weekly jobless claim figures dipped slightly, by 6,000 claims, to 472,000 in the week ended Aug. 28. Economists expected the number of Americans filing new claims for unemployment insurance to have edged up slightly last week to 475,000.
Pending home sales - a forward looking gauge - rose 5.2% in July, according to an index from the National Association of Realtors. But the index, which is based on sales contracts signed in the month, was down over 19% from July 2009. Economists had expected pending home sales would be flat in July.
The housing data helped boost shares of homebuilders.
Separately, the government said that factory orders rose 0.1% in July, versus a forecasted 0.3% gain. But the Commerce Department said orders fell 0.6% in June, an improvement over the originally reported 1.5% drop.
The Labor Department said labor productivity in the non-farm business sector fell at an annual rate of 1.8% in the second quarter of 2010. The drop came as hours worked increased 3.5%, the largest quarterly gain in over four years, and output rose 1.6%.
The drop in productivity was roughly in line with estimates from private sector economists.
HP raised its offer to buy data storage company 3PAR to $33 per share, topping a $32 bid from Dell. The computer makers have been engaged in a bidding war for 3PAR since Dell made an $18 per share offer on Aug. 16.
3Par, which makes storage products used in cloud computing, accepted H-P's offer, valuing the company at $33 a share. H-P gained 1.2%, while Dell rose 2% and 3PAR climbed 2.5% to $32.86.
Burger King said that it has agreed to be acquired by investment firm 3G Capital in a deal valued at $4 billion. Shares of the fast-food company rose 25% after surging 14% in the previous session on rumors of the deal.
Shares of Mariner Energy fell 2.5% after a fire occurred on an oil and gas production platform the company owns in the Gulf of Mexico. All 13 people onboard the Vermilion 380 have been accounted for, Mariner said. They are currently investigating the causes of the incident.
European stocks finished mixed, with some markets notching up small gains after another string of positive US economic data.
The Stoxx Europe 600 index ended unchanged at 258.18. The index rallied 2.7% on Wednesday following the release of strong manufacturing PMI data from the US and China.
The German DAX index also finished flat at 6,083.85. The French CAC-40 index rose 0.2% to 3,631.43 and the UK's FTSE 100 index gained 0.1% to 5,371.04 points. Italy's benchmark index gained 0.2%.
The benchmark stock indexes of Spain, Portugal and Ireland ended lower on Thursday. In Greece, the ASE Composite stock index rose 2.7%.
Telecom shares and major banks led decliners in Europe.
Deutsche Telekom fell 1%. The telecom is reportedly due to lose exclusivity for Apple's iPhone in Germany ahead of the Christmas holiday shopping season.
Pernod Ricard, the producer of wines and liquors, reported a marginal rise in fiscal 2010 net income, while sales dipped 1.7%. Shares fell 2.4% in Paris.
Shares of Heineken NV dropped 2.1% in Amsterdam.
Shares of Capgemini rose 1.2% on news the consulting, technology and outsourcing group acquired a 55% stake in Brazilian information-technology company CPM Braxis.
The European Central Bank left its key interest rate unchanged at 1% at a meeting in Frankfurt. The central bank also revised higher its euro-zone growth estimates, with forecasts of 1.4% to 1.8% for 2010 and a range of 0.5% to 2.3% for 2011.
Separately, Sweden's Riksbank raised interest rates from 0.5% to 0.75%, the second consecutive increase.