Market in no-man’s land

One way to keep momentum going is to have constantly greater goals. - Michael Korda.

After last week’s stellar recovery the momentum seems to have eased a little this week. The broader market too has not been able to turn things around. Some cooling in FII inflows has made matters worse. Indecisive global markets have not helped either.



We expect the market to consolidate in the near term before turning up again. Today’s start is expected to be a subdued one owing to mixed overseas cues. US stocks erased early gains to close mixed while European stocks gained. Asian markets are struggling for direction.

Action appears to have shifted to the commodity space. Crude oil crossed $90 before softening. Gold hit another record as did copper.

The market could rebound if banks recover some of the lost ground. Oil PSUs could gain amid reports of a marginal increase in auto fuel prices. The mid-year economic review paints a rosy picture of India but inflation might inch higher if the imminent fuel price hike materialises.

The Nifty needs to surpass 6020-6030 in order to break out of the current range. Till then, it is likely to trade between 5940-6030. On the way up, the Nifty could face resistance around 6070-6080. In case of a fresh fall, support is likely to kick in at 5800. Overall, the trading range is expected to be 5800-6200.

There could be a minor year-end "Santa Clause Rally", provided the overseas markets advance afresh. For now though we seem to have hit a speed breaker. October IIP (on Dec. 10), monthly inflation (Dec. 14) and the mid-quarter RBI review (Dec. 16) are the big events to watch out for in the next few days.

FIIs were net sellers of Rs 5.2bn in the cash segment on Tuesday while the domestic institutional institutions were net sellers of Rs 4.27bn, according to the NSE Web site. FIIs were net sellers at Rs 7.4bn in the F&O segment. The foreign funds were net buyers at Rs 769mn in the cash segment on Monday, as per the SEBI data.

Asian Markets on Wednesday:

Asian stock indices were trading mixed in early morning trade on Wednesday, but the market in China was quite choppy amid growing speculation of a fresh round of monetary tightening in the next few days.

The Nikkei in Japan rose after the yen and other Asian currencies weakened against the dollar.

Hong Kong shares edged lower in early trade, with resource stocks led by CNOOC leading the decline after crude-oil prices fell overnight in New York, while the US dollar's modest gains against several Asian currencies damped risk appetite.

Depository receipts of iron ore miner Vale SA were trading at 268.80 Hong Kong dollars on their debut in Hong Kong, compared with the closing price of $33.93 (equal to HK$264) for Vale's American Depository Receipts overnight.

The MSCI Asia Pacific Index slipped 0.5% to 133.09 as of 10:48 a.m. in Tokyo.

The Asia Pacific gauge fell 0.6% last month, the first decline in three months, amid concern that China will intensify efforts to curb inflation, speculation Europe will fail to contain the region’s sovereign-debt crisis from spreading and as tensions in the Korean peninsula escalated.

The Nikkei in Tokyo was up 0.7% at 10,210 while the S&P/ASX 200 index in Sydney was down 0.4% at 4,706. The Hang Seng in Hong Kong was down 0.6% at 23,289. The Shanghai SE Composite index in China was up 0.1% at 2,878 after being as low as 2,862.

South Korea’s Kospi Index was nearly flat at 1,962. The Taiex in Taiwan was marginally up at 8,710 while the Straits Times index in Singapore was also almost unchanged at 3,191.

The Standard & Poor’s 500 Index rose 0.1% yesterday after surging 1% to a two-year high earlier. US Stocks pared gains in the final hour of trading after a probe of insider trading reportedly widened and President Barack Obama said he would push to overhaul the tax code in two years.

The dollar rose against most of its major counterparts as Treasury yields surged on speculation that an agreement to extend tax cuts will boost the economy, increasing demand for US assets.

The greenback rallied against the euro and the yen after Obama agreed to extend middle-class tax cuts introduced by the previous administration.

The yen depreciated to as low as 83.55 against the dollar today in Tokyo, compared with 82.51 at the close of stock trading yesterday. Against the euro, Japan’s currency weakened to 110.81 from 110.11.

A weaker yen boosts overseas income at Japanese companies when converted into their home currency.

US Markets on Tuesday:

US stock benchmarks closed nearly unchanged, retreating from the day's peak levels, as reports of a widening federal probe into insider trading and a spike in Treasury yields partly offset early enthusiasm over the deal to extend Bush era tax cuts.

Commodities also shed early gains to close lower as the dollar recovered. The euro slipped as Ireland voted on a tough austerity package.

The major indexes had maintained healthy gains for much of the day as Wall Street embraced President Barack Obama’s decision to compromise on tax cuts. But by then end of the day, the Dow Jones Industrial Average ended down 3.03 points at 11,359.16, more than 90 points off its high for the day. Of the Dow’s 30 components, 17 were higher.

The S&P 500 Index finished flat at 1,223.75, with industrials pacing gains that included all 10 of the index’s industry groups.

The Nasdaq Composite index rose 3.57 points, or 0.1%, to 2,598.49.

Advancers edged just ahead of decliners on the New York Stock Exchange, where volume topped 1.6 billion.

Obama reached a deal with Republican lawmakers late on Monday that would extend Bush-era tax cuts for two years and unemployment benefits for 13 months. It would also lower the payroll tax by two percentage points for a year.

But the momentum faded late in the day after Obama, who wanted the cuts for high-earning taxpayers to expire, said that he would push to have them eliminated after the two-year extension is over.

"This gives us the time to have this political battle without having the same casualties for the American people," he said.

Despite his opposition to the tax cuts, Obama stressed that the overall deal will prevent millions of jobless Americans from losing their unemployment benefits and could help stimulate the economy.

The yield on the 10-year Treasury note jumped to its highest level since June. The price on the benchmark 10-year US Treasury fell, pushing the yield up to 3.16% - a level not seen since late June.

The dollar rose versus the euro and the yen, but remained weak against the pound.

Oil for January delivery fell 69 cents to end at $88.69 a barrel. Earlier, prices rose above $90 a barrel for the first time since October 2008.

Gold futures for February delivery fell $7.10 to settle at $1,409 an ounce, after reaching a new intraday high of $1,432.50 earlier in the session. Gold settled at a record $1,416.10 an ounce on Monday.

Silver for March delivery gained 51 cents, or 1.7%, to $30.25 an ounce. Earlier in the session, silver topped $30.75 an ounce - a new 30-year high.

Consumer credit increased $3.3 billion in October, according to the Federal Reserve. Economists had expected a $2.5 billion decrease. This follows September's $2.1 billion increase in consumer credit.

Bank of America agreed to pay $137 million in fines to federal and state regulators to settle charges of bid rigging in the municipal bond derivatives market. Shares were up 0.5%.

The Treasury Department said late on Monday that it planned to sell 2.4 billion Citi common shares, priced at $4.35 a share. That gives the government a $12 billion profit, including dividends and interest payments, on its $45 billion Citi bailout.

The Citi stock rose 14 cents, or 4%, to $4.60 per share.

3M said that it expects full-year earnings will be between $5.90 and $6.10 per share in 2011, on sales of up to $30.5 billion. Analysts had been expecting earnings of $6.20 per share. Shares of the company fell 3%.

AGL Resources and Nicor Inc. announced a merger creating a leading U.S. natural gas distribution company. The combined company will be known as AGL Resources. Shares of AGL were down 5.8%, while shares of Nicor rallied 4%.

European Markets on Tuesday:

European stock indices rose to close at their highest level in more than two years as a US deal to extend Bush era tax cuts and hopes that the Irish parliament will approve a tough new budget buoyed sentiment.

The Stoxx Europe 600 index advanced 0.9% to 273.90, its highest closing level since September 2008.

Dublin’s ISEQ index was one of the strongest performers in the region, rising 1.7% to 2,797.88.

Germany’s DAX 30 index climbed above the 7,000 level for the first time since June 2008. The index finished up 0.7% at 7,001.91.

The UK's FTSE 100 index gained 0.7% to close at 5,808.45 and the French CAC 40 index climbed 1.6% to 3,810.50, though both remained below the peaks they hit earlier in 2010.

Bank stocks traded mostly higher while the volatile Irish banking stocks also rose.

German Chancellor Angela Merkel on Monday dismissed calls to increase the size of the European Union’s bailout fund or create European sovereign bonds.

Euro zone finance ministers' met in Brussels for the second day. The eurozone ministers said late on Monday that the European Financial Stability Facility does not need more money to cope with the current sovereign debt crisis.

Investors largely shrugged off the potential for more fiscal tightening in China, after the state-run China Securities Journal said that the People's Bank of China may hike interest rates this weekend, before the release of inflation data for November on Monday.