Spike threatens hike!

"Inflation is bringing us true democracy. For the first time in history, luxuries and necessities are selling at the same price." - Robert Orben.

Freezing temperatures in northern India can’t take the heat off policymakers in New Delhi as inflation shows no sign of cooling. Prices of essential food items continue to soar even as the non-food element of WPI starts turning costlier, triggering expectations of some interest rate hikes later this month. Add to it the fact that the Government has now linked NREGA pay with inflation. This will not only require more funds but will also push wage inflation higher. So, all the boastful predictions that inflation will soften to 5-6% by March-end may turn out to be hot air.



Coming to the markets, India seems to be underperforming vis-à-vis the developed counterparts like the US and Europe. A multitude of factors have combined to put the bulls on the backfoot. The near-term prospects continue to look slightly dim. Patiently await the start of a fresh intermediate up-trend before making fresh investments. All eyes are on today’s monthly jobs data in the US, which has been showing tell-tale signs of steady improvement.

The global commodity complex has seen some moderation in the past couple of days even as the dollar has recovered some ground. While it may be good for inflation-hit India, stocks of companies linked to commodities may come under pressure.

Quarterly earnings reports (both here and abroad) coupled with the outcome of RBI’s policy meeting later in the month will have a bearing on the sentiment. Global factors will of course continue to play an important role.

We expect the NSE Nifty to trade in a range of 5950-6150 in the near term. It could find support at 6000 while resistance is expected at 6100 and 6200. In short, the bulls will have to be lot more patient to see new all-time highs for the main indices.

FIIs were net sellers of Rs 3.85bn in the cash segment on Thursday, according to the provisional NSE data. The domestic institutional institutions were net sellers at Rs 3.38bn. FIIs were net buyers of Rs 1.65bn in the F&O segment on the same day. The foreign funds were net sellers of Rs 924mn in the cash segment on Wednesday, according to the SEBI web site.

Asian Markets on Friday:

Asian stock indices were trading mixed in early morning trade as shares of resource companies fell in the wake of continued weakness in the commodity space. Copper, gold and crude oil futures retreated. The euro weakened against the yen.

Sentiment in Asia was somewhat cautious ahead of the widely tracked monthly US jobs data on Friday.

Hong Kong shares declined early, as investors locked in gains after the recent advance, with metal and energy producers knocked back on a fall in commodity prices.

Chinese stocks were subdued amid persistent worries over potential monetary tightening in the coming days. There have been reports this week that the Chinese central bank may set lenders' reserve requirements monthly on a bank-by-bank basis.

The MSCI Asia Pacific Index rose ~0.6% to 138.07. The index rose 14% last year after a 34% increase in 2009.

The Nikkei In Tokyo fell ~0.1% to 10,514 while the Shanghai Composite index gained 0.2% at 2,830. The Hang Seng in Hong Kong was nearly unchanged at 23,812. South Korea’s Kospi Index was also virtually flat at 2,078.

The Taiex in Taiwan was down ~1% at 8,791 while the Straits Times index in Singapore fell 0.3% at 3,268. The S&P ASX 200 index in Australia was down ~0.6% at 4,698.

The Asia Pacific gauge rose to its highest level in two-and-a-half-years this week as data on US manufacturing and services industries boosted optimism that a recovery in the world’s largest economy is strengthening.

But, US stocks edged lower on Thursday after December chain store sales trailed estimates at some retailers, outweighing growing optimism in the jobs market.

Crude oil for February delivery declined 2.1% to $88.38 a barrel in New York yesterday.

The London Metal Exchange Index of six metals, including copper and aluminum dropped 0.2% yesterday, falling for a second day.

Gold futures for February delivery declined for the third straight day yesterday.

The euro depreciated to as low as 108.12 yen yesterday in New York, the least since Jan. 3. A weaker euro cuts the value of European income at Japanese companies when repatriated.

In today's trade, the dollar traded near a two-week high against the yen amid expectations that US companies added more jobs last month.

The euro headed for a weekly loss versus 13 of its 16 major counterparts on concern that European governments will struggle to raise funds as the region’s fiscal crisis lingers.

The Australian dollar was close to a two-week low against its US counterpart as worsening floods impaired the South Pacific nation’s coal industry.

Gold dropped for a fifth straight day, the longest losing streak since August 2009, as investors resume buying of risky assets amid increasing signs of sustainable recovery in the US economy. Silver, platinum and palladium all declined.

Oil rose from the lowest in three weeks.

US Markets on Thursday:

US stock indices finished pretty mixed as the dollar gained ground against major counterparts and investors turned a little cautious ahead of Friday's important monthly jobs data.

An increase in weekly jobless claims coupled with a lower-than-expected rise in retail sales kept investors at bay even as euro-zone debt worries resurfaced.

The blue-chip Dow closed down 25.58 points, or 0.22%, to 11,697.3. The Nasdaq Composite index edged up 7.69, or 0.28% to 2,709.89. The Standard & Poor’s 500-stock index shed 2.71, or 0.21%, to 1,273.85.

The S&P 500’s telecommunications sector declined nearly 2.8%.

Retailers also lagged in the wake of a soft round of December same-store sales figures, which largely fell short of analysts’ expectations.

The dollar rose against the euro for a fourth consecutive day, rising more than 1% to $1.3016. It also rose 0.3% against the British pound. The greenback edged up slightly versus the Japanese yen.

The dollar index, which measures the US currency against a basket of rival currencies, rose 0.6%.

A stronger buck weighs on commodity prices, which are priced in dollars.

Oil for February delivery lost $1.92, or 2.1%, to settle $88.38 a barrel.

Gold futures for February delivery fell $2.00, or 0.3%, to settle at $1,371.70 an ounce.

The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 3.41%, from 3.47% late on Friday.

US stocks have been steadily rising of late amid persistently positive economic reports. Wednesday's strong report on private sector payrolls from ADP helped push the Dow to a fresh two-year high for the third day in a row.

Investors are hoping that the government's monthly employment figures due before the opening bell on Friday will show improvement in the jobs picture.

The Labor Department reported that the number of Americans filing for first-time unemployment benefits rose ticked back above 400,000 last week - rising by 18,000 to 409,000 in the latest week. Economists had expected jobless claims to increase to 405,000.

On Friday, the government's monthly jobs report is expected to show employers boosted payrolls by 150,000 last month, following a 39,000 increase in November.

That comes on the heels of a report from payroll processor ADP issued on Wednesday, showing that private-sector employers added 297,000 jobs in December. Economists had been looking for a rise of 100,000.

Meanwhile, monthly same-store sales figures were marginally lower than consensus estimates owing to major snowstorm in the East Coast, extra deep discounts and shopper fatigue. Analysts expected an overall gain of 3.4% from a year ago.

Worries in the euro-zone debt markets flared up after the European Union (EU) proposed a framework for dealing with bank and investment-firm failures that asked whether bondholders should share the burden in paying for future bailouts.

The worries weighed on the euro and boosted the dollar.

Before the opening bell, Costco logged a 6% jump in December same-store sales, beating the 6.2% increase expected by analysts. Shares of the retailer finished slightly lower.

Shares of Target and Gap fell almost 7% after the retailers' December same-store sales missed big. Sales at discounter Target rose just 0.9% compared to estimates for a 4% increase, and No. 1 clothing chain Gap's sales fell 3% despite heavy discounts in December.

Shares of MetroPCS Communications sank 6.7% after the prepaid wireless provider said its fourth-quarter subscriber growth slowed from the prior quarter, when it tripled the number of customers it signed up.

Shares of BP fell after the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling released a report spreading the blame for the Gulf of Mexico oil spill.

The commission said that problems with deepwater drilling are "systemic" and that only "significant reform" will prevent another disaster.

Shares of graphic-chip maker Nvidia Corp. rallied 14% after the company announced late on Wednesday that it is developing its first computer processor aimed at mainstream computing, a move that makes the company a direct challenger to Intel Corp. and Advanced Micro Devices.

Shares of seed giant Monsanto Co. rose 2.4% after the company swung to a first-quarter profit, boosted by growth in its seeds and genomics business.

European Markets on Thursday:

European stocks ended mostly lower, led down by Portugal and Spain, as nervousness ahead of tomorrow’s US nonfarm payrolls report encouraged traders to book some recent profits.

The Stoxx Europe 600 index closed up 0.4% at 281.49 points, but most of the continent’s regional benchmarks finished with losses.

The FTSE 100 index dropped 0.4% to 6,019.51, weighed down by the mining sector.

Germany’s DAX 30 index bucked the negative trend to end up 0.6% at 6,981.39.

In France, the CAC 40 index ended virtually unchanged at 3,904.42.

Portugal’s PSI 20 index fell 1.2% and Spain’s IBEX 35 declined 1%. In Italy, the FTSE MIB index gained 0.4%.

BP fell after a US probe into the Gulf of Mexico oil spill blamed management failures at BP, but also highlighted the role of contractors Transocean Ltd. and Halliburton Co.

Total rose in Paris. The company said it has made a new gas discovery on the U.K. continental shelf.

ARM Holdings gained after Microsoft Corp. said the next version of its Windows operating system will support the company’s chips.