Weathering the storm!

Human misery must somewhere have a stop; there is no wind that always blows a storm. - Euripides.

The political class has finally managed to temporarily weather the Anna Hazare storm over the Lokpal Bill. There is a sense of relief. Also, the parliament’s resolution on Saturday after a constructive discussion has fueled expectations that a few key reform bills may get cleared soon.

The start today is likely to be a good one, spurred by healthy gains across global markets. US stocks rallied on Friday, despite Fed chairman Ben Bernanke refraining from announcing another stimulus. The FOMC may consider the same at its September meeting, he said.



IMF MD Christine Lagarde has warned that the global recovery is under threat due to problems in the US and Eurozone. ECB president Jean-Claude Trichet has denied that European banks are facing a liquidity issue.

Markets will digest and dissect a lot of data points this week, including US jobs report on Friday.

For India, it is a truncated trading week. Q1 GDP data will be out on Tuesday. Q1 FY12 GDP is estimated to be around 7.5% compared to 7.8% in the last quarter of FY11. India's economic growth stood at 8.5% during FY11, compared to 8% in the previous fiscal year.

Indian markets will remain shut on Wednesday and Thursday on account of Ramzan Id and Ganesh Chaturthi.

India has underperformed global markets lately, which is a cause for concern. But, FIIs were not heavy sellers on Friday. The Indian market can stage a comeback if FII outflows reverse and overseas markets recover some more ground.

The NSE will today kick off trading in S&P 500 and Dow Jones derivative contracts.

Hurricane Irene has not inflicted as much damage in the United States as it was expected to. US financial markets will open for trading later today, according to reports. Back home too, several parts of the country are witnessing torrential downpour.

FIIs were net sellers of Rs 2.26bn in the cash segment on Friday, according to the provisional NSE data. The domestic institutional institutions (DIIs) were net buyers at Rs 3.92bn on the same day. FIIs were net buyers of Rs 17.66bn (provisional) in the F&O segment on Friday.

The foreign funds were net sellers of Rs 14.94bn in the cash segment on Thursday, as per SEBI data. Mutual Funds were net buyers at Rs 2.02bn on the same day.

Global Data Watch: German CPI, US personal income and spending, US pending home sales, Japan unemployment rate and retail sales.

Meanwhile, the People's Bank of China will reportedly ask banks to hold more types of deposits in reserve, effectively tightening credit conditions further. The central bank will require banks to include so-called "margin deposits," or collateral deposited by customers for letters of credit and other guarantees, in calculating the proportion of deposits they must put aside for the required reserve ratio, according to reports.

This may drain 900 billion yuan ($140 billion) from the banking system over six months, according to Bank of America Merrill Lynch. China has already raised reserve ratios to a record 21.5% for the biggest banks.

Asian markets on Friday

Asian stock indices were trading mostly higher on the back of a positive session for the US markets on Friday, but equity indices in China fell after reports that its central bank will ask local lenders to hold more types of deposits in reserve, effectively tightening credit conditions further.

The MSCI Asia Pacific Index was up 1.2% at 121.78 as of 11:78 a.m. in Tokyo. It was heading for its highest close since Aug. 18. About four stocks rose for each that fell in the gauge.

The index snapped four weeks of losses last week.

The Nikkei in Japan was up ~0.5% at 8,845 while the Shanghai Composite in China dropped 1.2% at 2,580. The Hang Seng was up 1.35% at 19,847 while the Kospi in South Korea rallied 2.85% at 1,829.

The Taiex in Taiwan was up ~1.7% at 7,573 while the Straits Times in Singapore was up ~1.3% at 2,783. The S&P/ASX 200 index in Australia advanced ~1.5% at 4,264 while the NZX 50 index in New Zealand was up ~0.3% at 3,306.

The People's Republic of China (PBOC) will require banks to include so-called "margin deposits," or collateral deposited by customers for letters of credit and other guarantees, in calculating the proportion of deposits they must put aside for the required reserve ratio, according to reports.

This may drain 900 billion yuan ($140 billion) from the banking system over six months, according to Bank of America Merrill Lynch.

China has already raised reserve ratios to a record 21.5% for the biggest banks.

Federal Reserve Chairman Ben S. Bernanke didn’t announce a third round of quantitative easing, known as QE3, and instead decided to extend next month’s policy meeting to a second day.

Speaking at the Jackson Hole summit of world central bankers over the weekend, Bernanke said that the US economy was slowly recovering and that the central bank has more means to prop up growth if needed.

The FOMC meeting in September will allow a fuller discussion of the economy and the central bank’s possible response, he said.

US Market on Friday

US stock indices closed higher on Friday, and in the process registered their first weekly advance in the past five weeks after Federal Reserve Chairman Ben S. Bernanke said the central bank will discuss options to boost economic growth at its September policy meeting.

After falling more than 200 points, the Dow Jones Industrial Average rose as much as 176 points. It eventually finished with a gain of 134.72 points, or 1.2%, at 11,284.54.

The Standard & Poor’s 500 Index gained 17.53 points, or 1.5%, to 1,176.80, with technology companies rising the most among its 10 industry groups.

The Nasdaq Composite Index advanced 60.22 points, or 2.5%, to 2,479.85.

For every stock that fell, four gained on the New York Stock Exchange, where 1.1 million shares traded. Composite volume neared a relatively light 4.3 billion, in part due to early exit by some traders to avoid Hurricane Irene.

Fed chief Bernanke warned that the US economy continues to remain weak in the short term. He did not say anything about new stimulus measures up the central bank’s sleeve, suggesting that the Fed may be in "wait and see" mode.

Bernanke however said that the Fed policymakers would expand its September meeting from one day to two days.

The stock indices shot up just ahead of Bernanke’s address, then fell sharply after he finished his speech at the Jackson Hole summit.

Hope of a possible indication on fresh stimulus from the Fed had helped drive gains for world markets earlier this week

The VIX rose as high as 43.84, and ended down 4.14 points, or 10%, at 35.62.

Overall, it was a solid week for Wall Street, with the Dow and the S&P gaining more than 4%, and the Nasdaq climbing 5.7%.

The price on the benchmark 10-year U.S. Treasury rose slightly, pushing the yield down to 2.20% from 2.22% Thursday.

The dollar fell against the euro, the Japanese yen and the British pound.

Oil for October delivery rose 13 cents to $85.42 a barrel.

Gold futures for December delivery jumped $34.10 to $1,822.60 an ounce.

The Commerce Department said that the U.S. economy grew at a revised annual rate of 1% during the second quarter, down from a previously reported 1.3%.

The University of Michigan's consumer sentiment survey came in slightly better than expected at a reading of 55.7, up from the multi-year low of 54.9 reported two weeks ago.

Meanwhile, hurricane Irene was making its way up the East Coast toward New York City, but exchanges said they were prepared to resume trading as usual on Monday.

"We have contingency plans in place for such events, with the goal of having the market up and running while ensuring the safety of our people," said a spokesman from NYSE Euronext, the parent of the New York Stock Exchange.

New York City Mayor Michael Bloomberg announced a mandatory evacuation of some parts of the city. NYC subways, trains and buses will also be shut down this weekend.

Insurance shares were mixed as the East Coast braced for Hurricane Irene.

Shares of Pandora rallied 7%, as second-quarter revenue spiked 117% to $67 million -- beating analysts' forecast for $61 million. But the online radio company's stock is off almost 17% from where it debuted in June.

Halliburton is on a hiring spree this year. The company is planning to create as many 15,000 jobs globally, including 11,000 in North America. Shares rose 4%.

Tiffany's shares jumped 9%, after the luxury jeweller posted higher-than-expected earnings and sales for the second quarter.

European Market on friday

European equity benchmarks ended in the red on Friday as investors continued to stay away from regional banks amid persistent concern over Greece’s bailout.

Trading turned a bit choppy late in the session as investors reacted to a speech by U.S. Federal Reserve Chairman Ben Bernanke, who refrained from announcing any fresh plan to stimulate the world’s largest economy.

The Stoxx Europe 600 index dropped 0.7% to end at 225.52, but gained 1.1% for the week.

The pan-European index, which had been trading down 1.9% ahead of Bernanke‘s speech, initially extended its fall to as much as 2.7% as the Fed chairman spoke, before paring losses.

Germany’s DAX 30 index slid 0.8% to close at 5,537.48, led by banking and insurance stocks.

The DAX has become one of the most volatile European indexes in recent weeks. Short-selling bans in other countries may have prompted some traders to turn their attention to the DAX as a proxy for other euro-zone markets.

The CAC 40 index fell 1% to close at 3,087.64. The U.K.’s FTSE 100 index finished almost unchanged at 5,129.92.

Banks were the worst performers, especially Greek lenders.

The ASE Composite index fell 1% to 880.08, as worries over the Greek bailout persisted.

The Greek government warned that it may opt out of a debt-swap deal if not enough bond holders sign up. Already there are differences over possible collateral for countries participating in the bailout.

Shares of Peugeot pared losses but still ended down 0.6% in Paris after UBS downgraded the stock to neutral from buy.