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Saturday, September 17, 2011

Market gains for the third straight day; ONGC jumps


Key benchmark indices managed small gains amid high intraday volatility, after the central bank delivered another 25 basis points hike in repo rate--the key short-term policy rate--at its mid-quarter review today, 16 September 2011, to rein in inflationary expectations. The market extended gains for the third straight day and scaled one-week closing high. The barometer index BSE Sensex settled below the psychological 17,000 level, having alternately swung above and below that mark in intraday trade. The BSE Sensex rose 57.29 points or 0.34%, off close to 190 points from the day's high and up about 45 points from the day's low. The market breadth was negative, having alternately swung between positive and negative zone earlier in the day.



From a recent low of 16,467.44 on Tuesday, 13 September 2011, the Sensex has jumped 466.39 points or 2.83% in three trading sessions. Euro-zone debt worries had pulled Indian shares lower before the three-day rebound. From a 5-week closing high of 17,165.54 on Thursday, 8 September 2011, the Sensex had tumbled 698.10 points or 4.06% in three trading sessions to 2-week closing low of 16,467.44 on 13 September 2011. Earlier, the market had staged a strong rebound after a steep setback in August 2011.

With Q2 September 2011 drawing towards a close, focus may shift to expectations of Q2 results of individual firms. Advance tax payments made by the top 100 companies based in the country's financial capital Mumbai reportedly rose 18% in Q2 September 2011. The tax collections are not uniformly good or bad across companies and sectors, except for oil marketing companies, which saw a decline in levies paid.

Coming back to today's trade, state-run ONGC jumped as the latest petrol price hike could help reduce the subsidy sharing burden of the state-run oil exploration major which is required to share under-recoveries at state-run oil marketing companies (PSU OMCs) on selling diesel and cooking fuels at government-set prices. Index heavyweight Reliance Industries (RIL) edged lower in volatile trade. Another index heavyweight Larsen & Toubro rose. Interest rate sensitive banking stocks rose in choppy trade as the rate hike by RBI was on expected lines. Realty stocks, too, gained. Tata Motors soared 7%. Other auto stocks were mixed. Metal shares were mixed.

Key policy decisions by the Indian government on Thursday, 15 September 2011, eased concerns of a policy paralysis, aiding the upmove on the bourses today. Meanwhile, the government's decision to defer the mega Rs 11000 crore follow-on public offer (FPO) of ONGC helped ease concerns of the large issue sucking secondary market liquidity.

The market pared gains soon after a firm opening triggered by a rally in Asian shares. The market regained strength later. The market trimmed gains in morning trade. The Sensex once again regained strength later. A bout of volatility was witnessed in mid-morning trade as key benchmark indices trimmed gains after hitting fresh intraday highs to hit fresh intraday lows. Wild swings in share prices was the order of the day in early afternoon trade after the Reserve Bank of India (RBI) raised repo rate--the key short-term policy rate--by 25 basis points at its mid-quarter review today, 16 September 2011.

Higher opening of European shares ensured firmness on the domestic bourses in early afternoon trade. Intraday volatility continued as key benchmark indices trimmed gains in mid-afternoon trade as US index futures fell. Volatility continued in late trade.

The BSE Sensex rose 57.29 points or 0.34% to settle at 16,933.83, its highest closing level since 8 September 2011. The index jumped 246 points at the day's high of 17,122.54 in early afternoon trade. The index gained 13.02 points at the day's low of 16,889.58 in early afternoon trade.

The S&P CNX Nifty rose 8.55 points or 0.17% to settle at 5,084.25, its highest level since 8 September 2011. The Nifty hit a high of 5,143.60 in intraday trade. The Nifty hit a low of 5,068.10 in intraday trade, its lowest level since 15 September 2011.

The BSE Mid-Cap index rose 0.38% and outperformed the Sensex. The BSE Small-Cap index fell 0.01% and underperformed the Sensex.

BSE clocked turnover of Rs 2646 crore, higher than Rs 2570.88 crore on Thursday, 15 September 2011.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,473 shares fell and 1,392 shares rose. A total of 131 shares remained unchanged. The breadth swung alternately between positive and negative zone earlier in the day.

Among the 30-share Sensex pack, 17 fell and the rest rose.

IT stock fell on profit taking after a recent rally triggered a recent steep slide in rupee against the dollar. The rupee witnessed a steep fall against the dollar recently as euro-zone debt worries triggered global risk aversion. A weak rupee boosts revenue of IT companies in rupee terms as the sector derives a lion's share of revenue from exports.

India's largest software services exporter Wipro fell 2.37%, reversing initial gains. The company has entered into a strategic alliance with Saab AB to develop and market protective software for the Swedish major's Land Electronic Defence System (LEDS). LEDS provides protection to light and medium combat vehicles and main battle tanks against rocket-propelled grenades, anti-tank missiles, mortars and artillery shells.

India's largest software services exporter TCS declined 1.04%. The company on Thursday said it has signed a multi year contract with Nets, one of largest payment cards, payment solutions and payment exchange information companies in Northern Europe. The contract comprises application, maintenance and development services across Nets' value chain of cards, payments and eSecurity. TCS's advance tax payment reportedly jumped 111.11% to Rs 570 crore in Q2 September 2011 over Q2 September 2010.

India's second largest software services exporter Infosys fell 0.51%, with the stock snapping three-day gains. The company is reportedly close to acquiring the health care business of Thomson Reuters in a $700-750 million deal. If the deal goes through, it will be the largest acquisition by Infosys. Thomson Reuters' health care business provides data, analytics and performance benchmarking solutions and services to companies, government agencies and health care professionals.

Index heavyweight Reliance Industries (RIL) fell 0.92% to Rs 827.45. The stock was volatile. The stock hit high of Rs 849.30 and low of Rs 822.05. The company's advance tax payment reportedly jumped 67% to about Rs 2000 crore in Q2 September 2011 over Q2 September 2010.

BP PLC will be able to start work on jointly developing RIL's oil and gas blocks in India only after a revised production-sharing contract is drafted and signed by the stakeholders, the upstream regulator said on Thursday, 15 September 2011. "The amendment to the production-sharing contract is yet to be signed. BP will come in only when the amendment is signed," S.K. Srivastava, Director at the Directorate General of Hydrocarbons, told reporters on the sidelines of an industry conference. In the production-sharing contract, the explorers agree with the government to bear risks, production and development costs in return for a share of production.

Srivastava said that RIL is yet to approach the regulator with a new draft of the contract. RIL on 30 August 2011 closed a deal with BP to sell a 30% stake in its 21 oil and gas exploration blocks in India to the UK-based explorer.

RIL had, last week, denied inflating costs on its D6 gas field in the Krishna-Godavari (KG) basin. RIL made the clarification after CAG said in its final report submitted to the parliament on Thursday, 8 September 2011, that RIL initially estimated capital expenditure of D-1 and D-3 gas discovery at $2.4 billion, which it later revised to $8.8 billion.

Interest rate sensitive banking stocks rose in choppy trade as the rate hike by RBI was on expected lines. The RBI today, 16 September 2011, said the year-on-year non-food credit growth at 20.1% in August 2011 was above the indicative projection of 18% cent set out in the July 2011 policy review. India's largest private sector bank by net profit ICICI Bank rose 0.58%. ICICI Bank's advance tax payment reportedly remained unchanged at Rs 600 crore in Q2 September 2011 over Q2 September 2010.

India's largest bank by branch network and net profit State Bank of India (SBI) rose 2.5% to Rs 1945.55. The stock had hit a 52-week low of Rs 1,812.90 in intraday trade on Wednesday, 14 September 2011. SBI's advance tax payment reportedly fell 10% at Rs 1700 crore in Q2 September 2011 over Q2 September 2010.

India's second largest private sector bank by net profit HDFC Bank fell 0.18% in volatile trade. HDFC Bank's advance tax payment reportedly rose 33% to Rs 800 crore in Q2 September 2011 over Q2 September 2010.

Axis Bank rose 1.56%. The private sector bank today said its board has considered and unanimously approved the transfer of the financial services business of Enam Securities whereby the Enam Financial Services business will be demerged from Enam into the bank under a Scheme of Arrangement. Enam shareholders will get 5.7 equity shares of Axis Bank for every one equity share of Enam. Upon completion aforesaid transaction, the bank will sell the Enam Financial Services business to ASSL, its wholly owned subsidiary. ASSL will pay the bank a cash consideration of approximately Rs 274 crore, which represents the book value of the Enam Financial Services Business, Axis Bank said. A total of 1.37 crore shares of Axis Bank will be issued to Enam shareholders.

Interest rate sensitive auto stocks were mixed after RBI's another rate hike. India's largest car maker by sales Maruti Suzuki India rose 2.16% to Rs 1106.65, up from the day's low of Rs 1060.20. The stock reversed initial losses on reports the company will resume operations at both its factories on Sunday, 18 September 2011, as workers at two parts manufacturing units of its parent Suzuki Motor Corp. have withdrawn a strike.

Maruti decided to shut its factories on Friday, 16 September 2011, after about 1,900 workers went on strike at Suzuki Powertrain India and Suzuki Castings. The strike led to a shortage of critical parts, including diesel engines and transmissions for some gasoline car models, forcing the auto maker to stop operations at the factories at Manesar and Gurgaon in Haryana. Maruti will resume production on Sunday instead of Monday to make up for the production loss on Friday.

Tata Motors, India's biggest auto maker by revenue, jumped 7.02% after company said its global vehicle sales in August rose 3% from a year earlier to 87,459 units. The company said sales at its UK-based luxury car unit, Jaguar Land Rover, jumped 31% to 21,242 vehicles during the month. Sales of Land Rover sport-utility vehicles surged 43% to 17,833 units, but Jaguar sedan sales fell 10% to 3,409 autos. Global sales of all trucks and buses rose 17% to 48,023 units, the company said. The company's advance tax payment reportedly remained unchanged at Rs 90 crore in Q2 September 2011 over Q2 September 2010.

Mahindra & Mahindra fell 0.68%, reversing initial gains. The company announced during market hours on Thursday that the board of directors of the company has approved divestment of up to 8.09% stake in its subsidiary Mahindra Holidays & Resorts India (MHRIL) in one or more tranches at the best available price through a recognised stock exchange by June 2013 to enable increase of MHRIL's public shareholding and free float in the stock market. M&M currently holds 83.09% of the equity of MHRIL. Shares of MHRIL jumped 4.97%. M&M's advance tax payment rose 6.25% to Rs 170 crore in Q2 September 2011 over Q2 September 2010.

Shares of bike makers fell on fears the latest petrol price hike may adversely impact sales during the festive season. India's largest two-wheeler maker by sales Hero MotoCorp fell 0.26% to Rs 2197. The stock had scaled a record high of Rs 2,231.70 in intraday trade on 9 September 2011. The company's sales rose 19% to 5.03 lakh units in August 2011 over August 2010.

India's second largest two wheeler maker by sales Bajaj Auto fell 0.19% to Rs 1625.55. The stock had hit a record peak of Rs 1694.90 in intraday trade on 6 September 2011. The company's advance tax payment reportedly rose 4.17% to Rs 250 crore in Q2 September 2011 over Q2 September 2010. The company's total sales rose 16% to a record 3.82 lakh units in August 2011 over August 2010. Motorcycle sales jumped 17% to a record 3.38 lakh units in August 2011 over August 2010.

Interest rates sensitive realty stocks rose as today's rate hike by RBI was on expected lines. DLF, HDIL, Indiabulls Real Estate and Unitech gained by between 0.54% to 4.8%.

India's largest power generation firm by capacity NTPC rose 4.75% after the company said that Simhadri Super Thermal Power project's Unit-3 of 500 megawatts capacity has kicked off commercial operation from midnight of 16 September 2011. With commencement of operation of the unit, the commercial capacity of Simhadri Super Thermal Power project is 1,500 megawatts (MW) and that of NTPC is 30,330 MW, NTPC said in a statement.

Metal stocks were mixed as LMEX, a gauge of six metals traded on the London Metal Exchange rose 1.19% on Thursday, 15 September 2011. Sterlite Industries, Sesa Goa, Hindustan Zinc, and NMDC rose by between 0.22% to 6.42%. Bhushan Steel, Sail, Jindal Steel & Power and Nalco shed by between 1.1% to 1.97%.

Tata Steel fell 1.3%, reversing initial gains. The company's advance tax payment reportedly rose 19.23% to Rs 620 crore in Q2 September 2011 over Q2 September 2010.

Tata Steel after on Wednesday announced a major five-year improvement programme at its IJmuiden steelworks in the Netherlands. The five-year programme with investment of euro 800 million is designed to sustain the plant's potential to be a world-class steelmaker, Tata Steel said in a statement. After the investment, the plant's annual capacity will rise to 7.7 million liquid steel by 2015-16, from current 7.2 million.

The total number of full-time jobs will reduce by 1,000 over the next four years. There will also be investment of staff training and development and enable the plant to meet the demand of the current complex market situation, the company statement said. "The IJmuiden works enjoys the great advantages of an ideal location with its own port for bringing in raw materials and close proximity to the market, excellent lay-out, an ability to be flexible in the use of raw materials, and a high level of technology and craftsmanship," said Dr Karl-Ulrich Köhler, MD & CEO, Tata Steel Europe.

JSW Steel rose 0.68% in volatile trade. The company said during market hours on Thursday that a cut in its steel production is expected to continue till the resumption of iron ore supplies from e-auction by 'Monitoring Committee' in terms of a Supreme Court order.

Hindalco Industries rose 0.35% in volatile trade. The company's advance tax payment reportedly rose a muted 7.14% to Rs 150 crore in Q2 September 2011 over Q2 September 2010.

Larsen & Toubro rose 1.23%. The company's advance tax payment reportedly rose 16.67% to Rs 350 crore in Q2 September 2011 over Q2 September 2010

State-run ONGC jumped 5.61% as the latest petrol price hike could help reduce the subsidy sharing burden of the state-run oil exploration major which is required to share under-recoveries at state-run oil marketing companies (PSU OMCs) on selling diesel and cooking fuels at government-set prices.

Meanwhile, the government today, 16 September 2011, deferred the about Rs 11000-crore follow-on public offer (FPO) of ONGC. ONGC said in a statement that the government has decided not to proceed with the FPO of ONGC as per the timeline mentioned in the Red Herring Prospectus dated 5 September 2011 and it will evaluate its decision in relation to the FPO in due course. The FPO was scheduled to open on 20 September 2011 and close on 23 September 2011.

HDFC rose 0.85%, extending Thursday's 1.56% gain. The housing finance firm's advance tax payment reportedly rose 9.52% to Rs 460 crore in Q2 September 2011 over Q2 September 2010.

PSU OMCs reversed initial gains triggered by a hike in petrol prices by Rs 3.14 per litre or about 5% from Thursday midnight. BPCL, Indian Oil Corporation and HPCL fell by between 0.48% to 2%. A ministerial panel's meeting to consider limiting the sale of cooking-gas cylinders at subsidized rates which was scheduled today, 16 September 2011, has been reportedly deferred. PSU OMCs sell cooking gas, diesel and kerosene at state-set discounted prices to help the government control inflation. They get cash subsidy from the government to help trim their losses.

PSU OMCs are currently losing Rs 267 a cylinder. The government is considering to restrict the number of subsidized gas cylinders to help retailers cut their losses and reduce the government's subsidy burden. It is also working on a proposal to directly transfer fuel subsidies to the poor.

Airline stocks fell as PSU OMCs hiked aviation turbine fuel prices (ATF) prices on Thursday, 15 September 2011. ATF constitutes more than 50% of operating cost for airliners. Jet Airways (down 0.51%) and SpiceJet (down 2.24%) edged lower. Kingfisher Airlines rose 2.18%.

Prices of jet fuel are directly linked to crude oil prices. State-run oil marketing companies--Indian Oil Corporation, BPCL and HPCL revise jet fuel prices on the 1st and 16th of every month based on the average international crude price in the preceding fortnight. State-owned oil companies on Thursday hiked jet fuel, or ATF, price by 2.5% in line with firming of international oil rates. Aviation Turbine Fuel (ATF) price at Delhi's T3 airport was hiked by Rs 1,429 per kilolitre (kl), or 2.5%, to Rs 57,689 per kl with effect from Thursday midnight.

SRS clocked highest volume of 3.32 crore shares on BSE. Cals Refineries (1.3 crore shares), Resurgence Mines (1.02 crore shares), Le Waterina (93.73 lakh shares) and Pipavav Defence 48.29 lakh shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 266.67 crore on BSE. SRS (Rs 111.86 crore), Tata Steel (Rs 71.55 crore), Tata Motors (Rs 69.39 crore) and RIL (Rs 65.09 crore) were the other turnover toppers in that order.

A recent India investor survey report prepared by J P Morgan Asset Management-ValueNotes expects benchmark Sensex to trade between 20,000 and 22,000 by end of this year. According to the report, the investment sentiment is affected by concerns such as recession, frequent hikes in interest rates and volatility in the domestic investment environment. Despite witnessing a 4.2-point decline from the last quarter, the 'Retail Investor Confidence Index' ranks the highest at 137.5 points. Retail investors' activity in mutual funds has improved 11% since the last quarter, the survey said. The survey was carried out from 22 July to 4 August 2011.

The survey also shows that investors are becoming cautious as preserving capital emerges as a popular investment strategy among retail investors (40%). However, 40% of investors, in comparison to 57% in March 2011, are expected to turn "somewhat aggressive" about their investment strategy over the coming six months.

At the time of announcing a 25 basis points rate hike, the Reserve Bank of India (RBI) today, 16 September 2011, said that it is imperative to persist with the current anti-inflationary stance because a premature change in the policy stance could harden inflationary expectations, thereby diluting the impact of past policy actions.

In recent weeks, as a result of global risk aversion, the rupee has depreciated, which may have adverse implications for inflation, the RBI said. Inflation remains high, generalised and much above the comfort zone of the Reserve Bank of India, it said. The central bank said that today's (16 September 2011) repo rate hike is expected to reinforce the impact of past policy actions to contain inflation and anchor inflationary expectations. As monetary policy operates with a lag, the cumulative impact of policy actions should now be increasingly felt in further moderation in demand and reversal of the inflation trajectory towards the later part of 2011-12, RBI said.

Going forward, the stance of the monetary will be influenced by signs of downward movement in the inflation trajectory, to which the moderation in demand is expected to contribute, and the implications of global developments, RBI said.

Although India's exports have performed extremely well in the recent period, this trend is unlikely to be sustained in the face of weakening global demand, RBI said. This, combined with the slowing down of domestic demand, to which the monetary policy stance is also contributing, suggests that risks to the growth projection for 2011-12 made in the July 2011 monetary policy review are on the downside, RBI said.

Corporate margins in Q1 June 2011 moderated across several sectors compared to levels in Q4 March 2011. However, barring a few sectors, significant pass-through of rising input costs is still visible, RBI said.

The central government's fiscal imbalances widened during April-July of 2011 reflecting, primarily, the impact of decline in revenue receipts coupled with pressures from non-plan revenue expenditures on account of higher petroleum and fertiliser subsidies. Fiscal deficit at 55.4% of the budget estimates in the first four months of the current fiscal was significantly higher than that of 42.5% during the corresponding period last year (when adjusted for the more than budgeted spectrum proceeds).

Reacting to the RBI's latest rate hike, Navneet Munot, Chief Investment Office (CIO), SBI Mutual Fund said, "The lag effect of past actions and global environment would moderate the domestic demand and inflation trajectory going forward, in our view. Our sense is that RBI is likely to take a pause after today's rate action. This should be viewed positively by bond and equity markets. Sentiments in equity markets should improve on evident signs of peaking of rate cycle. Markets would closely watch global developments and movement in commodity prices".

Economic Affairs Secretary R. Gopalan on Thursday, 15 September 2011, said that the government has raised the limit of overseas borrowing for companies to $750 million from $500 million. Indian companies can also now raise loans up to $1 billion in Chinese yuan, Mr. Gopalan added. The relaxation of overseas borrowing rules will help Indian companies tap cheaper cash abroad amid rising credit costs in the local market. US and European countries have near-zero interest rates in a bid to support weak economic growth.

The government on Thursday, 15 September 2011, cleared the ambitious $90-billion Delhi-Mumbai industrial corridor. The Delihi-Mumbai industrial corridor project will set up nine mega industrial zones of about 200-250 square kilometre (km) along with a 1,500 km high speed freight line connecting the two cities. It will include three ports and six airports, as well as a six-lane intersection-free expressway connecting the two cities and a 4,000 megawatts (MW) power plant and also set up seven new cities.

Meanwhile, the public private partnership (PPP) approval committee approved projects worth Rs 18000 crore on Thursday that include a housing project for para-military forces and a road project among others.

Finance Minister Pranab Mukherjee on Tuesday, 13 September 2011, said central banks in emerging economies have been forced to raise interest rates repeatedly as they battle high inflation, exposing them to volatile capital flows. "An issue of immediate concern for emerging economies is managing large capital flows," he said. "Large and volatile capital flows to emerging markets can be destabilizing as they lead to high exchange rate volatility and in some cases make it incumbent to maintain high levels of foreign exchange reserves as an insurance against sudden and large-scale flight of international capital."

Given the lackluster initial FII response to the government's sharply raising the ceiling of FII investment in long-term corporate bonds issued by the companies in the infrastructure sector in March 2011, the government on Monday, 12 September 2011, further relaxed the norms on FII investment in such bonds. The Finance Ministry said in a statement that FIIs can now invest in long-term infra bonds, subject a ceiling of $5 billion limit, which have an initial maturity of five years or more at the time of issue and residual maturity of one year at the time of first purchase by FIIs. These investments are subject to a lock-in period of one year. FIIs can trade amongst themselves in these bonds but cannot sell to domestic investors during the lock-in period of one year.

FIIs can also now invest, subject to a ceiling of $17 billion, in long-term infra bonds which have an initial maturity of five years or more at the time of issue and residual maturity of three years at the time of first purchase by FIIs. These investments are subject to a lock-in period of three years. During the three-year lock-in period, FIIs can trade amongst themselves but cannot sell to domestic investors. The Securities & Exchange Board of India (Sebi) is expected to issue notifications incorporating these changes in the scheme by 15 October 2011.

Sebi had in early August 2011 allowed Qualified Foreign Investors (QFIs) to subscribe to Mutual Fund Debt Schemes which invest in the infrastructure sector subject to a total overall ceiling of $3 billion within the total ceiling of $25 billion.

Planning Commission deputy chairman Montek Singh Ahluwalia on Monday, 12 September 2011, said at a conference that private funding has to make up half of the infrastructure investment of $1 trillion planned for in the five years during 2012-2017. Prime Minister Manmohan Singh said at the conference that to overcome the fund crunch for infrastructure projects, the government has proposed to set up a $11 billion fund to help finance infrastructure projects. "We have also constituted a high-level committee to suggest measures necessary for financing our ambitious program in infrastructure development," Mr. Singh said.

Prolonged rainfall in the latter part of the season has helped ease concerns that this year's monsoon might drop below the long-term average after a brief lull in July, when the country usually receives a third of its monsoon rains. The first advance estimates for the 2011-12 kharif season point to a record production of rice, oilseeds and cotton, while the output of pulses may decline.

A good monsoon season can typically boost rural farm incomes and have an impact on the wider economy through increased spending on consumer goods as well as reduced prices of food items. But food prices may not necessarily fall if delayed and excess rains in some regions affect crop yields.

Moody's Investors Services affirmed its Baa3 rating for India's foreign currency government debt and its Ba1 rating for local currency debt in an annual credit analysis released last week. The ratings firm assigned a positive outlook to India's rupee-denominated bonds, saying it will consider a unified Baa3 rating for all bonds if India improves its fiscal position and its commitment to strengthening the domestic market. The outlook for foreign-currency debt is stable.

The report was upbeat about India's ability to weather a global economic downturn. "While it is not immune to an international growth slowdown, the strength of domestic demand and the diversity of the economy provides a buffer against a deceleration in globally exposed sectors," the report said. It noted that India's foreign currency reserves equal four times its foreign debt obligations.

A debt-to-GDP ratio of 71% is cause for concern, as interest on this debt eats up 25% of India's revenues annually. However, "Moody's expects that continued GDP growth and incremental fiscal consolidation efforts will continue to lower the government debt/GDP ratio," the report said.

India's merchandise exports grew 44.2% in August 2011 from a year earlier, totaling $24.3 billion, sharply slowing from the previous month's pace, Commerce Secretary Rahul Khullar said last week. Imports in the just-ended month rose 41.8% from a year earlier to $38.4 billion, which widened the trade deficit to $14.1 billion from $11.1 billion in July.

European stocks rose on Friday, 16 September 2011, as the region's finance ministers convened in Poland to consider new measures to fight the deepening euro-zone sovereign debt crisis. Key benchmark indices in UK, France and Germany were up by 0.84% to 1.78%.

US Treasury Secretary Timothy Geithner has also flown in for the two-day European Union finance ministers' meeting.

Investors will be looking for signs that policy makers are ready to take steps to ensure the implementation of the 21 July 2011 agreement by heads of state to enhance the power of the European Financial Stability Facility (EFSF) and provide a second bailout for Greece. A spat triggered by Finland's demand for collateral from Greece in return for Helsinki's participation in a second bailout program has raised tensions. Moreover, uncertainty over Greece's ability to meet deficit criteria needed to secure its next round of funding under its bailout has stoked fears of a potential near-term default.

Ministers are expected to further discuss the possibility of developing a euro bond that would be issued collectively by the euro zone. Such a move would lower borrowing costs for weaker euro members, but would likely raise borrowing costs for stronger members. Such an effort remains opposed by Germany.

Ministers are also expected to focus on efforts to prevent the spread of the crisis to Italy, the region's third-largest economy, and Spain, its fourth largest. The European Central Bank (ECB) has reluctantly but aggressively bought bonds since early August 2011 in an effort to drag down bond yields in both countries. The measures are widely seen as a temporary measure to keep borrowing costs from rising to unsustainable levels until national parliaments approve the proposed changes to the EFSF, which will allow the fund to buy bonds in the secondary market.

On Thursday, 15 September 2011, the ECB, in coordination with the US Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank, announced it would provide additional dollar liquidity to banks. The move was seen as pre-emptive effort to head off growing tensions in the interbank lending market tied to worries abut the exposure of banks, particularly in France, to Greek debt.

The decision followed a pledge made earlier in the week by Germany and France to support Greece as it struggles to cut its debt pile.

Asian stocks surged on Friday, 16 September 2011, with news of global central banks' plan to boost dollar liquidity in Europe, helping to alleviate concerns there about the prospect of another funding crisis. The key benchmark indices in China, Hong Kong, Indonesia, Singapore, Japan, South Korea and Taiwan rose by between 0.13% to 3.72%.

Trading in US index futures indicated that the Dow could fall 25 points at the opening of US stocks on Friday, 16 September 2011. US stocks rose for a fourth day on Thursday as coordinated central bank action calmed fears that Europe's financial sector was headed for a credit freeze due to the region's sovereign debt crisis. On the macro front, weekly US jobless claims hit their highest level since late June and a gauge of New York state factory activity contracted in September. Another report showed manufacturing activity in the Mid-Atlantic region contracted for a second month in a row.

The Federal Open Market Committee (FOMC) is scheduled to undertake a two-day policy review on US interest rates on 20 and 21 September 2011. It remains to be seen if the Federal Reserve announces further measures to revive the US economy. Among the options that the Fed may consider include another round of quantitative easing or QE3, the Operation Twist which is the purchase of long-term verses selling short-term bonds so as to lower long-term yields, and lowering the rate on excess reserves held by banks at the Fed in order to increase the monetary aggregates.