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“Life is a festival only to the wise.” Ralph Waldo Emerson.

Happy Janmashtami. The bull camp appears to have regained its winning ways just as the festive spirits are beginning to escalate here in India. The start promises to be good given the cheerful mood across the globe following encouraging reports on manufacturing output – first in China and then in the US. While people in India form human pyramids to reach a high-hanging pot of butter and break it, the bulls too will team up to help the Nifty break past 5500.

The crucial thing to watch out for is whether the Nifty can sustain above 5500. Just recently it crossed 5500 but failed to extend its ascent. Bulls are of course hoping this time things might be different. But, the precarious and uncertain global situation could continue to play spoilsport every now and then. All eyes are on Friday’s US monthly payroll data, which could swing the sentiment either ways, at least in the immediately short term. The fact that global data points are not consistent will make world markets that much more volatile.

Back home, the Government has revised GDP data (based on expenditures) at market prices to show even better growth. However, if the latest batch of reports are any indication, we could see some softening in India as well. The overall GDP number for FY11 will be fairly robust. The big challenge will be how to tackle an apparent slowdown in key regions like the US, China and euro-zone. Inflation of course continues to be a big issue, and the RBI is likely to continue hiking rates to try and contain it.

FIIs were net buyers of Rs3.59bn in the cash segment on Wednesday (provisionally), according to the NSE web site. Local funds were net buyers of Rs1.68bn. In the F&O segment, the foreign funds were net buyers at Rs6.82bn. FIIs were net buyers of Rs5.38bn in the cash segment on Tuesday. Mutual Funds were net sellers at Rs3.52bn on the same day.

Telecom shares might continue to hog limelight as they have received 3G spectrum from the Government. Auto stocks may also remain in the spotlight after reporting strong monthly sales. Companies with exposure to insurance could see some action as the new ULIP regime kicked off from Wednesday.

Reliance has increased its stake in EIH from 14.2% to 14.8%. Promoters of Bajaj Auto have hiked their stake in the company. TCS’ UK arm has bought Unisys Insurance Services, in lieu of which the company has received business worth £250mn for six years. Reliance Broadcast Network plans to raise Rs4bn through a preferential issue.

Compucom Software’s board will consider issue of preferential shares to promoters and others besides a QIP on Sept. 9. Unity Infraprojects has bagged a couple of projects from Maharashtra. Aegis Logistics’ Board has approved a stock split and plans to raise Rs1bn by way of preferential allotment or a QIP. NALCO is considering selling stake in its $3.9 billion aluminium project in Indonesia in lieu of acquiring equity in coal mines in the island country. JSW Energy has commissioned commercial operation of the first unit of 300 MW of the 1,200-MW (4×300 MW) thermal power project at Jaigad, Ratnagiri district of Maharashtra.

US stocks started September with a bang after a dismal August, as investors welcomed a surprising increase in manufacturing output at home and in China. In the process, Wall Street ignored slightly bearish reading on private payrolls, construction spending and weak auto sales.

The Dow Jones Industrial Average rose 254.75 points, or 2.5%, to 10,269.47, with all 30 of its components tallying gains.

The S&P 500 Index gained 30.96 points, or 3%, to 1,080.29, with the industrial and consumer-discretionary sectors pacing the rise among its 10 industry groups.

The Nasdaq Composite Index climbed 62.81 points, or 3%, to end at 2,176.84.

For every stock on the decline, six rose on the New York Stock Exchange, where 1.2 billion shares traded.

The major US indices had ended Tuesday’s session unchanged, closing out a lackluster August.

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

Currency trading volume around the world has hit $4 trillion a day, a 20% jump compared to 2007, said the Bank of International Settlement.

Oil futures for October delivery rose $2.08 to $74.03 a barrel.

Gold for December delivery fell $2.20 to $1,248.10 an ounce.

The yield on the 10-year Treasury note rose to 2.58% from 2.48% late on Tuesday.

The Institute for Supply Management reported that its index of factory activity rose to 56.3 last month from 55.5 the prior month. Economists were expecting the index to edge lower. Readings above 50 signal growth.

The manufacturing data boosted industrial names and companies in the materials sector.

Meanwhile, payroll processing firm ADP reported that employers cut 10,000 jobs in August. Economists were expecting private sector employers to add 13,000 jobs during the month, after adding 37,000 in July.

A separate report showed that planned job cuts plummeted to a 10-year low in August, as employers shed 34,768, down 17% from the previous month, according to outplacement firm Challenger, Gray & Christmas.

The reports come two days before the government’s monthly report on jobs and unemployment on Friday. Economists expect the government to report that the economy lost 120,000 jobs in August, after employers cut payrolls by 131,000 in July. The unemployment rate is expected to edge up to 9.6% from 9.5%.

Other reports on Wednesday included construction spending, which fell 1% in July, versus a forecasted 0.7% decline.

While the improvement in manufacturing allayed some concerns about the US economy, Wall Street remains vulnerable given the uncertain outlook for growth.

The focus could shift to jobs on Thursday morning when the government’s weekly report on initial claims for jobless benefits comes out. Investors will also absorb the latest readings on factory orders and pending home sales shortly after the market opens.

General Motors, Ford Motor and Toyota all reported disappointing sales, kicking off what is expected to be the worst August for industry-wide auto sales in 27 years. The drop in auto sales is partly a result of tough comparisons to the Cash for Clunkers program of last summer.

Shares of Burger King Holdings jumped 14%, following a report that the fast food chain is considering a possible sale to buyout firms. The Wall Street Journal reported that that private equity firms that have expressed interest in buying Burger King include Britain’s 3G Capital Group.

Apple’s stock was up 2.8% as the company held its annual music-themed special event. CEO Steve Jobs unveiled its newest range of iPods and advances in the iTunes music store.

Shares of BP climbed 3.7% as the oil giant said it has agreed to sell its interests in ethylene and polyethylene production in Malaysia to government-owned Petronas for $363 million in cash.

European stocks rallied on the back of positive data on manufacturing output in the US and China, assuaging some concerns on the ongoing economic recovery in the global economy.

The Stoxx Europe 600 index advanced 2.7% to end at 258.19 points.

The Institute for Supply Management (ISM) in the US reported that its manufacturing index rose to 56.3% in August from 55.5% in July. The data was better than expected, since economists had projected a decline.

China’s manufacturing activity expanded in August, according to two separate surveys released on Wednesday. Also, Australia’s economy grew more than expected in the second quarter.

The French CAC 40 index was the top gainer, surging 3.8% to 3,623.84. The UK’s FTSE 100 index rose 2.7% to 5,366.41. The benchmark indexes in Italy, Spain and Denmark all gained more than 3%. Sweden’s OMX Stockholm 30 index soared 3.7%.

Shares of French media and communications giant Vivendi surged after the group said its full-year earnings outlook has improved and its adjusted second-quarter earnings beat forecasts.

Cement producers in Europe got a boost after Cheuvreux upgraded the sector, lifting both Holcim and Lafarge to outperform from underperform. Shares of Holcim gained 3.2% in Zurich and those of Lafarge rallied 5.5% in Paris.

In Germany, shares of Heidelberg Cement jumped 5.9%, as Cheuvreux reiterated its outperform rating on the stock.

This post is shared on the moneyvidya blog by Dead Presidents. Please visit http://deadpresident.blogspot.com to see DP’s personal blog/website

Stocks may edge higher at the onset of the trading session, extending Tuesday’s (31 August 2010)’s strong intraday rebound. Data showing resumption of buying by foreign funds and firm Asian markets, will support share prices. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could gain 35.50 points at the opening bell.

Auto and cement stocks will be in focus as companies start unveiling sales data for the month just gone by. HSBC will release manufacturing Purchasing Manager’s Index (PMI) for August 2010 today, 1 September 2010. The manufacturing PMI had edged up to 57.6 in July 2010 from 57.3 in June 2010, when it slipped from a multi-year high.

HSBC may also unveil the services sector PMI for August 2010 this week. The index, which shows business activity in the services sector, had eased to 61.7 in July 2010 from 64 in June 2010.

Foreign funds bought shares worth a net Rs 287.88 crore on Tuesday, 31 August 2010, as per the provisional data released by the stock exchanges. Domestic funds dumped shares worth a net Rs 595.33 crore on that day.

The economy grew at a robust pace in the first quarter, the latest data showed. The gross domestic product (GDP) grew 8.8% in Q1 June 2010. The manufacturing sector grew 12.4%, mining sector expanded 8.9%, construction sector grew 7.5%, and farm sector expanded at 2.8%. Output in the combined sectors — trade, hotels, transport and communication, jumped 12.2%.

The economy could grow better than 8.5% in the fiscal year that ends in March 2011, Planning Commission deputy chairman Montek Singh Ahluwalia said on Tuesday, 31 August 2010. Government spending is expected to pick up after the June-September monsoon rains, Ahluwalia said.

Asian stocks edged higher on Wednesday, 1 September 2010, on positive economic data in US and China. The key benchmark indices in Hong Kong, China, South Korea, Indonesia, Taiwan, Singapore and Japan were up by between 0.26% to 1.3%.

China’s official purchasing managers’ index rose to 51.7 in August from 51.2 in July, according to figures released Wednesday by the China Federation of Logistics and Purchasing. The reading was a tad lower than market expectations. A reading over 50 indicates an increase in manufacturing activity.

This post is shared on the moneyvidya blog by Dead Presidents. Please visit http://deadpresident.blogspot.com  to see DP’s personal blog/website.

In the fall of 2008 when the Sub-Prime Mortgage Crisis erupted in full fury, Central Banks around the world united in a concerted effort to fight off a complete economic meltdown by slashing short-term interest rates to historically low levels.  This swift and decisive action by Central Banks worked.  A complete meltdown was in fact subverted, and by the Spring of 2009, the global recession hit a bottom and economic growth slowly returned.  Today, nearly 16 months after the global economy bottomed out, the economic recovery is beginning to hit major resistance in several parts of the world.  Although every economy around the world entered the 2008 Crisis, each economy is emerging from it at a different velocity.

United States

In the U.S., Federal Reserve Chairman Ben Bernanke has recently stated that the Fed may introduce further quantitative easing measures in order to stimulate a very weak economic recovery.  Key economic data out of the U.S. throughout the months of June and July have confirmed that the U.S. recovery is slowing significantly.  Although a historically unprecedented supply of U.S. Dollars has been injected into the economy over the last 2 years, inflation is not a threat.  In fact, recent economic data is confirming that deflation is more of threat than inflation.  Due to this very stagnant recovery, Mr. Bernanke and the Fed are seriously considering further quantitative easing measures, and they plan to keep interest rates at exceptionally low levels for an extended period of time.

EuroZone

European Central Bank President Jean-Claude Trichet is standing in the exact opposite camp than Mr. Bernanke.  President Trichet recently wrote an article for the Financial Times in which he loudly proclaimed that now is the time for all industrialized nations to begin tightening monetary policy by introducing fiscal austerity measures.  This, of course, is in direct contradiction to Mr. Bernanke’s words.  President Trichet and the ECB have already introduced very strict austerity measures in several EuroZone countries, and they are expected to begin speaking about an exit plan from current accommodative levels.  This topic is being highly debated every day in financial publications all around the world.  Many expert economists are concerned that if austerity measures are forced upon an economy before economic recovery is self-sustaining that it could pre-empt a full recovery and actually pull an already weakened economy back into recession.  President Trichet apparently is not concerned that this is possible as he and his board members appear to moving forward with further fiscal tightening.

U.K.

England is the only major industrialized nation with extremely low interest rates that is currently facing strong inflationary threats.  U.K. inflationary data has been beyond target levels for several months, and this has caused Andrew Sentance, a Bank of England Board Member, to vote for an interest rate hike at two consecutive meetings.  Sentance is the first Board Member out of the U.S., EuroZone, and U.K. to vote for an interest rate hike since the outset of the Crisis in 2008.  The problem with an interest rate hike in the U.K. is that the recovery is definitely not self-sustaining.  Thus, Governor Mervyn King has been very dovish concerning the U.K. recovery and has stated recently that England has a long way to go for a full economic recovery.

Thus, we have the U.S. in the far camp of loose policy, the EuroZone in the far opposite camp of tight policy, and the U.K. in the middle.  These opposing views concerning monetary policy will, undoubtedly, continue to cause very volatile and strong currency movements which will be reflected on a forex platform.  Whichever Central Bank leader proves to be right in time, could lead his economy out of the recession well ahead of the others.

TV Channels blaring that India’s inflation rate slipped into the negative for the first time in 30 odd years. What does it really mean? It really means nothing to the common man!

Prices are still soaring or at least stable at their peak - and why is this not reflected in the Inflation numbers?

This is because India calculates Inflation differently than other countries

• India uses something called the Wholesale Price Index (WPI) to calculate and then decide the inflation rate in the economy.
• Most other developed and developing countries use the Consumer Price Index (CPI) to calculate inflation.

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Recently, there was a news story about 70+ cricketers abandoning the ICL 20/20 league and going back to the fold of BCCI (or IPL?). I read this news on at least 15+ sites (news sites and blogs). In all these publications, I could not find any blog post or news report that points to the fact that ICL losing sheen is lost opportunity from the perspective of economy, opportunity, employment, and many more. Perhaps, it reflects the state of our media. There is more focus on re-running the same news again and again. It’s a “me too world”, but we forget that in “me too world”, we as individuals also become “one of those”…..

I believe that ICL losing steam is a great lost opportunity. This was an opportunity that would have unleashed the economic power of sport to the wider mass of India’s population. (more…)

An asset or investment for which the future return is know with certainty and therefore which carries no risk. Theoretically there is no such thing as a totally risk free asset, however many government securities and deposits with financially secure banks are taken as the benchmark for the rate of return on a risk free asset

Although domestic news remains dominated by the election, a brief look at the overseas news media shows that there is a new global story on everyone’s minds. Swine flu is admittedly not as dramatic a sounding a story as some. However, it has many people very worried and is already impacting global markets.

Currently cases of the new strain of Swine flu have been confirmed in Mexico, the US, Canada, Israel, New Zealand Spain and the UK. Also there are suspected cases under investigation in Korea and many countries in South America and Continental Europe. Although approximately 150 people have died so far, the World Health Organisation (WHO) has stated publically that this has the potential to become a world-wide pandemic. 

Like Avian flu before it, this may turn out to be an exaggerated threat. The scale of the potential disaster is however enormous and markets are, as the are prone to do, pricing in some of the downside. Global markets corrected yesterday and today, airlines and travel companies being amongst those hit the hardest. 

The social disruption witnessed in Mexico has highlighted not only the personal but also the potential economic costs of the disease. Mobility of people has to be restricted to prevent the spread of the virus and many activities simply grind to a halt. The potential cost of large scale infection and therefore immobilisation in the US would be serious for the global economy and this does not consider the real possibility of an outbreak in India itself. 

With more countries reporting cases of Swine flu by the hour, global market sentiment has reversed and fear is showing signs of return. This could well be the trigger for a serious correction of the rally that indices have seen in recent weeks, particularly if the pace at which the disease is spreading continues to grow.

How long the current rally will continue and whether this really is the start of the next bull run are questions which everyone is mulling over. What we should also be asking is what changed in the last 5 weeks to justifiy a 30% rally?

For all the talk of global cues and increased risk appetite, no one has convinced me that this rapid advance  isn’t irrational and therefore likely to correct itself. Now obviously this is part of a global rally just like it was a global crash. This just begs the question of whether the the global rally is sustainable or can be justified logically? 

I think not and I say  this because 18 months of absorbing bad news seems to have made markets all over the world, and particularly in India, immune to it. Bad news is no longer newsworthy but good news is trumpetted from the rooftops.  For example; March YoY export decline was the worst on record (India), motors sales last month were the worst on record (UK), recent unemployment figures were the worst for 6 years (US). All these stories demonstrate a continuing global decline but had minimal impact on the markets. However, the same markets rallied when the G20 re-announced existing IMF funding plans.

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Those people with a closer ear to the ground may have got wind of it but I was quite shocked to read that the RBI has been printing so much money, approximatlely 1.5 lakh cr.  At 45% of the 2009FYE fiscal deficit the action certainly solves, or helps to solve, one problem. Unfortnately creating so much cash out of thin air undoubtedly creates problems as well.

It is easy to see why the action was taken. Recent stimuls packages and other subsidy programs have put a massive strain on the government budget. There is increasing concern about the markets capacity to absorb large issues of government debt without crowding out interest rates. Tax rises are obviously out of the question. So where was the Centre supposed to get money from other than printing it?

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