Wednesday, October 15, 2008
World Daily Markets Briefing
| by: ADVFN Newsdesk Forex Sterling rises as UK bailout cheered, data brushed off LONDON - Sterling rose against a broadly weaker dollar on Tuesday, extending its recovery from five-year lows as traders cheered a plan by the UK government to inject 37 billion pounds into the country's ailing banks. The pound climbed on the view the UK was taking charge in diffusing the global credit crisis, and with market focus fixed on saving the financial system from meltdown, traders largely brushed off a big jump in consumer prices to a 16-year high. UK figures on Tuesday showed the CPI rose 5.2 percent on the year in September, outstripping expectations for 5.0 percent and jumping after a 4.7 percent rise in the previous month. Still, Bank of England policymakers had anticipated the rise and while price growth may start to peter out, the data did little to convince investors that more interest rate cuts are needed to prop up the economy. "(Inflation at) 5.2 percent year-on-year is likely to represent the peak and the trend will be steadily down from here," said Alan Clarke, economist at BNP Paribas. "Overall, this is unlikely to deter the MPC from cutting interest rates again next month ... Moreover, the prospects for inflation over the medium term have diminished significantly in light of the worsening outlook for growth." Deterioration in the UK economy was underlined by Royal Institution of Chartered Surveyors data showing the decline in UK house prices accelerated in September and sales fell to their lowest level in at least 30 years, indicating a further deterioration in the housing market. Meanwhile, retail sales fell for a fourth straight month, offering further evidence the UK economy is sliding into recession and keeping expectations high that the Bank of England will have to continue cutting interest rates. Sterling climbed roughly 1.1 percent to a session high of $1.7598, extending its recovery from $1.6803 touched according to Reuters data on Friday, its weakest since late 2003. A climb in the euro against the dollar was helping to boost the pound's rally against the U.S. currency, traders said. Sterling traders brushed off Tuesday's weak economic figures, which also included a government reading that showed house prices in Britain fell at an annual 3.4 percent in August, which added to the argument for more rate cuts. The BoE last week joined other major central banks around the world in delivering a 50 basis point rate cut to help deal with the banking crisis, a move that took UK base rates to 4.5 percent. A Reuters poll taken after the coordinated cut showed most economists expect the BoE to cut rates by an additional 50 basis points by year-end US Stocks at a Glance US STOCKS-Wall St jumps after bank rescue plan NEW YORK - U.S. stocks gained more than 2 percent on Tuesday after the Treasury Department said it would pump $250 billion into major banks, easing fears about stability in the U.S. financial system. The Dow Jones industrial average climbed 354.51 points, or 3.78 percent, to 9,742.12. The Standard & Poor's 500 Index was up 33.03 points, or 3.29 percent, at 1,036.38. The Nasdaq Composite Index gained 50.52 points, or 2.74 percent, at 1,894.77. HEADLINE STOCKS-Some U.S. stocks watch on Oct 14 Tuesday: PEPSICO INC PepsiCo reported quarterly profit that missed the Street's expectations, as it was hurt by disappointing U.S. soft drink sales. Shares of Pepsi fell 2.1 percent to $60.45 in pre-market action. JOHNSON & JOHNSON Johnson & Johnson reported third-quarter earnings that beat expectations, as profit was fueled by strong sales of consumer products and medical devices. Shares of the company rose 3.7 percent before the opening bell to $64.99. Intel The world's biggest chip maker is expected to report third-quarter results later on Tuesday. Intel closed at $16.99 on Monday. BANK OF AMERICA WELLS FARGO & CO JPMORGAN CHASE BANK OF NEW YORK MELLON CORP STATE STREET MERRILL LYNCH CITIGROUP GOLDMAN SACHS MORGAN STANLEY Shares of major U.S. banks rose before the bell on news that the U.S. government will directly inject capital into financial institutions to help thaw frozen credit markets. MACROVISION SOLUTIONS CORP Macrovision said late on Monday that it had agreed to sell its TV Guide Magazine to private-equity firm OpenGate Capital. The terms of the deal, which is expected to close Dec. 1, were not disclosed. Shares of Macrovision closed at $13.67 on the Nasdaq. RACKABLE SYSTEMS INC Rackable Systems, which provides servers and data-storage products, forecast a surprise 2008 loss and cut its revenue outlook for the period, as it was hurt by a slowdown in corporate purchasing due to a weak economy. Rackable closed at $8.74. Europe share European shares rise early led by banks, energy FRANKFURT - European shares rallied for a second day on Tuesday, following robust gains for U.S. and Asian equities, as investors cheered government and central bank measures designed to end the financial crisis. By 0900 GMT, the pan-European FTSEurofirst 300 index was up 4.2 percent at 976.96 points, adding to its biggest one-day percentage rise on record -- 10.1 percent -- on Monday. In points terms, the benchmark index has now clawed back more than half of last week's losses. "Most of the recovery is probably behind us by now," said Thomas Gruener, equity strategist at LandesBank Berlin. UniCredit said the coordinated approach adopted by the euro zone countries to combat the credit crisis "is improving the extremely negative sentiment and relieving some pressure on the strongly oversold equity markets." Investors in Europe were also drawing comfort from a U.S., plan due to be unveiled at 1230 GMT and expected to entail $250 billion worth of capital injections into U.S. banks. About half of the total was likely to go to the top nine U.S. banks to get them lending to each other again, people familiar with the plan said. U.S. stocks posted double-digit gains overnight and Asian equity markets rallied strongly on Tuesday. Tokyo's Nikkei soared more than 14 percent, its biggest one-day gain ever. "Risk appetite of global investors is increasing gradually," Germany's Commerzbank said in a note. Hopes that the steps announced by governments and central banks to resuscitate comatose credit markets would prove sufficient to avoid a prolonged slump in economic growth pushed the crude oil price more than 3 percent higher towards $84 a barrel, helping energy stocks. Oil & gas shares were the top weighted gainers, with BP up 7 percent, Royal Dutch Shell up 6.5 percent, ENI up 7.5 percent and Total up 7 percent. Banks extended Monday's rally although the details, of many of the rescue packages remained unclear. "Near term, we view the combined response from European governments as a positive limiting systemic risk, and we now view liquidity driven defaults as less likely," JPMorgan said in a note on European banks. Ratings agency Moody's said "a substantial de-risking of the banking system is being achieved by providing significant capital and transferring banks' credit risk to their supporting governments for the period necessary to restore confidence and normal financial market operations". Shares in Deutsche Bank rose 11.5 percent, Barclays gained 11 percent and CS Group added 3 percent. "The response of policymakers to the global economic crisis over the weekend reassured the markets but concerns for a global recession remain," Marfin Analysis in Greece said. "We expect valuations to play a bigger role in investment decisions going forward," Marfin said in a note. UniCredit said the corporate earnings reporting season beginning in Europe would likely see many companies issuing "very muted guidance", confirming that the financial crisis was feeding through to the real economy. Shares in British confectionery giant Cadbury Plc rose 4.5 percent after it reported a 6 percent rise in third-quarter underlying sales and announced a further 580 job cuts to keep it on track to meet its annual sales and profit margin goals. Whitbread Britain's biggest hotel and restaurants operator, rose 3.3 percent after the company reported a first-half pretax profit ahead of expectations. Burberry also beat forecasts with a 13 percent rise in first-half revenue, but its shares fell 2.2 percent. Chief Financial Officer Stacey Cartwright told reporters that trading was extremely erratic and that it was difficult to forecast demand for the key Christmas trading period. Britain's FTSE 100 rose 4.3 percent, the French CAC 40 advanced 4.3 percent and Germany's DAX was up 3.9 percent. Asia at a Glance Hong Kong shares end higher on global bank rescue; properties outperform HONG KONG - Share prices closed higher, extending yesterday's over 10 pct gain, as governments across the world stepped up rescue of troubled banks to restore confidence in the financial system. Subtantial gains in Japan, whose benchmark index finished up 14.2 pct in its biggest ever one-day rise, and a 11 pct advance of the Dow Jones Industrial Average overnight provided cues for local investors but the market lost some of its momentum as mainland bourses ended weaker after early gains. Resources stocks were up after commodity prices rebounded overnight. The Hang Seng index closed up 520.72 points or 3.19 pct at 16,832.88, off a low of 16,615.01 and high of 17,141.05. Turnover was 81.66 bln hkd. Local property developers extended yesterday's strong gains, with the sectoral index surging 1,369.75 points or 8.13 pct to 18,223.72. Henderson Land jumped 2.25 hkd or 8.11 pct to 30.0, Sun Hung Kai climbed 7.6 hkd or 11.45 pct to 74.0, Hang Lung Properties gained 0.84 hkd or 5.01 pct at 17.6, Wharf was up 0.86 hkd or 4.77 pct at 18.9 and Cheung Kong up 4.1 hkd or 5.3 pct at 81.5. New World Development was up 0.30 hkd or 3.92 pct at 7.95 after reporting that its year to June net profit rose 124 pct from a year earlier to 9.67 bln hkd. Mainland financials posted strong gains on rumors that China may remove a business tax on the sector and on speculation that the nation's sovereign wealth fund will buy more bank shares. China Construction Bank gained 0.15 hkd or 3.57 pct at 4.35, ICBC climbed 0.13 hkd or 3.04 pct at 4.41, Bank of Communications rose 0.31 hkd or 5.05 pct at 6.45, Bank of China was up 0.09 hkd or 3.15 pct at 2.95 and China Merchants Bank jumped 1.64 hkd or 10.07 pct at 17.92. In the insurance sector, China Life was up 0.50 hkd or 1.92 pct at 26.5, while Ping An lost 1.70 hkd or 3.66 pct at 44.8. Local banks were mostly higher on hopes that the credit crunch will ease following moves by governments and central banks to pump in hundreds of billions of dollars into the financial system. Standard Chartered jumped 26.9 hkd or 18.29 pct at 174.0, HSBC was up 0.40 hkd or 0.35 pct at 114.9, Bank of East Asia was up 0.45 hkd or 2.08 pct at 22.10 and BOC Hong Kong gained 0.52 hkd or 4.23 pct at 12.82, while Hang Seng Bank lost 1.30 hkd or 1.09 pct at 117.7. Other blue chips were also higher, with China Mobile rising 2.15 hkd or 2.87 pct at 76.95, Hong Kong Exchanges gaining 2.5 hkd or 2.78 pct at 92.5 and Hutchison Whampoa up 4.10 hkd or 8.63 pct at 51.60. Resources stocks rebounded sharply higher after commodity prices rallied overnight. Upstream oil play CNOOC jumped 0.87 hkd or 13.81 pct to 7.17, oil refiner Sinopec gained 0.21 hkd or 3.72 pct at 5.86 and PetroChina -- which has both refining and production business -- rose 0.20 hkd or 2.99 pct at 6.9. Among other commodity plays, Chalco surged 0.29 hkd or 8.17 pct to 3.84, Angang Steel rose 0.13 hkd or 2.29 pct at 5.81, Jiangxi Copper jumped 0.61 hkd or 10.6 pct to 6.36 and China Shenhua jumped 1.82 hkd or 11.97 pct to 17.02. China consumption-related stocks also outperformed on hopes that Beijing will implement policies to boost domestic consumption amid signs of export weakness. The official Shanghai Securities News cited a central bank advisor as saying that China should boost domestic demand to offset the negative effects of the global financial turmoil. Denway Motors jumped 0.34 hkd or 19.77 pct at 2.06, Great Wall Motor surged 0.15 hkd or 6.88 pct at 2.33 and Dongfeng Motor rose 0.34 hkd or 14.91 pct to 2.62. Among other China consumption plays, electrical appliance retailer Gome Electrical was up 0.06 hkd or 4.0 pct at 1.56 and department store operator Parkson Retail rose 0.22 hkd or 2.36 pct to 9.56.The Hang Seng China Enterprises index ended up 352.03 points or 4.35 pct at 8,435.46. India's benchmark index, the Bombay Stock Exchange's Sensex, gave up around 386 points from the day's high, and closed 1.54 percent higher at 11,483.40. After a phenomenal loss in the last week, Indian shares recovered 9.18 percent in the first two trading sessions. The S&P CNX Nifty of the National Stock Exchange ended 27.95 points or 0.8 percent higher at 3,518.65. Metals Gold, precious metals higher as commodities rally LONDON - Gold and other precious metals rose on Tuesday as fresh plans to stabilise the banking sector sparked a rally in commodities, with platinum up more than 6 percent and silver climbing 4 percent. But analysts said gold could come under pressure in later trade if equities extended their gains, curbing interest in the precious metal as a haven from risk. Spot gold jumped 2 percent to a session high of $853.50 an ounce and settled back to $850.60/853.60 by 0942 GMT, against $830.80 in late New York trade on Monday. "Equities, and markets in general, are picking up, which is supporting commodities," said Standard Bank analyst Walter de Wet. "But if market sentiment improves, gold will struggle more and more to make higher ground, especially if the U.S. dollar remains at current levels or strengthens." Financial markets surged after news that the United States could pump $250 billion into U.S. banks in what Federal Reserve chairman Ben Bernanke called a comprehensive attempt to end the credit crisis. Both equities and commodities bounced after the announcement, with European shares rising more than 5 percent, tracking a sharp rise in Asian markets. On the currency markets, the dollar slipped against the euro as investors cheered European plans to stabilise floundering banks, after Britain, Germany and France announced plans to recapitalise their banking systems. A weaker greenback, as well as the recovery in equities and an improvement in investors' outlook for the global economy, sparked fresh buying of commodities, with oil and industrial metals all trading higher after heavy losses last week. The Reuters-Jefferies CRB index .CRB rose 3 percent to 298.70 on Monday, after scoring its lowest since January 2007 last week. Oil prices surged more than $2 a barrel on Tuesday, extending the previous session's 4 percent gains, as the governments' moves to rescue banks fuelled hopes a global recession could be averted. Rising crude prices boost interest in gold as a hedge against oil-led inflation, and enhance the appeal of commodities as an asset class. But analysts fear a recovery in the stock markets could pressure gold if it continues. The precious metal has held up well in recent weeks as stocks sold off, with investors buying gold as a haven from risk. That position may now be reversed. "The normal fundamental factors are again playing a stronger role, while flows out of the save haven might still be negative for gold," said investment bank Dresdner Kleinwort in a note. Among other precious metals, silver tracked gold higher to rise 4 percent at its session high of $11.10 an ounce. Silver, which is primarily viewed as an industrial metal, is also benefiting from hopes more stable markets could support demand. Spot silver was at $10.92/11.00 an ounce against $10.66 in late New York trade on Monday. Platinum and palladium, which are also largely traded as industrial metals, climbed, with platinum gaining more than 6 percent to its session high of $1,040 an ounce. Both metals have posted sharp losses in recent months as investors worried about the demand outlook for the car industry, which accounts for around half of total platinum demand. This could curb further gains, analysts say. "With real demand still under pressure, people might be a bit scared to take substantial long positions (in platinum)," said Standard Bank's de Wet. Spot platinum was at $1,021.50/1,041.50 an ounce, up from $978.50 in late New York trade on Monday, while palladium was at $202.50/210.50 an ounce against $196.50. Labels: ADVFN NewsDesk, Forex Analysis |
posted by Matbank at 12:22 AM
Time to start buying again!
(Article by Robin Swami - an ace blogger in www.moneycontrol.com)
Searching for direction in the market? This article is for you!
The fall in the Indian Equity Market is due to systemic global risk that is common to entire market and not specific to Indian Market. This has happened due to financial system instability caused or exacerbated by idiosyncratic events or conditions in financial intermediaries elsewhere (read US and Europe). Now that the growth in these developed economies have tappered greatly, the Emerging Markets will feel only ripple effects, which will however be compensated by domestic demand. Therefore, if both developed and emerging markets have fallen propotionately, the emerging markets, with their relatively higher growth rate, should send buy signals much sooner.
Out of these Emerging Markets India has reached the point where one can press BUY button and GO LONG. Now, I will elucidate the reasons. Indian GDP rate "may" fall marginally, but it will still remain the second fastest growing major economy. The dollar rise will make exports competitive once again. The negative effects of dollar rise will be adjusted by the falling crude price. As I mentioned earlier, the fall globally has been initiated by the over ambitious finacial players. The Indian finacial system is one of the most robust in the world. The government and RBI have shown commendable speed and sense of responsibility by taking timely monetary and fiscal measures like CRR cut etc. (If sources are to be believed, more are on cards – something like a mini budget). The pay commisssion and loan waiver will further fuel demand.
I would say, for India, it has been a bear market within a long term bull run (extending till 2040) caused by external factors beyond its control. This is definitely reason for Indian investor to be cheerful and look for buying opportunities, whenever they apear.
I consider that Indian market is at its bottom or very close to it. At this point I would like to bring in a fact which bring out that India is already over sold. We all know that the US market is close to recession. But legendary investor Warren Buffet has called BUY in the US equities. These are some of his famous words which he uttered on 17th october 2008. "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.But fears regarding the long-term prosperity of the nation's many sound companies make no sense," he said. Buffett said major companies would suffer earnings hiccups, but added they "will be setting new profit records five, 10 and 20 years from now."
If it is so for the US economy how much more true for an economy which is the emerging growth engine of the world?
It is time for us to stop looking at global indices for cues and start picking up equities from Indian bourses. The universe of stocks has become large. But I would recommend investors to buy large cap stocks with strong fundamentals. The following are my recommendations:-
Reliance Industries
ONGC
SBI
Infosys Tech
L&T
Reliance Com
Sail
Short term investors can look for 20% return (7-15 days). If you can hold it till December, expect close to 40% returns. This level I believe is close to true value. If you hold for 8-12 months, then you are likely to get returns close to 100%
True value of sensex is close to 14000. I used to talk about growth premium, which India truly deserves. If you consider this then the value is 17000. This level may be achieved in 8-12 months. But I strongly feel that sensex will very soon revert to 12000 levels. There will be very strong resistance at 10000 in downside(similar to the one we had on the upside).
It is rumored that a US based billionaire investor has heavily initiated long postions. If you (Indian Retail Investors) have not sold your stocks so far, please do not make the mistake of selling them now. If you have cash, start accumulating and building your portfolio in a gradual manner. 3-4 years down the line we may see levels of 30,000.
Happy Investing Folks! Cheers, finally bottom is in sight!!