Posts Tagged ‘PMI’

Weekly Update 13th – 17th December 2010

The fall in the domestic markets in the week gone by was really painful. The fall was seen across the board; both mid and small size company stocks were heavily punished. SEBI probed in some companies for price rigging reignited the concerns that there may be some cases which are yet to come.

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On the global front, thiswas the week when most of the major developed markets along with the emerging economies closed in positive. The disconnect reveals that overhand in the markets was more related to domestic issues only.U.S. economic data is continuing to point out that environment over there is improving. A consumer sentiment that reflects the strength of consumer spending rose six months high to 74.2 in the first half of December from 71.6 at the end of November.

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U.S. trade deficit in October shrank more that expected to $38.7 billion from a revised $44.6 billion shortfall the month before. Further more, the expected continuance of Bush tax for next two years which is likely to be cleared by U.S. senate in next two weeks will also help in improving sentiments. Japanese economy saw an annualized expansion of 4.5 percent for the quarter ended 30th September against expectations of 4.1 percent. In order to address inflationary pressures in the economy, China once again raised the reserve requirements for the third time in five weeks by 50 bps.

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The recent move takes reserve ratios requirement now to18.5 percent for the biggest banks. Chinese leaders have also indicated that the nation will shift to a tighter, “prudent” monetary policy for next year. Consumer and producer price index rose to 5.1 percent and 6.1 percent respectively for the month of November as against the expectation of 4.7 and 5.1 percent respectively. Moving ahead, we believe that the concerns pertaining to Indian Industrial growth and in turn overall growth of the economy would not be there after seeing the 10.8 percent growth in IIP for the month of October as compared to 4.4 percent last month. Moreover,we also believe that even for the month of November we could see the Industrial growth picking up close to 12 percent.

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The indicators like car sales growth of 20 percent,commercial vehicle sales growing by more than 18 percent and HSBC Manufacturing PMI rising to 58.4 in November from 57.2 in previous month give support to our belief.In the forthcoming days we believe we may continue to see bouts of volatility in the markets as nervousness is still there. In short term now we think the advance tax figures would help the markets in gauging the profitability of India Inc. as the result season is approaching. Nifty has strong support between 5900-5840 and Sensex between 19400-19000.In commodity section, bullions counter may trade on volatile path due to lack of clear direction on risk sentiment. Base metal counter will take cues from economic data from US. Crude oil further movement will depend on the demand from China, OECD countries and weather conditions in Europe.

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OPEC members are planning to increase output over the coming months. Copper will continue to make fresh high in near term as the global deficit will push its prices to new levels. The outcome of Central Economic Work Conference in China will further guide the movement in metal counter. In agro pack guar complex may remain on weaker side amid weak export demand. Jeera and peeper maytad lower on selling pressure on news of re-sowing. Mentha oil can tumble lower onarrivals. Soya will remain range tracking mixed movement in CBOT. CPO may trade on higher side tracking firm Malaysian CPO.

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Weekly Update 6th-10th September 2010

Stocks rallied this week as the manufacturing in U.S. and China expanded at faster pace reassured investors about the economic recovery. The ISM manufacturing increased to 56.3 for a sizable eight tenths gain from July.

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China’s PMI rose to 51.7 from 51.2, signaling that the economy’s slowdown is stabilizing. In U.S. payroll jobs in August slipped 54,000 after falling a revised 54,000 in July for the third straight month but there was a moderate gain in the private sector.

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Government jobs dropped 121,000 while private non farm employment continued to rise, gaining 67,000 in August. Also on the positive side, wages were up. President Barack Obama said there is “no quick fix” for the economy and will unveil new ideas next week to boost growth and hiring. Chief of Bank of Japan said that the bank is ready to take more actions after giving 10 trillion yen ($118 billion) to a bank loan facility and the nation’s Prime Minister said that the Japanese government is ready to take “bold” action on the currency if necessary which is threatening its exporters.

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India being second biggest emerging economy showed yet another strong performance in terms of growth. The economy saw an expansion of 8.8 percent in the first quarter ending June, the fastest pace in two and a half years giving an imprint of strong underlying domestic demand. Trade data showed that exports rose for the ninth straight month in July 2010, growing an annual 13.2% to $16.24 billion and Imports for the month rose 34.3% to $29.17 billion, widening the country’s trade deficit to $12.93 billion. Exports during the April-July period rose 30.1% to $68.63 billion.

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Being a short trading week, stock specific activity is expected to rule in the market as investors would like to see Industrial Production numbers for the month of July scheduled to be released on Friday, 10th September. In line with rebound in the global indices, Indian market too witnessed sharp bounce after testing the major support zone of 5350 levels. As expected, dollar index traded with the negative bias throughout the week and likely to be sideways to negative bias in the coming days as well. Keeping in the mind all the cues, one may stay long with trailing stop loss strategy or book partial profit on rally to avoid any notional loss. Nifty has support between 5400-5350 and Sensex between 17800-17600 levels.

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Currency play together with some improvements in economic releases invited bulls in industrial metals while energy pack could not retort positively. Bullions continued to rock on investment demand. Now there is a state of confusion on the subject of the further trend in commodities. Dollar index has taken the crucial support of 82 and moved northward. Base metals gave knee jerk reaction on weak unemployment data of US at the same time as precious metals are trading near multi week high. Various interest rate meeting may inject volatility in commodities. Buying is still intact but upside appears to be limited in short run in base metals. Furthermore, base metals and crude oil are moving in a different direction that is a cause of concern for the market players. It is creating an ambiguous situation and indicating unclear trend of commodities.

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Services Sector Slows Down for Second Consecutive Month in August

India’s services sector slowed down for a second consecutive month in August as the pace of expansion comes down from a record high level seen in June, as reflected in the HSBC Services Purchasing Managers’ Index (PMI) based on a survey of 400 firms. However, even the current reading on the PMI is very robust and consistent with a fast expanding economy.

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The headline seasonally adjusted HSBC Business Activity Index stood at 59.3 in August, falling slightly from 61.7 in July. This was the second successive decrease in the headline figure, even though it continued to signal a very sharp pace of expansion in the country’s service sector.

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Earlier the manufacturing data too had shown some slowdown in expansion in August, although the absolute figure there too remained strong. Overall, the HSBC India Composite Output Index for the month of August stood at 60.3, down from 61.9 in July. However, the latest reading continues to remain consistent with a very rapid pace of growth in the overall economy.

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Looking at the sub-indices, the index of incoming new business received by the service sector firms increased markedly during the month, boosted by the ongoing improvement in global economic conditions as well as strong domestic demand. The survey also revealed that the latest growth was faster than that posted in July. All the six sectors monitored under the survey indicated that new business had risen during the month.

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Further, despite the sharp rise in output recorded during the month, backlogs of work with the service sector companies continued to rise in August. It clearly indicates increasing capacity pressures being faced by the economy. A similar finding was also revealed by the manufacturing PMI, thus indicating that overall economy was under capacity pressures and growth could slow down until the pace of investment picks up.

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In a related inference, the August data signalled a marked increase in input costs faced by Indian service companies. This is an expected development when capacities come under pressure. The latest rise in input prices was driven by higher purchasing costs and wage inflation. The survey indicated that while the rise in costs in August was marginally lower than the previous month, it was nonetheless strong in the context of the historical data.

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Overall, the services sector as well composite business activity seems to be doing pretty well for now. The recent slowdown reflects that capacities are getting filled and therefore pressures on cost side are building up. Commenting on the India Services PMI survey, Frederic Neumann, Co-Head of Asian Economics Research at HSBC said, “Service sector activity, which in India accounts for the bulk of economic output, slowed a little last month. But, monetary officials can hardly afford to relax their guard. Growth remains strong, and there are few signs that input and output price pressures are letting up meaningfully. Both employment generation and outstanding business remain consistent with a robust, ongoing expansion.”

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CRUDE OIL ECONOMIC RECOVERY IS HELPING CRUDE RALLY

Crude oil, the life blood of the economy, is rallying to highest levelssince 2008 highs, indicating that the global economy is back on track which is also supported by rise in key global equities markets. In the first quarter of 2010, front-month NYMEX crude prices rose 5.6%.

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Crude oil prices have negated the hike in dollar index and crude stockpiles in US. Traders have placed fresh bets on a rise in demand affirming a faster pace of economic recovery in the US. Crude prices have more than doubled since dropped below $35 late in 2008, but still significantly lower as compared to the record high neaar $147 a barrel in july 2008.

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Positive economic indicators of US like PMI, home sales and employment data are showing that economic recovery is back on track and that will increase fuel consumption. Data showing an unexpected increase in pending home sales and a survey result indicating service sector growth added to investors’ confidence in the US economy .

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The institute of supply management’s non-manufacturing index rose to 55.4 in the month from 53.0 in february, sharper than economists expectation for a modest increase to 53.6.

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A report from the National Association of Realtors the pending home sales index rose 8.2% to 97.6 in february,  from a downwardly revised 90.2 in the previous month, countering consensus expectations for a 51 decline.

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According to EIA “Projected economic growth this year is higher in this forecast, with U.S. real GDP growing by 208% and world oil consumption weighted real GDP growing by 3.4%”. Given expected oil demand growth in 2010, oil prices should continue to firm despite expected increase in both non- OPEC and OPEC production this year.

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According to EIA” projected growth in domestic crude oil production is more moderate in 2010, increasing by about 210,000 bbl/d” Crude oil future outlook looks promising as it is driven mainly with global economic recovery. And summer demand in US will also keep the prices well supported.