Buyers should outnumber

For Mumbai Stocks, buyers should continue to outnumber today. The Government continues to clip the wings of expending bureaucrats. Less Government with efficient governance should see efficiency gains leading to fiscal deficit reduction. With assertive policies, India growth story seems to be attractive today.
It seems to be a day to hold. Cashing in on expectations can wait for another day.
Gold looks south trending.
Europe might get a breather. 

QE3 bond purchases over

Fed keeps low interest rate ; as accomodative policy continues. Our views are:
Market expectations met.
Good news for Wall Street.
great news for all markets.
Euro may strengthen.
Gold and oil  may decline.
USA recovery on track. 

A Requiem for QE: Roses in December

Seven years of Quantitative Easing will phase out this evening. For long years and with $4 trillion plus, the Fed kept the World going. Bold generals of an inspiring Monetary policy which reminded one of John Maynard Keynes.
The stimulus program kept the USA, the world's largest economy and the others afloat.

There are fears that gnaw what happens when the Fed is quiet and the price curve moves up. US market seems confident at least on the retail front.
Fed took us through the Economic Winter. "Christmas comes at Winter time ; God Gave us memory so that we may have Roses in December." (Anonymous)

ECB and Bundesbank need to take a leaf out of the Fed's book on  how to manage a potential deflation. The other route is to go the Japanese way. 

Money Laundering : Western Banks thrive at cost of emerging economies?

The list of Indian black money submitted to the Supreme Court (of 627 names) apparently is of account holders of the HSBC . That calls for some reflection on corporate and transnational ambiguity.

It is interesting to note that HSBC (Mexico related) reportedly was involved in ignoring possible money laundering transactions pertaining to non monitored wire transfers and foreign currency. It also violated sanctions against governments of Iran, Libya, Sudan, Cuba. HSBC paid up nearly $1.9 billion  in 2013 towards these charges in a compromise deal with the investigators.

Where are the Basel Committee's (BIS) KYC norms? Where are the corporate governance norms so much preached about? If you are a transnational bank and you publicize corporate social responsibility, does it give you a right to abet crime?

Regulators in the West indeed seem to be soft on these banks. When corrupt regimes of emerging economies join powerful and deceitful bankers, truth is smothered!!!

Mumbai Stock Exchange may not be so euphoric today...

FIIs may not be so keen to enter as the US Fed briefing is expected by late evening IST.  Earnings of corporates abroad have been good for FIIs to redeploy.

The role of the corporates in possible money laundering blacklists seeks invitation of regulatory action.  Even if delayed , justice may  catch up. The speculative urges on big names which are on rumor rounds may hold back to caution.

India's banks NPAs seem to worry a bit, if European stress tests are a standard to go by.

The RBI is still waiting for an interest rate signal The RBI acts more like the German Bundesbank than the Fed in its obsession with inflation stance. Good for disinflation; not so good for growth.

Gold may not rise today...

Europe is in the throes of a probable deflation. ECB is halting and slow.
Fed is at the end of a stimulus curve.
Oil is down.Commodity prices do have some correlation.
Anxiety has ebbed with consumer confidence gaining in the USA as job seekers perceive greater employment prospects.  Market has already factored in a soft Fed.
Chinese economy has to emerge stronger to demand.
It may just about hold. 

All good on the Eastern front...

Asia opened good, buoyed by US consumer confidence.
Fed should continue to be the nice , understanding friend it has always been. Living up to rational expectations of the investor!
Indian markets should follow Asia but then the big thing to watch is involvement of big Indian corporates in moneylaundering schemes. (called black money in local parlance) The list of names to be placed before the Supreme Court is  rumored to include big corporate entities. As corporate governance norms are largely 'made to order' in India, it is possible that FIIs might sell off at the initial rise to exit from those corporates rumoured to be having illegal accounts abroad. Regulators continue to be paper tigers! Markets factor that aspect too.

USA economy is on course...

With consumer confidence rising to highest levels since 2007 October, US residents seem  happy with job prospects. That puts US growth expectations back on track. The durable orders were rather attributable to managerial ratchet effect. (Managers are more conservative as they stare at recession and take time to deploy resources in probably adverse  economic circumstances. 

US durables' data not so benign...

One hope was that USA was picking up. Now that companies seem circumspect to place orders, oil will fall further, in all likelihood.
Gold may improve marginally but nothing of a flight into may occur.
Dollar holds the key for all emerging economies.
Sweden cut its interest rate to zero. leading to a depreciation of its currency against the dollar.
ECB's chief economist accepted that momentum in euro-zone is weakening.
IMF fears ('high probability') deflation in Europe. So USA and dollar are still perhaps the best bet.

There is cause for concern. markets cannot live on hope alone...

ECB is it putting its act together?

Finally, we have news of ECB  in action. We see efforts to depreciate the euro by lowering interest rates and compelling an exit from the currency. That should the European industry good.
We also hear of asset expansion by ECB; bold moves from a conservative central banking institution which has to take on board 18 national interests!
However, ECB  has to be aggressive ; a few billions may not suffice ; if it hesitates, it might affect Europe and global markets. 

ECB bond buying is hope of coordinated central banking action...

ECB is reportedly on to  market liquidity infusion efforts. That should be good news (even if it is at rather early  stages).  Coupled with the Fed move expected, there is hope of coordinated central banking action now. This should be positive for global markets.

One impact of falling oil prices is the impact it will have on economies like Nigeria. There is pressure on its currency and economy. Given that it has political problems, it remains vulnerable. 

Asian and Europeans optimistic...

As the global markets expect the Fed to continue to lead (where perhaps ECB could have helped more) the players in Asia and Europeans are optimistic of a soft Fed.

Emerging economies would heave a sigh of relief that current situations do not immediately permit Fed to move up rates.

Markets are seeking some positive clues to parking huge liquidity. However, by the time Fed communicates, the market would have factored a soft approach. What happens then?

Indian Banks :Buyer Beware!

The leadership issue in state run Indian banks may not be set right by  fiddling with the selection procedure at the top. There is already a screening procedure at almost every alternate stage which indeed looks like an assessment centre at least on paper. So tinkering with the selection procedure would only slow down decision making.

With double digit NPA figures prophesied by the knowledgeable, (all stressed: those restructured included) banks' bottom lines  will be under stress. Indian banks are perhaps over-regulated and under-performing.

With huge vacancies coming up, owing to retirement, and with a strong government at the centre,  it might be a good time to restructure banks. Leadership, however,  is lagging behind. Until such private sector led restructuring occurs,

Indian banks , are they good avenues? 

Gold headed south again

As the market awaits Fed news, gold is headed south. As oil falls, middle east markets will be affected and purchase of gold will slow down. With Indian regulators catching up on errant gold dealers indulging in possible laundering, buyers will be fewer in number. With the US dollar likely to strengthen , gold sellers may switch for the day. 

New York Flat; Float today...

As we wait for Fed's directions, we can only float again... there is nothing in the data which augurs 'bullish well'.  Housing, (which has most multiplier), contracts were lower than anticipated; services sector too grew less than expected (where the modern day jobs are) and manufacturing did not have much to offer. Twitter performed better than expected but gave out a possibility of a slow down. Fears of  low energy prices kept the Dow on restraint showing US oil related companies are hit too.

The most worrying is a news that indicates that  company earnings may have outrun real GDP growth:  ($11 trillion added on to S & P values) as real sector growth does not measure up.
This indicates that the world's rich and powerful may be bidding on sentiments rather than on real growth. More than half the world slowing down, a bull run on the stock markets may not seem to last.

From my window as I see this morning:

• Sellers should exceed buyers for gold; oil;
• Dollar may strengthen on bouts of uncertainty; 
• India stocks may see falls with optimists trying to talk  it high;
• Fear of regulatory action on big companies may see FIIs exit scrips ;
• Europe may be  flat ahead of Fed
• and US awaits Fed.

So float today. Do not swim.  
We shall await the Fed's decision. Someone has to lead. 

jaynayar@gmail.com

A Tale of 2 Emerging Economies: Brazil & India

Brazil decided to  travel left of center.
India chose to travel right of center.
Brazil has to reassure markets, and Brazil might be sold off for a few sessions unless there are strong statements.
India, post election looks a winner. With the reforms back slowly though, on course, India is sought after by other economies as a potential growth area.
Brazil will face foreign investors exiting. If Mexico (1994) is an example, the nationals will leave before the foreigners!. Brazil losses have to be recouped elsewhere.

So BRICS is weakened a shade: China slowing, South Africa under gold declines, and Russia affected by oil declines and Ukrainian politics. 

Wall Street cautious. . .

Fed will have to postpone its QE withdrawal.  Given that Europe seems fragile and with Japan and China not so healthy,  the mantle of leadership again falls on Fed. Markets are so dependent on the direction of the Fed. 

New York looks set to move in ranges. . .float do not swim.

Given the German sentiment and the general caution among investors, New York may prefer to float rather than swim. There is nothing in the air which seems to encourage swimming in choppy wattters.

German sentiment weakens as expected...

Germans are downbeat. Lowest since at December 2012. 7000 firms were surveyed, so it really reflects a good sample.
Lending to Eurozone entities contracted for 29th month.
Dax seemed to take both news in its stride. Or is it just a wave up? 

Why German sentiment of business should be down. . .

Euro strength affects competition.
Real wages may be falling in Europe.
Countries like Greece are still to recover.
May be a few but European banking is under stress.  As real incomes fall , NPAs will rise, stress should increase. Consumer spending will fall.  

Is the RBI a tiger or an elephant?

" The RBI has 17,334 employees on its payroll but only 3,281 are executives belonging to grade B and above. There are close to 4,500 grade A officers. These and a few treasurers constitute the officers of RBI—some 7,801. There are 3,738 clerks and rest of them—5,795—are subordinate staff engaged in maintenance and other services. Clearly, the employee roll is skewed in favour of subordinate staff and clerks and this must change. Automation will render some of them redundant. Mumbai apart, Kolkata, New Delhi, Chennai, Bangalore and Ahmedabad—out of the 29 regional offices of RBI—have a sizable number of employees. I wonder what they do. Still, retrenchment is highly unlikely as RBI’s employee strength will come down to around 14,000 in the next three years in the natural course with many employees retiring. If they are smart, the employees should grab this opportunity with both hands to upgrade their skills." 

Read more at: http://www.livemint.com/Opinion/3euUm9JzZSTJfI0ClZ9NGP/New-challenges-for-newlook-RBI.html?utm_source=copy

Banks have to be efficient and smart; central bankers have to be more efficient and smarter. 

Oil falls should be slower ...

Although Brent has seen falls on the back of Goldman Sachs slicing forecast prices, one must accept that if stock markets expect economic growth, then demand for oil should follow real growth forecasts. Unless there is a slowdown of a serious nature or an oil glut (which supply excess is already factored in)  prices cannot fall drastically. India and China growing should seek oil. So the fall has to be slower although Iran, Libya and USA supplies are greater than the demand. The OPEC cartel is weakening. Demand for dollar ( in which currency oil trade is invoiced ) should also see a fall... 

Mumbai tracks Asian sentiment...

Indian Rupee strengthened even as Mumbai stocks edged up seeking to touch 26950 levels. Optimism holds the ground still. With Asian moves on the back of USA data and the market ignoring Europe, and with crude prices benign to India, stock markets seem set to touch 27000 levels soon though there could be resistance there. 

Gold will continue to soften?

With the equities leading a recovery, gold is bound to falter further. As markets shrug off even bank stress data, the mood is buoyant for equities. All trends are southward looking for gold then. With Japanese and Chinese growth in a situation of not much to write home about, Gold has to move downwards. 

Asia factors in Europe

Asia took Europe in its stride. Europe's woes no more make news. They absorbed the news of stress tests quite well; and the Asian markets rose and that seemed largely driven by sentiments on USA the world's largest economy doing well. Thus the Euro was left not to weaken as markets whispered that European banks may have only a few billion dollars needed to recapitalize for loss categories in non performing assets.

While it looks like Europe is discounted for, one has to wait to receive further positive news. Market may have  already factored in a lower business sentiment in Germany. However, this strengthening of euro seems to affect European competitiveness rather adversely. So European companies would be under pressure. High end companies like BMW and Benz may not be affected as their buyers are rather price inelastic (as they are luxury - 'to be seen to possess categories') . But the Medium enterprises would be under pressure as the euro  appreciates.  This sector normally is a job multiplier one as high end companies are very technology driven. Joblessness in Europe is quite high and there are no immediate prospects of revival there.
Buoyed on the back of Europe and US data, Mumbai might rise in the morning trades but by afternoon, the in and out trader would have booked his gains and exited . Until the RBI responds to the FM's call for an interest rate cut (the intransigence of the Central bank!!!) there is nothing much for corporate sector to hope for.

jaynayar@gmail.com

European banks and stress tests...

European banks reportedly need capital infusion of $32 billion. Like Spanish banks sometime ago, Italian banks seem to wobble. Bank capital implies losses in advances made and therefore are holes in bank balance sheets. Since banks borrow and lend to each other, inter-bank impact can be quite worrying. So there is likely to some pressure on bank scrips. Given the fact that Europe has been under duress for over 3 years, this state of affairs is no surprise. There is also a strong suggestion that adequate provisions have been made. But a loss is a loss...Stock markets anywhere must recognize that the ailing continent of Europe has an asset hole which will affect most banks somewhere for sometime...

Fears of a contagion impact might see banks' sell off on Monday early. By afternoon, if Europe is able to withstand, there might be a slowdown in sell off. One hopes that by New York opening time, people look away from banks elsewhere!
So Australian dollar, Kiwi and Yen assets may be gainers early morn and US  assets by afternoon. Asians are followers right now. In Europe the currency to watch tomorrow may be Swiss Franc as investors wait on the sidelines.

Markets seem calming...

With ECB reportedly buying  debt, there is a sense of optimism. Euro has been falling (as it should) Local currencies in Asia are being bid up.  With technology looking up somewhat, US competitiveness looks set for a good run. If ECB continues, then we are possibly seeing a reversal of trends. 

China growth does not convince...

Asia's markets shrugged off the Chinese GDP figures, the weakest in post 2009 . Expectations of European equity markets following last evening's Dow on an upward move seems rather a hope. Unless the ECB continues aggressively with a stimulus programme, Europe has no real economics to back such a surge at this point. A strengthening of Euro may further dampen shares.
Europe may rise marginally  but has by the end level off or cede space.

Asian Stocks recede as expected; Gold time

Chinese growth may be even lower than 7.5 % expected. With the second largest economy indicating a slower than anticipated growth, demand for oil is expected to be even lower.

Russian scrips are already under pressure  and this will be accelerated by the credit rating agencies downgrading it. The Russians have reportedly used $ 13 billion to defend the ruble; it is difficult to protect a currency when its fundamentals and sentiments are down. Weak Russia might also hurt Germany as it is a business destination.

The reforms surge in India may not keep the momentum in Mumbai stock exchange for long.  For a day in out trader, the best tactic may be  to wait for the initial euphoria to peak in the first half of the day and sell at perceived high levels,  to buy at lower levels later. There is nothing much in the international markets to buy right now except greenback and precious metals.

With Diwali in India and the brewing storm in the markets, investors best bet is the US dollar and Gold. Both are time tested weapons and needs no brain haggling!!!

Costs of Ebola

The economic costs of Ebola are grim. As the World Bank worries , IMF  would have to revise downward growth figures for Africa. There is virtual shutdown of these countries, Doing business will be a difficult prospect. Airlines will suffer losses. Worst case scenario costs may be up to 2015 are estimated at USD 32.6  billion by the World Bank. If only Africa had this type of money for growth! Europe will suffer quite a bit as it has traditional links and business with Africa. 

Time for creative destruction...

IBM is realistic. It sensed right that buyers are becoming wary. People are reluctant spenders when they see uncertain days ahead...

IT industry is in a state of  creative destruction with Cloud, mobile apps and Big Data hustling minds... it might take a bit of time for the corporates to gather their wits around...

Ebola is making everyone take notice and IMF will have to further revise its figures.

Crude will have to follow the fall in equity markets  and Tuesday should see a sell off  beginning equity markets in Asia.  

It is a Volatile world...

It is an uncertain world... markets are volatile. Japanese markets today saw a steep rise;  banks in London seem worried; software firms in Germany are not doing as well as it should; in a volatile world, unless there are strong signals from policy makers, people sell and wait on the sidelines. That is what is a normal investor behavior. Credit markets look vulnerable and that is why banks are under pressure. Assets are again leveraged too high?
Higher the risk, higher the return. There are limits to asset growth. 

Sell on the fact...

Europe stocks are being rational. The risks remain. The dollar's rise has to be seen partly as a response to benign data and partly as a return to safety. What is most worrying is that IT stocks are not doing as well as they should. It will take some time to neutralize the several  trillion losses the markets have reportedly suffered in the previous days.  

Buy on the rumour, sell on the fact...

Dalal Street climbed up morning 400 points on the euphoria over diesel reforms and also in the pro-reform verdict of the people in the recent elections. Diesel price fall indicates sooner than anticipated monetary easing as prices slide to match diesel declines.  These might be a good time to sell for an in and out trader ; as these factors are already factored in.

The German Deutsche Bundesbank and the Lufthansa strikes point to an indifferent collectivism which further threatens the Euro...

Gold , Diwali and elections...

Gold has been softer with the Dow ending the week on a higher than 'down in the dumps' feeling. However , this author feels that gold is bound to increase over the immediate coming weeks.

Reasons:

With Diwali, the Hindu festival this week, there could be demand  from the gold hungry Indians. Indians are likely to keep the stock market high today with the reforms in petroleum prices and the election results but these may have already been factored in by the markets. As such any rise in stocks may be a time to sell (for an in and out trader)and park elsewhere.

There was nothing major that happened for stalled Europe... the world economies remain as worried as  they were  and wait patiently for the European (read German) mechanic, who as usual is taking time to come...

Investors left yen assets and Japanese companies rose as every fall in the currency is good for an export driven corporation like Toyota.  The likelihood of Pension funds buying domestic shares has helped. However, deployment elsewhere would be affected. So net- net, demand remains the same.

Chinese growth is slowing and so the Central bank there might infuse  in more money.   Both are good for gold.

jaynayar@gmail.com

Europe: The swarm of sellers is buzzing...

European crisis started a few years ago. Restrictive policies, high wages, lack of  entrepreneurial innovation, the strengthening of the Euro, all worked in fusion to keep Europe away from competitiveness.  There has to be creative destruction in Europe if it has to outlive the competition of Asia.

Asset markets are in turmoil.
People sell euro to buy yen just as a safe option; but in reality Japan is still a worried nation. China does not as yet inspire confidence.
So this week end there might be some contrarians who try to buy ; but the swarm of sellers is still buzzing. Fly in to gold,  dollar, yen, Australian dollar possibly, NZ Dollar  they seem safer till the wind passes by.

When Sentiments are geographically spread: a ratchet effect

Citigroup say there is a trillion dollar windfall 'stimulus' in the precipitous oil price falls. That means savings are possible; then  consumer spending should increase. However,  the equity markets are contemplating: falling oil demand means global  output deceleration ; and this has geographically spread from Japan to China to Europe affecting an otherwise recovering USA. Latin America has also been affected. Faced with a possible job cut scenario, customers will be on a lower ratchet - refusing to move up until there is a market indicator from some acceptable term....
The trend is your friend; right now it is a sellers more buyers less for equities. With IT stocks too failing , there is some significant  innovation or central bank action needed.
 It is parking in least risk assets that the investors are obsessed with. 

Oil writhes in agony...

From $ 115 a barrel in June to under $85 today is a precipitous fall. No stops there as yet. With the world bracing for another long spell of economic woes, Gulf economies, Norway , Venezuela , Russia have serious reason to be worried. The equities and oil have fallen in quick succession. OPEC meet is far away and anyway they were never a disciplined lot. USA sprang a surprise with its oil production. South Africa, Australia, Ghana may look up with gold up. India benefits as oil falls. Sentiment is however affected by global cues.
ECB where are you? Germans one is reminded of how the Germans broke the Pound Sterling in the 1990s with their stubborn approach. 

Indigo buys new planes

That is indeed a smart move in an industry which is assayed with doubts, buying 250 aircraft is a move that should invite attention. The sale is supposed to be $ 26 billion worth; and is a shrewd move to penetrate the growing Indian market. Indeed a bold , move. '
Although it did not lift Airbus shares as any such news should have, the faith in the burgeoning Indian market is so optimism inducing.
 Europe's stagnation worries have affected investors and the sentiment still  awaits Europeans getting their act together. That seems unlikely and so sellers continue to outnumber equity markets. Flight to safety  is a bird right!!!

Deceleration worries...

Inflation was lower in India and China. Good for consumer; not so good for extant demand.
Inflation is turning negative in Europe. Not at all good.
Near zero interest rates have not kicked up growth in Japan. Abenomics as yet ineffective.
USA yet the only economy that sees a shade of probable inflation by 2015. Some confidence there.
Purchases are the answer; both at macro and micro levels. With Christmas sales due, will consumers buy or decide to be austere? US yes, Europe neutral. Asia unsure.
With anxieties giving way to tensions and European policymakers pregnant with meaningless silence, today seems to be a day for falling equities, falling Indian Rupee, rising dollar and rising precious metals.


jaynayar@gmail.com

Some Wall Street optimism...

USA has an inherent strength in its research and technology which makes it a world leader. Its immigration policy indicates its openness to a crowd of the young and the bright  that really makes it internationally competitive. That 'less traveled road' makes all the difference and with a nearly 15 percent drop in oil prices, real incomes in USA will increase. That should see the great economy wither the current storm. Wall Street optimism : would it be a harbinger?  

The return of the dollar

Germans need to give way. They do not seem inclined. So investor confidence sags.
Draghi fights a lone battle to expand European Central Bank's balance sheet. Fed is Fed and ECB can only  aspire as yet.
When in doubt investors return to USA and precious metals.Sell off of assets elsewhere  need to be deployed elsewhere. Right now USA looks good. So there could be a good flow into US equities today more because there is nowhere else to go right now.
New York could be a night watchman.
But how long can it last?

Seek safe heavens...

With Ebola fears adding to travel worries and consequential fall in airline stocks, (one surprise was that earlier yesterday European airlines  flew a brief move up on the back of lower aviation fuel! ) the social dimensions are adding to the economic woes taking its toll on the markets.

Economies in the Middle East may be caught between falling oil prices  and falling tourist traffic on Ebola fears given that they have invested in capacity building for tourism. (Dubai)

Until the Europeans permit doses of Keynesian stimulus and structurally reform their labor market (which is politically not a 'sellable ' even if 'doable'. Piling on to euro may just about add to the woes the Europeans for whom deflation fears are more worrying.

China's trade figures which were good yesterday are being challenged as possible reflections of arbitraging currency appreciation and so some doubts linger.

Some storm coming our way. With no let up in investor anxiety, precious metals seem a 'park platz'. Gold may still have some way to climb up.

jaynayar@gmail.com

Europe skids to slide...

As France earned lower ratings, Dax fell to lows of the year. Germans, still seem hesitant to lead boldly. They have this dilemma of appealing to the home constituency while enacting their role as the powerhouse of Europe. The Germans have to reassure their followers and that seems some way off.

As the rich lose wealth in a stuttering stocks scenario, demand for Europe's big sellers like Mercedes and BMW may see declining sales. If oil prices persist at below $ 100, the Middle East may see less of purchasing power for costly European goods.

Negative interest rates seem to suggest long term stagnation a la Japan. Eurozone is too disparate in approach. Unemployment is soaring. Investors, long patient with Europe, seem to be giving up. T he Chinese data showed a better export performance; but in a slowing world, such export growth cannot be sustained.

ECB  has to do a Fed trapeze. The million dollar question is will Germany let ECB be?  For today, sellers will outnumber buyers in Europe. 

JP Morgan and India

JP Morgan just cut its growth forecast (2014-15)for India by 0. 2 percentage points to 5.1 . That is on the evidence of weaker than anticipated industrial output. JP Morgan should have given the benefit of price lowering and input cost lowering effect on India. There would now be pressure on the Government to bring in structural reforms to break the slowing trends.  Markets may have already discounted that growth has not been on anticipated levels. 

Gold has a little more to go up supported by technicals.

As suggested here, gold has been climbing up. Unless there are coordinated policy decisions announced , gold seems inclined to climb higher as the technicals support the sentiments. Dollar, equities and oil have been into weaknesses; and adds to investor anxiety. In the shortest run, gold looks the best haven. 

Rupee Range bound?

The Indian markets are a lot dependent on the foreign institutional investors for trends. Investors who are not so technically proficient watch for moves of FIIs and follow the latter on a bandwagon effect.

So this week, with the NYSE down, Europe down, China slow and with the IMF - World Bank predictions at low levels, why should the FIIs sell their Indian assets? Growth data for industrial output was lower than anticipated in August; July output too was lower by 0.1 percentage point . Yet India was consistent in growth for a fifth straight month. So the third largest Asian economy has been a performer.

FIIs will also wait to hear the estimates of losses in the cyclone that hit India's eastern states. Laggardly that bureaucracy is, it would be a difficult estimate to make in the immediate short term. Losses imply restoration/ revival investment which may be a Keynesian antidote to a resilient economy and India should be able to absorb the impact.

The fall in oil prices is benign for India.

So Indian Rupee may not see a dump from FIIs as they have nowhere else to go but gold. There might be some exit, but  a few other investors may hold on for lack of alternatives and waiting for the markets to be in full swing on Tuesday before making big moves.  Result could be a ranged movement with possibility  of some appreciation

jaynayar@gmail.com

Monday openings: Asian shares fall with gold and yen rising...

Asia kept on with the convergence of declines. Gold and Yen rose as  less risky destinations to park international liquidity. Oil continues to slide which is negative for Middle East and may just have dependent economies like Dubai worried. Australian stocks fell and that is an indicator largely of China concerns. Europe will apparently be in the red territory as investors shy away from a weak Germany and wobbly France. 

This author can be contacted at jaynayar@gmail.com 

Gold between moving averages...

For nearly three weeks, the markets have seen declines. US gross domestic product grew 4.6 percent between March and June, the unemployment rate dropped to 5.9 percent in September; and added 248,000 to payrolls.  Oil has been falling and looks set to fall further.  Yet there has been a slump in the market. Fear is the trigger. Investors have already started flying to safer havens; gold has been challenging its post 2011 trends to decline in recent days. Gold might  try to move up;  a  200 day moving average level might be what gold bulls  hope for. Unless there is a calming of nerves in the market. 

 

Bullish on Gold for the coming week.

Gold is likely to gain in the coming week unless coordinated central bank action is forthcoming. Several strands on the international economic arena together are likely to have a benign impact on gold.

ü  The International Monetary Fund last week cut the 2014 global growth forecast to 3.3 percent from 3.4 percent. This will add to investor anxiety and seek a safe haven in the precious metal.

ü  The European Central Bank must hope to take the euro down so that European competitiveness is not so affected. With the impending deceleration of Germany, Europe's powerhouse, Europe looks wobblier.

ü  Historically, Germans have not been keen on government spending and hence attempts to stimulate Europe may meet German resistance.  Germans will delay or stall Draghi's desires to expand ECB's balance sheet.

ü  Given that the strengthening of dollar will impact adversely on American competitiveness,  and given that the Chinese are in no mood to listen to let the Chinese yuan  be decided by market forces (despite the Chinese proud claims that the yuan is being used as reserve  currency at least by some central banks) Americans may like a weaker dollar.

ü  On the pretext that a drop in US stimulus program me would slow down global growth, America will keep its expansion options open. (One of the commendable things is that the Fed is rather transparent with its policy implementation timetables.) 

ü  The German idea of  shift away from government spending to private and public investment is not a short run solution. Given its relative non acceptance of migrants Germany's costing is unlikely to attract private investment.

ü  Given that German exports are inversely related to euro, and given their historic intransigence ECB seems a powerless creature,  USA is a better destination for digital technology.

ü  With the Chinese economy still slow and with no great structural reforms on the anvil for India, investors may like to choose a safe heaven.

ü  The safe haven currency of Swiss Franc is affected by Switzerland's zero rate policy  and possible disinflation.

New York Hope...

New York has to hold on... unless buyers outstrip sellers in Wall Street today ,  next week there may be a sell off week across. Global equities are supposed to have already lost $ 3.5 trillion; and if New York does not reverse the trend, there could be blood in the market streets next week... such a fall is not warranted. The Germans have been , usual, at loggerheads with the rest of Europe. USA has to ignore Europe and strategically place itself with Asia if growth has to move forward. The real sector is well placed to avoid  another recession.

New York stocks, Russian ruble and the week that went...

It is fashionable to think that there is a convergence of markets : so if New York catches cold, Mumbai must sneeze!!!The better than expected performance by Infosys kept optimism on a day the global fears rattled the markets. Asia sympathized with Wall Street as it turned sellers.


To fly into gold continued to be a conservative's labor!  As Europe totters, and oil slides, Russia also would weaken with its impact on all where Russians invest. The ruble cannot be defended easily in a falling market. The Russians might like a gradual fall; but the market laden with hard currency shortages might not toe the same line.




Metals fell , Europe stumbled, Fed was soft and the markets staggered. There has been a bout of pervasive pessimism.


So tonight as New York opens and Asia drifts off, the markets need to recover. The sentiment has to turn. New York has to lead in trend reversal for the sake of the coming week! There is much to be optimistic about in falling oil and employed Americans. Forget the Europeans, they have neither the men nor the machines.

Irrational fears knock at gold's doors

Irrational fears stalk the world market... investors then keep on knocking at gold's doors.

Gold is always a safe haven for families, investors and central banks. So it continues to stay in the news despite the low income streams. With the Fed minutes indicating slower action, and with a lot of pessimism on growth, investors swarm into gold. Investors are on a learning curve; it is the Japanese experience and now the European one which is keeping them flocking to gold. People are wary of possible secular stagnation. Chinese and Indian fascination for gold adds to the demand factor.

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The Chinese economy is onto a slower pitch. Housing and retail markets have been slow. Some 40 industries are reportedly affected by the construction sector ; so the multiplier is weak. The Chinese authorities seem to be loosening liquidity. the second largest economy is however quite a safe bet with foreign exchange reserves at $ 4 trillion.  So worries can only be in the immediate near term.

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India has been trying to gather the growth pace. With nearly 300 projects waiting clearances, growth is a natural priority for the government. So investment with all its multiplier should work well for the 1 billion people economy. Falling oil prices should be music to India's ears. As oil moves below $ 90, India growth story gets a push.

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Petro-producers should start worrying as extraction costs are high. The Middle East looks set for deceleration unless its investment funds are loosened. Economies like Dubai, so dependent on extraneous factors seem suddenly vulnerable. Oman appears to have difficulty in extracting its limited reserves. 

USA comes through strong...but the dollar better be weak....

Jobless claims- fell underlying the return of USA on to the economic growth scene. Less numbers of Americans sought benefits. Buoyed by high oil production in USA, oil prices have been falling.  With oil prices on the decline, industry , services and agriculture all should see lessened costs and enhanced margins. Consumer spending should increase in the months to Christmas.

European secular decline a la Japan may be a good reason for gloom; but then have we not already discounted that apprehension? As costs mount, companies would move out of Europe... unless there is a quicker restructuring(which is unlikely)  unemployment will increase there... Europeans who are averse to migration may have to themselves migrate... A technical recession in Germany the powerhouse of Europe will accelerate Europe-pessimism.

USA wants a strong but not stronger dollar. That is in line with macro growth urges-  to make imports costlier and exports earning more. Europeans had better learn that trick!

Fears of a global slow down seem to hold gold high.  If there are hints of a weaker dollar, gold might gain marginally.
 

Sentiments drive markets...Unreal economics?

IMF  and World Bank predictions drove markets down... German, China and LatAm concerns expressed by Washington's supra-nationals helped push the markets down...
In this fall, are the seeds of the rise. Consumer spending will increase as real incomes increase following drop in gasoline prices. China, India, USA and even Europeans will benefit.
The strengthening of the dollar will keep the prices of oil down for sometime.  Corporates will gain.
The problems of banking are however the main worry in the minds of Asian giants India and China. Loads of non-performing assets and recovery  worries haunt banks and regulators. If the Asians are able to smoothen those creases, Asia will pull the World recovery with USA. Cost heavy, close fenced Europe will continue to totter ... the question is not whether but when the cost heavy economies will decline and fall... If euro declines it reflects real economics...

Gold returns ...

Tuesday/ Wednesday are days the World came under a barrage of not so benign news... worried investors in a flight to quality seemed to get back to gold...Chinese came back again after a holiday to buy their precious metal...A parallel run by risk averse investors rushed once more into gold. So the old grandma's favorite  was lustrous again thanks to haunting fears of a slowdown. Will it hold? Unlikely-  as there is some correlation  between oil and gold... both move in tandem. So as oil looks dull, gold may have to gather some dust. But for today and until the fear wanes off, gold looks good.

IMF - World Bank Worries over Growth:Fears? Ghosts of Fears?

IMF has just lowered global growth expectations because of slower growth in Latin America, Japan & China.  World Bank has lowered its growth estimates for China and East Asia. Markets have also been hit by weak German data.

The markets may have already factored  these: Japan has been in recession for long; Europe has been ailing with problems in Portugal, Greece,  Spain. The key issue in the European economies seems to be ageing: the ratio of non-productive to productive labor (in these economies) is high. The Chinese economy is stalling; but it should revive soon.

However, the USA  and Indian economies should counterbalance. With a command over a quarter of the World GDP by PPP, the two economies could keep the world growth on momentum.  The recent employment figures of  USA encourage one to be optimistic. The Indian economy seems to have a new direction. One high growth area is Africa  though corruption and Ebola may temporarily hold this continent back. 

Yet sentiments seem hesitant on global markets. "Fear creates its own ghosts which are more fearsome than fear itself!"

Indian markets hesitant

For a second day, India had more sellers on its stock markets than buyers.
 Fear that metal prices may drift lower and anxiety on earnings results due. Investors seemed wary even as  the euro weakened.
On the international front, World Bank cautioned of a slower growth rate in China and East Asia.  There  is some anxiety on investors being impacted by China's local government finances, shadow banking, pollution etc.  The political impact of Hong Kong does not seem to worry market investors so much yet... So growth worries nag...
The good news for India is that lower commodity prices are good for input costs. Oil prices falling will give a push to India's industry and smother overall prices down... the forex deficit will be healthier and if the Government ensures less government as it has promised, there should be a reduction of fiscal deficit too.
Yet international investors are hesitant... it seems to be just a technical correction... there is no reason for a trend reversal...
 

Gold dims in glitter

As anticipated, gold is on its ebb. A further fall seems on the cards. Chinese markets open on Wednesday and that opening may be the day to watch. Even if the buyers (Chinese jewelers more likely than industrial demand) come in, with the buoyant dollar,  it is unlikely that precious metals will pick soon. With oil prices looking south, all in all it is good news for the Indian markets. Input costs should move down and strengthen company bottom lines.
The drop in oil prices will boost consumer spending.  The only issue is it is going to pressurize oil producers whose costs of production are high. If these suppliers cannot produce to profit, they are likely to curtail production which might move oil prices even higher.
However, that is over the medium term. And in the long run , as Keynes said, we are all dead. So market players, think of the shortest horizon and be positive on the Indian economy.

Bang Bang Dollar Week

Markets are also about sentiments. With non farm payroll results reading good, (jobless rolls were lowest in 6 years at 5.9 percent) and with the benign impact of  falling oil price, markets look to be in for a 'senti push' positive territory at the start of the week. According to Reuters, Tokyo's Nikkei rose 0.9 percent in early trade while South Korean shares was quieter but still rose 0.3 percent Monday morning. Dollar looks good with the US economy on a great comeback. Dollar's rise and the fall in oil prices should together impact on gold which should be down. Spouses in India will be happy. In a falling market, however, housewives should wait to buy.


In the overall, should generally be good for the Indian market as FIIs may still be around and as input costs recede. On the banking front, it looks like Indian bank mid year results are crucial as NPA provisions may take their toll on bottom lines. Indian banking resources may grow faster than NPA worries so the investor may still be buying.

The Reserve Bank seems a bit too long in coming out with guidelines for small banks. Or is it that everyone is still busy with the new schemes?

Positive Signs for World Economy.

It has been happy news for the developing economies like India. Oil is receding ; Employment news in USA is good ; gold has been drifting lower.