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Global markets: Interest rate concerns - Views on News from Equitymaster
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  • May 8, 2004

    Global markets: Interest rate concerns

    With Fed announcement and employment report scheduled to be released in tandem, it was obvious that these would be the biggest indicators of which way the markets would move. Thus while the Fed statement did soothe some nerves, the employment report made sure that the euphoria did not last long. As a result, for the week ended May 7, 2004, the NASDAQ reported a marginal decline, while the Dow edged 1% lower.

    The week's proceedings got off to a positive start on Monday. This was largely attributed to last week's sell off, which led to bargain hunting at lower levels. The buoyancy spilled over into Tuesday, following the Fed announcement that although it would raise interest rates, it will adopt a gradual approach towards it. This led the investors to eagerly await Friday's employment report, an extremely crucial indicator of determining the timing of the interest rates rise. As a result, the markets remained jittery over the next two days and witnessed mixed trends. Better than anticipated employment report finally made its way into the markets on Friday but failed to ignite them. On the contrary, the stock markets witnessed a broad based selling as it led to an emergence of fear of an earlier than anticipated hike in interest rates, thus hurting demand as well as corporate profits. The markets are expected to remain subdued next week with interest rates rise probably being the central talking point.

    Indices 30-Apr-04 7-May-04 Change
    NASDAQ 1,920 1,918 -0.1%
    Hang Seng 11,943 11,911 -0.3%
    Nikkei 11,762 11,439 -2.7%
    BSE 5,655 5,670 0.3%
    FTSE 4,490 4,498 0.2%
    Dow 10,226 10,117 -1.1%
    Dax 3,985 3,896 -2.2%

    Major markets across the world witnessed selling pressure during the week with the UK benchmark and its Indian counterpart being the only exceptions. However, even they witnessed only modest gains. With negative news in the form of US interest rates, Chinese economy and rising crude prices flying thick and fast, major markets across Europe and Asia remained jittery and subdued. The FTSE and Sensex however bucked the trend and ended firm, with the latter presumably on the back of exit poll report, which ignited hopes of a majority for the reforms friendly incumbent government.

    (Price in US$) 30-Apr-04 7-May-04 Change
    Dr.Reddy's 19.6 19.7 0.5%
    HDFC Bank 29.0 31.0 6.9%
    ICICI Bank 15.5 15.8 1.9%
    Infosys 81.0 84.0 3.7%
    MTNL 7.6 7.5 -1.4%
    Rediff 8.7 7.9 -9.2%
    Satyam 19.4 20.0 3.1%
    Satyam Infoway 6.5 6.5 0.0%
    VSNL 7.3 6.7 -8.2%
    Wipro 43.1 44.5 3.2%

    Among Indian ADRs, while the telecom and dotcom companies experienced selling pressure, buoyancy was witnessed among tech, banking and pharma ADRs. Banking major HDFC Bank, which gained 7% over the week, emerged as the highest gainer. Impressive results posted by tech companies over the last one month and investor's propensity for moving towards less leveraged stocks on account of interest rate concerns resulted into Indian tech ADRs witnessing gains over the week. Pharma major, Dr. Reddy's also edged higher, mainly on account of its acquisition of a US based company specializing in dermatology.



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