Jul 3, 2004|
Global markets: Have news, shall move
After ending mixed the previous week, a broad based weakness was observed among US indices and as a consequence both the Dow as well as Nasdaq ended lower by around 1% each for the week ended July 2, 2004.
It was yet another week of roller coaster ride, with the markets advancing and declining with the announcement of every positive and negative news. However, it will be remembered most for the Fed policy meeting, which hiked the short term rates by an expected 25 basis points, thus throwing hints at the market that it would take a measured approach towards the same. This comforted the markets and expectedly the markets rewarded the investors with gains on Wednesday, the day the meeting was held. However, a spate of profit warnings and earnings downgrade on Thursday and lower than expected payrolls number for the month of June, were reasons enough for investors to book profits and also push the indices into the red on a week on week basis. Next week, all ears will be trained to the commencement of the earnings season, with the US corporates announcing their second quarter numbers.
Barring a couple of Asian indices, major stock markets across the world ended the week in the red. Worst hit was the UK benchmark, FTSE that ended lower by 2%. While weak macroeconomic news emanating from the US markets did spook investors, weakness in British grocer companies further added to the woes. With major economies across the world dependent on US to sell more automobiles and other items such as drugs and consumer goods, lower than expected jobs recovery, worried investors and hence the weakness. Indian benchmark, BSE however bucked the trend and ended 2% higher for the week. For one, the Indian economy’s dependence on US is much smaller as compared to other countries and secondly, after weeks of decline, the valuations had once again started looking attractive and hence the buying interest.
Indian ADRs ended mixed on the US bourses during the week. While telecom ADRs shone, software and dotcom ADRs remained under pressure. Registering gains of near 10%, ILD major, VSNL, emerged as the highest gainer. The buying interest is probably due to the feeling that the worst seems to be over for the company and considering the big plans of the company in the broadband segment, profitability might well be on rise. However, we believe that though valuations may appear cheap, until there is further clarity on how its new initiatives pan out, one has to exercise caution. Tech major Infosys was the other major gainer as it edged higher by nearly 2%.
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