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Global markets: Optimism despite concerns - Views on News from Equitymaster
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  • Jul 5, 2003

    Global markets: Optimism despite concerns

    US indices closed the week in the black. While the Dow closed higher by 1%, the NASDAQ gained 2%. It was a short week on account of the holiday for Independence Day. The week started on a negative note, though the losses were marginal. An increase (marginal) in regional manufacturing activity for the month of May failed to boost sentiments on Monday.

    For the next two days, the markets gained sharply. Despite poor economic news on manufacturing and construction, the markets gained on Tuesday on account of buying witnessed in technology stocks. On Wednesday more economic reports were released. This time it was on factory orders which increased marginally for the month of May. This apart, expectations of better earnings report from Microsoft for FY04 led to increased investor optimism towards the technology sector.

    The markets however witnessed selling pressure on Thursday on account of a poor unemployment report. The unemployment numbers rose sharply in the previous week. This led to weakness towards closing on Thursday as the labor market in the US still continued to show signs of contraction. Better than expected report on the service sector provided some respite. Markets closed towards the mid session on account of Independence Day on the Friday.

    Indices 28-Jun-03 5-Jul-03 Change
    BSE 3,583 3,583 0.0%
    Nikkei 9,104 9,104 0.0%
    Dax 3,225 3,225 0.0%
    NASDAQ 1,625 1,663 2.4%
    FTSE 4,068 4,068 0.0%
    Dow 8,989 9,070 0.9%
    Hang Seng 9,657 9,657 0.0%

    Asian and US markets strengthened during the week while European markets were in the red. Top gainer for the week was Nikkei (5%). Better US government report on factory orders led to the gains seen on the Nikkei. This was on account of expectations that exports will increase and this led to increased optimism. On the other hand, European markets ended weak on account of concerns that the companies will find it difficult to increase their bottomlines in the stagnating European economy. Also factory orders saw a decline, which led to further concerns.

    (Price in US $) 28-Jun-03 5-Jul-03 Change
    Rediff 4.8 6.9 44.2%
    Satyam Infoway 5.9 7.3 22.1%
    HDFC Bank 18.4 20.5 11.4%
    Dr. Reddy's 22.7 25.3 11.2%
    ICICI Bank 7.1 7.8 8.8%
    MTNL 4.8 5.2 8.8%
    VSNL 5.2 5.6 8.0%
    Satyam 9.6 9.7 1.4%
    Wipro 23.3 23.4 0.4%
    Infosys 54.9 53.1 -3.2%
    Silverline 1.8 1.7 -6.1%

    Rediff and Sify were the top gainers during the week. Banking stocks were in favour during the week. While ICICI Bank gained 9%, HDFC Bank was up 11%. ICICI Bank got a final approval for the dividend that it has declared and this improved investor outlook towards the stock. HDFC Bank on the other hand is trading at its 52-week high levels. Telecom ADRs continued to gain ground during this week also. Prominent among the gainers were VSNL (8%) and MTNL (9%). Software stocks traded mixed during the week.

    For the coming week, US markets will focus more on the corporate earning announcements for the recently ended second quarter and this will drive the sentiments going forward. However sharp increase in the unemployment figures continue to plague investor sentiments. Labor markets play a significant role in US economy and the contracting markets further intensifies concerns regarding US economic recovery.



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