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Global markets: Crude oil, the wrecker-in-chief - Views on News from Equitymaster
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  • Oct 23, 2004

    Global markets: Crude oil, the wrecker-in-chief

    Crude prices continued to weigh on blue chip heavy Dow and as a consequence for the week ended October 22, 2004, the index edged lower by a significant 2%. Tech heavy Nasdaq on the other hand managed to stay afloat, thanks mainly to better than expected results from some of the tech heavyweights.

    Although the US markets started the week’s proceedings in a not so buoyant manner and remained weak for most part of Monday, it turned around towards the latter half and ended the day amidst gains. While Nasdaq got a boost on account of rally in tech stocks, Dow edged higher on the back of drop in crude prices. However, after two consecutive days of gains (Monday and Friday, the previous week), bears made a comeback on Tuesday and weighed on Dow for the rest of the week as crude prices continued to make the investors jittery.

    At the end of it all, the Dow ended the week amidst decline for the third straight week in a row and hitting an 11 month low. Nasdaq on the other hand managed to avoid the coat of red for most part of the week on the back of some robust results by tech majors and its relative insularity to crude prices. However, earnings from Microsoft and Amazon at the fag end of the week left the investors disappointed and resulted in significant sell off leading the tech heavy index to end almost unchanged for the week.

    Indices 15-Oct-04 22-Oct-04 Change
    NASDAQ 1,912 1,915 0.2%
    Hang Seng 13,059 13,015 -0.3%
    Nikkei 10,983 10,857 -1.1%
    BSE 5,687 5,641 -0.8%
    FTSE 4,623 4,615 -0.2%
    Dow 9,933 9,758 -1.8%
    Dax 3,922 3,935 0.3%

    A coat of red was also evident among major indices across the globe with the German benchmark, Dax, being the only exception. Crude prices and weakness among US indices made investors across major European and Asian countries jittery and this led to weakness among the leading indices. Had it not been for the fact that the Chinese economy grew by 9% during the third quarter, the fall could have been much more intense. But the reassurance that the demand for raw materials from China would continue unabated did soothe investor nerves to a certain extent and thus restricted the magnitude of weakness.

    (Price in US$) 15-Oct-04 22-Oct-04 Change
    Dr.Reddy's 16.5 16.6 0.6%
    HDFC Bank 33.3 32.2 -3.3%
    ICICI Bank 14.4 14.7 2.1%
    Infosys 60.8 65.8 8.2%
    MTNL 7.2 7.4 2.8%
    Rediff 7.5 7.8 4.0%
    Satyam 26.4 25.7 -2.7%
    Sify 5.5 5.6 1.8%
    Tata Motors 9.0 9.2 2.2%
    VSNL 7.3 7.3 0.0%
    Wipro 21.5 21.3 -0.9%

    Indian software major, Infosys continued to shine on the US bourses and edged higher by 8%, the most by any Indian ADR during the week. The company has posted robust results for the September quarter and has added fairly large number of employees to its workforce, thus hinting at maintaining its robust growth momentum in the near to medium term. The other tech majors namely Wipro and Satyam, however witnessed profit booking and ended the week amidst decline. Apart from Infosys, telecom major MTNL, auto major Tata Motors and banking major ICICI Bank also edged higher and further built upon their market capitalisation.



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