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Global markets: The weak dollar drag

Nov 20, 2004

While the US indices rose mid-week on some company specific news, declines at the fag end due to macroeconomic concerns like rising crude prices and weakening dollar stalled the three-week rally on the US bourses. Thus for the week ended November 19, 2004, both the Nasdaq as well as Dow lost around 1% each. The week’s proceedings started against the backdrop of a three-week rally on the US bourses and hence despite further decline in crude oil prices, caution was the order of the day. As a consequence, the gains on Monday were largely muted. Tuesday saw the release of report on wholesale prices, which registered its biggest jump in nearly 15 years and stoked further fears among investors who were already jittery post the three-week rally. Little wonder that the indices lost significant ground on Tuesday, marking second successive day of decline. The gains were halted in their tracks for the next two days as investors cheered some positive news, key among which was the merger between retail giants, Kmart and Sears and solid earnings from tech major Hewlett Packard. This sparked a rally on both Wednesday as well as Thursday. However, all the hopes of ending the week in the positive were dashed on Friday as a rise in crude oil prices and weakening of dollar forced the investors to book profits and take some money off the table, thus sending the indices into the red for the day as well as for the week.

Indices 12-Nov-04 19-Nov-04 Change
NASDAQ 2,085 2,071 -0.7%
Hang Seng 13,784 13,788 0.0%
Nikkei 11,020 11,083 0.6%
BSE 5,964 5,962 0.0%
FTSE 4,794 4,761 -0.7%
Dow 10,539 10,457 -0.8%
Dax 4,143 4,135 -0.2%

Markets all across the world with the exception of Japanese benchmark, Nikkei, remained largely lackluster during the week. Just like their American counterparts, the European indices also happened to rise mid-week but gave away all their gains at the fag end on the back of rising crude prices and exception of the US drug authority, the FDA to some drugs from some of the key European drug makers. As far as the Asian markets are concerned, the resilience could largely be attributed to strength in electronics as it helped to offset the weakness in banking stocks. Despite a weakening dollar, shares in export-oriented automakers ended largely unchanged.

(Price in US$) 12-Nov-04 19-Nov-04 Change
Dr.Reddy's 17.6 17.5 -0.6%
ICICI Bank 17.1 17.5 2.3%
Infosys 65.9 65.5 -0.6%
MTNL 8.2 8.2 0.0%
Rediff 7.9 8.7 9.9%
Satyam 26.4 25.9 -1.8%
VSNL 8.2 8.4 2.3%
Wipro 22.2 22.6 1.9%

Selective buying was witnessed among Indian ADRs during the week. Dotcom major Rediff led the charge among gainers with gains of 10% while on the other hand tech major Satyam emerged as the highest loser with decline of more than 2%. ICICI Bank and VSNL were among the other gainers with gains of 2% each. Gains in the former could be attributed to a hike in deposit and lending rates effected by it and which is likely to push the earnings higher as there seems to be no let up on the credit off take front currently. On the other hand gains in VSNL, the country’s largest ILD player is probably a continuation of revived interest in the stock post its acquisition of Tyco global network for a sum of around Rs 6 bn. The fact that the company has other big investments lined up for the next couple of years point to the fact that it might well have entered into a new growth trajectory.

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