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Indian Indices Trade Marginally Lower
Fri, 30 Sep 11:30 am

After opening the day flat, the Indian indices have continued to trade near the dotted line. Sectoral indices are trading on a mixed note with stocks from the metal and telecom sector witnessing maximum selling pressure. Oil & gas and realty stocks are, however, trading in the green.

The BSE Sensex is trading down 24 points (down 0.1%) and the NSE Nifty is trading down 5 points (down 0.1%). The BSE Mid Cap index is trading up by 1.1%, while the BSE Small Cap index is trading up 1.2%. The rupee is trading at 66.60 to the US$.

Japan saw the outcome of weaker-than-expected consumption and inflation data for the month of August. Spending among Japanese households tumbled last month and consumer prices fell again.

Government figures showed that household spending in August contracted 4.6% from a year ago. This was way below expectations of a drop of around 2%. Core consumer prices, excluding volatile fresh food prices, contracted 0.5% YoY during the month of August. This was the sixth straight month of fall and way below the Bank of Japan's (BOJ) 2% inflation target.

Some respite, however, was found on the employment front. The labor market in Japan remained tight during the month of August with unemployment at a multi-decade low of 3.1%. Also, factory output rose a stronger-than-expected 1.5% in August.

The disappointing data raised concerns for the Japanese economy. Economists and market participants were seen questioning the BoJ's policy measures. The BoJ still has plenty of work to do to reach its 2% inflation target.

Last week, the BoJ issued a plethora of fresh changes to its policy approach. The bank said it would introduce a new policy tool control the yield curve known as quantitative and qualitative monetary easing(QQE). The bank further announced it would expand monetary base until inflation gets stable above 2%.

The bank, however, stood pat on interest rates and kept them in the negative territory. Along with the Fed and the BoJ, the monetary policies and low interest rates by other central banks have made things far worse than before for the global economy.

The concern is that global financial markets are behaving obsequiously to Fed and central banks cues. They are highly dependent on central bank behavior. Bill Bonner, in a recent article from the Vivek Kaul's Diary, wrote on how the Fed and the BoJ keep investors on the edge of their seats.

If you're interested in knowing what's really happening in the world of man and money, you can claim your free copy of Bill Bonner's latest book, Hormegeddon (just pay Rs 199 for shipping and handling).

In another news update, China's manufacturing Purchasing Managers' Index (PMI) came in at 50.1 for the month of September. This was seen a touch above the 50 reading recorded in August but below July's 50.6 reading. The data showed activity at China's small and mid-sized firms expanded this month.

Reportedly, output and total new orders expanded marginally. Also, firms raised their purchasing activity for the third month in a row. However, cost-cutting initiatives contributed to lower employment during the month of September.

While the above data flagged optimism about the manufacturing activity in China, the property market ignited worries. Real estate market in China, which contributes as much as a third to gross domestic product, is on the cusp of a bubble. This is seen as average home prices in 70 major cities spiked 9.2% YoY in August. This was recorded way higher than July's 7.9% increase.

We believe China needs to do a lot better to come out of the ongoing slowdown phase. Sluggish demand and excess capacity are threatening to slow down China's economic engine, which had been growing at a frenzied pace in the past. And lack of transparency in the government and banking entities in China have made it difficult to decipher the reasons for the grown decline.

The need of the hour is to have more credible and trustworthy reports on economic developments. And that is where Nitin Gregory fills the gap. In one of his articles, he gives his on-the-ground outlook at what drives the real estate in China and how it will fare in the short and the long term.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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Nov 23, 2017 09:23 AM