• NOVEMBER 6, 2004

Global markets: All round strength…

Bush’s re-election and strong jobs growth brought back cheers to the investing community and as a consequence, both the Dow as well as the Nasdaq ended the week with gains of over 3% each.

With the US presidential elections looming large on Tuesday, the week’s proceedings got off to a rather jittery start, as the outcome of the polls seemed largely uncertain. However, the markets cheered another steep fall in crude prices and the indices ended the day amidst gains. Yet another slump in oil prices on Tuesday was welcomed by investors as the markets advanced for most part of the day. But the gains vanished into thin year as exit poll news that started flowing in, showed a favorable position for John Kerry. This turned out to be a minor set back for the Wall Street, as it has historically preferred a Republican administration.

However things were quite different on Wednesday as Kerry was forced to concede defeat and this paved way for a Bush second term in office and put to rest all speculation regarding yet another dead heat and the ensuing legal wrangles. It was no surprise then that the Wall Streeters rejoiced and made the bulls strut their stuff, resulting into a strong rally both on Wednesday as well as Thursday. Buoyant investor sentiment got another shot on Friday when the monthly jobs report indicated that employers added 3,37,000 jobs to payrolls, the best gains in seven months and much above average forecasts for 175,000 jobs. Had it not been for the fall in dollar and rise in oil prices, the gains would have been much more.

Indices 29-Oct-04 05-Nov-04 Change
NASDAQ 1,975 2,039 3.2%
Hang Seng 13,055 13,495 3.4%
Nikkei 10,771 11,062 2.7%
BSE 5,676 5,891 3.8%
FTSE 4,624 4,740 2.5%
Dow 10,027 10,388 3.6%
Dax 3,960 4,064 2.6%

With US going to polls during the week, it is only natural that stock markets all across the world wait with bated breath for the outcome of the election as trade policies adopted by the elected party have significant impact on other key economies across the globe. Not surprisingly then, akin to their US counterparts, major indices across the globe rejoiced as the Republicans, which are believed to more trade friendly were voted back to power. Happy that the trade policies would continue unabated, major exporting nations like Japan and other European economies witnessed robust gains in their respective stock markets. Besides, strong growth in the US job markets which is likely to impact consumer spending and result into more demand for goods from across the continent also helped bolster gains among major global indices.

(Price in US$) 29-Oct-04 05-Nov-04 Change
Dr.Reddy's 16.6 17.3 4.2%
HDFC Bank 35.2 37.1 5.4%
ICICI Bank 15.8 16.7 5.7%
Infosys 66.4 65.6 -1.2%
MTNL 7.9 7.8 -1.3%
Rediff 8.5 7.8 -8.2%
Satyam 26.3 28.3 7.6%
Sify 5.9 5.7 -3.4%
Tata Motors 9.3 9.5 2.2%
VSNL 7.6 8.1 6.6%
Wipro 21.3 22.5 5.6%

Barring tech major Infosys and dotcom players, Indian ADRs benefited from the rally on the US bourses during the week and ended amidst robust gains. Edging higher by 8%, Satyam, the tech major was the highest gainer during the week. Not far behind was the ILD major VSNL, which edged higher by 7%. The optimism was the result of news that the company has entered into an agreement to acquire Tyco Global Network, which has a 60,000 km network of submarine cable systems, for $130 m. The deal, if approved, would make the company the owner of the largest global network in the world and would augur well for its growth prospects. Among other ADRs, banking companies also witnessed significant buying, presumably on the back of a strong credit growth that is being witnessed in the country.

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