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Week ended 02/11/2011 -- Market this week

Inflation is haunting more or less around all Emerging countries. Many of them have increased their interest rate and many need to increase again because inflation is not coming under control. Though there is some better signs are coming like in India the CPI figure is lesser than it’s previous figure, where as South Korean central bank has left it’s main interest rate unchanged because they want to see the effect of rate increase which it made in last month. Vietnam has devalued it’s currency for controlling the price rise.  As a result of bad market, Indonesia’s national airline company Garuda’s share price plunged in the opening day by 17% from it’s IPO price. Indonesian economy grew 6.1% higher in 2010 than 2009, consumer spending is an important part in this growth. Now this can make the space for more rate increase in coming days. Markets this week were divided as country facing inflation fever and other countries which are not facing it as a big threat.



INDEX
11-Feb-11
4Feb-11Feb-2011
28Jan-4Feb-11




DOW
12273
1.49%
2.27%




FTSE
6062
1.08%
1.92%




CAC
4101
1.33%
1.12%




DAX
7371
2.14%
1.60%




NIKKEI
10605
0.58%
1.76%




HANG SENG
22828
-4.51%
1.23%




AUS
4880
0.37%
1.84%




SHANGHAI
2827
1.03%
1.67%




SENSEX
17728
-1.55%
-2.10%




BOVESPA
65755
0.74%
-2.14%




RUSSIA
6956
-4.31%
2.53%




INDONESIA
3391
-3%
0.25%




KOSPI
1977
-4.58%
-1.66%




STRAITS
3077
-4.17%
-0.55%




THAI
949
-3.55%
0.30%




ARGENTINA
3460
4.70%
1.33%




S. AFRICA
32442
-1.39%
4.30%




On the other hand there are some mix news from other parts as in Spain there economy has expanded in 4th quarter by 0.2% where as in year 2010 it contracted by 0.1%. Unemployment in Euro Zone remain at 10% in December where as German export roses 0.5% in December and total 18.5% in 2010.  BoE kept it’s interest rate at 0.5%, this is the true sign of  problem that they are still facing in their economy.
US trade deficit his increasing very fast in December 2010 it reaches to 5.9%  quite a lot. And it looks more when the Chinese contributions come with it.
This week Emerging countries especially the Asian nations faces huge fall in their stock indexes. Russian index after a long time see lot of correction in this week as it was due for long.
As German economy is giving good result same reflection we get in their stock market, Dax’s is one of the best performer in this year. On the other side countries facing inflation fever are losing their gains. The spread between Dax and the Kospi was much this week , and in coming days it may increase more if things go this way.


Other markets

Look like some corrections is due on copper but I think this is short-term correction.


COMMODITY
11-Feb-11
4Feb-11Feb-2011
28Jan-4Feb-11




GOLD (Feb)
1359
0.81%
0.59%




OIL  (Mar)
85.58
-3.87%
-0.34%




COPPER (Mar)
453.6
-0.94%
4.72%


Though Silver price has declined to certain extent but it may be the base for new up move.
Gold market may see some buying from different Emerging countries but fall in stock markets making people more afraid to invest right now. Somewhere I was reading that Central Bank of Russia is planning to buy gold 100mt Gold from domestic banks though it is not going to effect gold market, Russia is gradually increasing it’s gold reserve.
As political tensions around the world have reduced gold may again face a price fall. In last two days it gave a hint of that. Actually all the precious metals are facing some fall in their values , as some experts are saying that people are shifting to riskier assets.


This week AUD has not made any impressive move but coming week it may again go for higher levels in up side, last day’s closing was good. Euro is little nervous in its last two days, as tension in Egypt reduces so focus again can shift into EU debt problem.



CURRENCY
11-Feb-11
4Feb-11Feb-2011
28Jan-4Feb-11




EURO
1.355
-0.14%
-0.29%




AUD
1.002
-1.08%
1.91%




YEN
83.4
1.50%
-0.06%




RUPEE
45.76
0.26%
-0.21%




SWISS FRANC
0.972
1.88%
1.27%




S.African RAND
7.217
-0.20%
0.82%




Brazilaian REAL
1.633
-2.39%
0.47%




Mexican PESO
12.03
0.41%
1.80%



Indonesia’s Rupiah gained 0.5% this week after reported best economic growth in 6 years. Overseas investors pulled $3.8 billion from stock markets like south Korea, Taiwan and Thailand. And in India they have pulled out more than $1 billion in January only. Yen fell with Singapore dollar, Indian rupee, Korean won and Philippine peso.


Mortgage rates use to follow the 10-year Treasury, so Fed some time buys this Treasuries to control mortgage rates. Though some are saying that US economy is improving but I think housing market is still in deep water and in this situation any increase in rate will have negative impact on it.



YIELDs
11-Feb-11
4Feb-11Feb-2011
28Jan-4Feb-11




2-Year Treasury
0.819
9.93%
36.19%




5-Year Treasury
2.346
3.80%
18.01%




10-Year Treasury
3.643
0.27%
9.32%




30-Year Treasury
4.716
-0.23%
4.39%



This week fed auctioned  $16 billion 30-year treasury bonds. I don’t understand such issue when the yield is on the higher side, they may have some reason to bring down short-term rates rather than the long-term. Anyway treasury prices increase with this auction as more buyers have come to purchase it in cheaper rate but later as political tension eased, the price again reduces.



Coming weeks

Dow continues its up move  and heading for 12800 level but it will take time for it. It is now in a level which last seen in more than 2-years ago. Same story also goes with other index like Dax, Ftse.
Most of the Emerging markets are facing huge corrections this week, looks like there is no boundary. So it will not possible to predict the movement for coming week. But as I am in Indian market I have a feeling that in coming week we may see some pullbacks as we saw in last day. But it is sure that sentiment is negative.

As I wrote in one of my previous writing that  FED program of Treasury purchase will create lot of liquidity and as I suspected that these moneys will be coming to Emerging markets, so this fall in Emerging markets may be connected with that. All these falls are making good entry points for new moneys. As the bond buying program will go up to June so we may get a time period here.

What Egypt tension has done is that it makes an increase in  Oil bills of some Emerging countries so that the inflation fear increases & markets get more opportunities to correct or better to say change in hands of stocks. Some time I feel all these episodes are created quite in a pre-planned way.
Today I was looking at a report which says that in US, consumer sentiment rises in February highest level in  8 months but I think these recovery in some developed markets are all just rubbish, they are true only in paper not in real world. All the moneys those are gathered are still in the hand of big organizations and their superior stuffs, general people are miles away from it. The biggest example of it is the mortgage situation in USA and performance of low and medium size banks and  still increasing bond yields of some of EU nations.

I don’t think this inflation and Egypt episodes will go so long as investor are gradually discounting these. So if markets go up from here, in coming days we may see a new incident in any other part of the world to make another round of corrections in stock markets, because North Korean tension and European debt problem diminish for this moment. As I told in past that a group is working quite hard for making all these things and they are quite successful in this matter.




NOTE :  Please see the disclaimer below this blog

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