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Week ended 02/25/2011 -- Market this week

As I told in my past writing, it is just a matter of time that a new crisis will be coming in some part of the world to make problem for stock traders as such Libyan crisis is making things really bad for those stock indexes which have already faced lot of corrections this year.
In Euro zone area confidence in economic outlook increases more than economist’s expectation and that is led by Germany where it makes a fresh high in February. But defeat of German ruling party in recent election is a very important event and that in future may questions about German chancellor’s steps to rescue the Euro as well as Euro Zone economies. As I told in past that any change in behavior of Germany may bring more problems for those problematic countries of Euro Zone.
After nearly 2 years Japan is facing trade deficit due to less export growth than expected and one of the main reason of this is Yen appreciation. Vietnam and Russia are some countries which have increase their interest rate to control their inflation. Now these rate hikes are not creating much panic as its are already discounted in stock prices.



INDEX
25-Feb-11
18-Feb-25-Feb-11
11-Feb-18-Feb-11




DOW
12130
-2.10%
0.96%




FTSE
6001
-1.33%
0.32%




CAC
4070
-2.09%
1.36%




DAX
7185
-3.24%
0.74%




NIKKEI
10526
-2.91%
2.23%




HANG SENG
23012
-2.47%
3.35%




AUS
4863
-1.47%
1.14%




SHANGHAI
2878
-0.72%
2.54%




SENSEX
17700
-2.80%
2.72%




BOVESPA
66902
-1.71%
3.51%




RUSSIA
7139
4.14%
-1.45%




INDONESIA
3443
-1.65%
3.24%




KOSPI
1963
-2.48%
1.82%




STRAITS
3025
-1.97%
0.29%




THAI
985
-1.00%
4.84%




ARGENTINA
3435
-2.88%
2.22%




S. AFRICA
31530
-3.23%
0.43%



All the major indexes of the world have faced correction this week. Geo-political events and corresponding Oil price increase may be one of the main cause of it. But we cannot forget that some of indexes are too much in overbought condition for a long time, so correction in their value was imminent or even more are due.

Now it is quite a few weeks that Russian index is decoupling with other indexes. Russia has increased it’s interest rate in spite of the fact it’s index has increased lot this week. While German DAX  like FTSE & DOW is facing some corrections. Russia has it’s own huge oil reserve so oil price in international market does not effect them much actually things become better for them.




Other Markets

When correction is going on equity market it is quite natural some of the investments will be shifting towards other areas.


COMMODITY
25-Feb-11
18-Feb-25-Feb-11
11-Feb-18-Feb-11




GOLD (Mar)
1408
1.44%
2.05%




OIL  (Apr)
97.88
9.10%
0.65%




COPPER (Apr)
444.65
-0.94%
-1.15%



Libyan crisis is creating more panic than Egyptian crisis. This week Oil price movement was terrible as it spoils most of the stock markets around the world. Though some decrease in price of Oil came due to profit booking  and there was also some news that Saudi Arabia has increased its production of Oil to offset the supply shortage that happened due to unrest in some Gulf countries.
It looks to me if political unrests in gulf region do not stop then Oil will see more up rises in it’s price from here, indeed much more from here. Actually the price increase is and will be very severe for those countries who depends on gulf region for Oil.

Though in case of Silver some indicators are showing that it is in overbought condition and we may see some correction  but in future it can go more. Not only China is increasing its Gold reserve it also becomes world’s largest producer of gold in 2010.



As geo-political tension increases the price of Gold also increases, if uncertainties go on in coming days we may see more up side in the price in spite of the fact that it makes lot of up side during February.



CURRENCY
25-Feb-11
18-Feb-25-Feb-11
11-Feb-18-Feb-11




EURO
1.375
0.43%
1.03%




AUD
1.018
0.39%
1.19%




YEN
81.67
-1.77%
-0.29%




RUPEE
45.37
0.42%
-1.26%




SWISS FRANC
0.927
-1.69%
-2.98%




S.African RAND
7.005
-1.64%
-1.31%




Brazilaian REAL
1.662
0
1.77%




Mexican PESO
12.11
0.74%
-0.08%



Many of the Currencies of the Asian countries dropped due to inflation and Libyan tension which may increase the oil price. Though Euro closes at 1.38 in Thursday but weekly closing was below than crucial 1.38. There is a growing expectation that Euro bloc may raise interest rate this year, but German steps is more important after the recent election defeat. AUD also made some up move in last few days.



YIELDs
25-Feb-11
18-Feb-25-Feb-11
11-Feb-18-Feb-11




2-Year Treasury
0.718
-11.46%
-0.97%




5-Year Treasury
2.163
-7.60%
-0.21%




10-Year Treasury
3.414
-6.20%
-0.08%




30-Year Treasury
4.497
-4.62%
-0.02%



Treasury prices effected this week by many ways such as ongoing Libyan crisis as well as weak GDP estimates and treasuries buying by fed. Now it is almost two weeks during which treasury yields are decreasing.



Coming week

Stock market around the world are now more or less following the same trend. Unless the Middle East crisis ends and also the oil prices stabilize we may not see a steady flow in the stock markets.
Though MSCI world equity index roses 6.1% where as MSCI Emerging market equity index lost 2.7% in this time but still it is premature to say that money is shifting from Emerging market to developed market. Behind this gain of MSCI world index contributions come from problematic countries such as Greece, Spain, Italy. Now it is a matter to look that whether these countries will carry on their contribution in future or not.
As we have already get information about slower economic growth of Euro Zone in last quarter of 2010.
US dept. of commerce cut it’s estimate of 4th quarter growth to 2.8% from 3.2% previously, lower Govt. spending than previously estimated was the main reason as they are saying. Economic growth for whole 2010 was revised down to 2.8% from 2.9%. The problem is, when they  are trying to control Govt. spending to bring down country’s large budgetary deficit the growth is slowing down despite the fact that growth has picked up in final quarter than it’s pervious quarter of 2.6%. Food and Energy price are making inflation to rose 0.4% in January compare to the previous month. US is not alone in UK  GDP slipped  by 0.6% in last 3 month of 2010.
So these are not a good platform for shifting moneys. In fact if moneys are shifted now, those investors will have to suffer a good amount of loss because stock price of some countries are hammered down so much that he will be some one fool who wants to liquidate right now by making loss.
Coming week Reports that are due from US are Pending Home sales, Auto sales, ISM Mfg Index & Non Mfg Index, Construction spending, ADP job reports,  Unemployment claim, Factory orders, and the very important one  monthly Employment Report.
As far as inflation is concerned I think now most of the countries are facing the heat. Some countries are discounting inflation through higher GDP growth rate. But those markets will be on top who can handle the oil price and fiscal deficit well.
What ultimately matter is the growth, moneys will not hear what someone like Mr. Buffet says, moneys will go there where they find better growth story.





NOTE :  Please see the disclaimer below this blog.

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