Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 59 views

    Ficc Times: The Week Gone by and The Week Ahead

    Uploaded by

    r_square
    1) Last week global markets did well and the INR rose against the dollar. This week, the key events were the US extending its debt ceiling and the BOJ adopting a 2% inflation target. 2) This week's key domestic events include the RBI's expected 25 basis point interest rate cut and an increase in import duties on gold and limits on FII investments in government bonds. 3) Looking ahead, the document outlines important global and domestic economic data releases and events to watch in the coming week, with a focus on the uncertainty around short-term debt limits in the US and the need for further monetary easing in Europe and India.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd

    Ficc Times: The Week Gone by and The Week Ahead

    Uploaded by

    r_square
    59 views5 pages
    1) Last week global markets did well and the INR rose against the dollar. This week, the key events were the US extending its debt ceiling and the BOJ adopting a 2% inflation target. 2) This week's key domestic events include the RBI's expected 25 basis point interest rate cut and an increase in import duties on gold and limits on FII investments in government bonds. 3) Looking ahead, the document outlines important global and domestic economic data releases and events to watch in the coming week, with a focus on the uncertainty around short-term debt limits in the US and the need for further monetary easing in Europe and India.

    Original Description:

    The week gone by and the wee ahead....

    Original Title

    FICC Times

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1) Last week global markets did well and the INR rose against the dollar. This week, the key events were the US extending its debt ceiling and the BOJ adopting a 2% inflation target. 2) This week's key domestic events include the RBI's expected 25 basis point interest rate cut and an increase in import duties on gold and limits on FII investments in government bonds. 3) Looking ahead, the document outlines important global and domestic economic data releases and events to watch in the coming week, with a focus on the uncertainty around short-term debt limits in the US and the need for further monetary easing in Europe and India.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    59 views5 pages

    Ficc Times: The Week Gone by and The Week Ahead

    Uploaded by

    r_square
    1) Last week global markets did well and the INR rose against the dollar. This week, the key events were the US extending its debt ceiling and the BOJ adopting a 2% inflation target. 2) This week's key domestic events include the RBI's expected 25 basis point interest rate cut and an increase in import duties on gold and limits on FII investments in government bonds. 3) Looking ahead, the document outlines important global and domestic economic data releases and events to watch in the coming week, with a focus on the uncertainty around short-term debt limits in the US and the need for further monetary easing in Europe and India.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    FICC TIMES

    THE WEEK GONE BY AND THE WEEK AHEAD

    25 Jan 2013

    Last week was good for the markets as S&P 500 continued to surge ahead and most market doing well across the globe.INR rose through the week, closed off the lows on oil demand.

    The key global event this week was the US reaching a decision to push the deadline for federal debt ceiling until May 19, a move that will allow the US government to keep paying its bills while giving more time to lawmakers for budget negotiations. In another significant development this week the BOJ formally adopted prime Minister Abes 2 percent inflation target but refrained from setting any monetary road map for the same, putting pressure on the Abe administration to revive growth through fiscal measures. The Japanese government meanwhile continued to endorse further monetary easing and yen weakness to revive growth. The Japanese yen declined for the eleventh consecutive week and closed at a two and half year low while other Asian currencies traded flat against the US dollar after the IMF lowered the 2013 global growth target to 3.5 percent from 3.6 percent in December. The IMF also warned that big downside risks remain as euro-zone crisis can renew and a tight US budget could hurt growth. The Euro, meanwhile, touched a 11-month high against the dollar after the ECB said banks would pay a greater than 137 bn Euros in loans next week. Positive economic PMI and business confidence data coming from Germany also aided the Euro. Closer home, the government continued to tweak policies in an attempt to rein in the deficits. This week saw the government increase import duty on gold and increase the FII investment limit in government securities and corporate bonds. These developments closely follow last weeks decision to partially deregulate diesel prices. The INR ended slightly lower for the week after remaining largely range bound during the week due to strong demand from oil importers at lower levels.

    The key events of last week:


    The Bank of Japan, in its policy meet earlier this week, doubled its inflation target to 2 percent and adopted an open ended commitment to buy assets. However, the asset buying program will commence only from January 2014, belying market expectations of an increase in its 10.3 tn yen asset buying program announced earlier this month 108, Madhava, Bandra Family Court Lane, BKC, Bandra(E), Mumbai 51 Page 1

    THE WEEK GONE BY AND THE WEEK AHEAD.

    Japanese CPI index fell 0.2 percent in December adding to the case for continuing easing to achieve the 2 percent inflation target Growth in Chinas manufacturing sector accelerated to a two-year high in January as reflected by the flash PMI. The PMI for January rose to 51.9, its highest level since January 2011, pointing to a steady recovery in the economy. The output index climbed to 22-month highs while the employment sub-index was at its highest since May 2011. The export orders sub index too rose to 50.1 in January, showing recovery in exports The US House of Representatives reached a decision to push back the deadline for raising the federal debt ceiling until May 19. The bill aims at passing a formal budget resolution by April 15, failing which the lawmakers pay gets suspended till the budget is passed. The bill seeks to avoid an immediate threat of US default by suspending limits on the government ability to borrow until May 19 without specifying any amount for debt ceiling increase The flash US manufacturing PMI rose to 56.1 in January from 54.0 in December, signaling a strong improvement in manufacturing business conditions in January. The growth in output was attributed to new order including new export orders. Manufacturing employment also increased at the fastest rate in nine months

    The Indian government remained in an overdrive to take corrective action on pending reforms after addressing diesel pricing last week, import duty on gold was increased this week, helping buoy the INR

    Euro-zone flash manufacturing PMI rose to a better than expected 47.5 in January from 46.1 in the previous month. The composite PMI for January rose for the third consecutive month to a ten month high of 48.2 as compared to 47.2 in the previous month. While the PMI suggests that the recent downturn may have reached its strongest back in October, the survey continues to signal falling activity overall. A PMI above 50 indicates expansion and below 50 indicates contraction. Euro-zone current account surplus for was at a record 14.8 billion Euros in November as against 8 bn in October.

    And closer home....


    The government increased import duty on both refined gold and raw gold this week as a measure to curb gold demand and rein in the current account deficit. Gold imports for the period Apr-Nov12 were US$ 32 bn as against US$ 38 bn in the same period last year. Outflow of foreign exchange on gold imports is impacting the current account deficit. The duty on raw gold including gold bars and Dore (an alloy of gold) has been increased from 2 percent to 5 percent. The duty on refined gold has been increased from 4 percent to 6 percent The government will also link gold ETFs with gold deposit schemes which will enable mutual funds to unlock their physical gold and invest in gold deposit schemes offered by banks. This will help improve the physical availability of gold in the market. Also, the minimum tenure of gold deposit schemes would be reduced from three years to six months The RBI hiked the FII limit in government securities and corporate bonds by US$ 5 bn each, increasing the total cap in domestic debt to US$ 75 bn. Further, the three-year lock in period for FIIs has been removed. The FII limit in G-Secs has been increased by 5 bn to 15 bn while

    108, Madhava, Bandra Family Court Lane, BKC, Bandra(E), Mumbai 51

    Page 2

    THE WEEK GONE BY AND THE WEEK AHEAD.

    the limit in corporate debt other than infrastructure sector has been increased by 5 bn to 25 bn. Also the one-year lock in period on holding of infrastructure binds has been done away with The INR ended slightly lower for the week after a remaining largely range bound during the week due to demand from oil importers at lower levels

    So what does the next week hold...?


    While the economic data released during the month indicates a slow although unsteady recovery for the US economy, the short-term debt limit deadlines in the US instead of a permanent cure will continue to keep a cloud of uncertainty over the financial markets, leading to higher volatility. In Europe, the ECB is moving away from unconventional monetary policy measures, unlike the U.S. Federal Reserve and Bank of Japan, which are buying bonds to stimulate growth. Although the level of economic activity seems to be stabilizing, recovery still seems elusive as the structural issues of financial deleveraging and sovereign debt crisis remain. To quote the ECB president "It is a situation where you have positive contagion on the financial markets and for the financial variables, but we don't see this transmitted to the real economy yet." Locally, the key event to look out for is the RBI monetary policy review next week where the consensus is for a rate cut. While the RBI is still not comfortable with inflation and the guidance in the last policy review still gives room to the RBI for a rate cut in the Jan-Mar quarter, we feel RBI will give in to the sheer pressure from the government and industry this time and go for a 25 bps cut, not to mention a rate cut now is long overdue. The rupee is likely to trade in a narrow range as investors will refrain from taking positions ahead of RBI policy. We remain convinced that RBI should not delay the rate cut any further. The economic outlook on the ground remains very uncertain and all must be done to support economic activity especially when price pressures provide the room for action. We expect the next week to be very important in confirming the market uptrend. Important upcoming International events to be tracked:
    Date 26-01-2013 28-01-2013 28-01-2013 29-01-2013 Country Japan US US US Event CPI Durable Goods Orders Pending Home Sales Index Consumer Confidence (Consumer Confidence - Level) Period Dec, 2012 Dec, 2012 Dec, 2012 Jan, 2013

    108, Madhava, Bandra Family Court Lane, BKC, Bandra(E), Mumbai 51

    Page 3

    THE WEEK GONE BY AND THE WEEK AHEAD.

    30-01-2013 30-01-2013 30-01-2013 30-01-2013 31-01-2013 31-01-2013 31-01-2013 31-01-2013 31-01-2013 31-01-2013 31-01-2013 31-01-2013 31-01-2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013

    Japan US US US US Japan Germany US US US US US US US US US US Japan Japan Japan India US US China EMU UK US US

    Retail Sales (Year over Year) ADP Employment Report (ADP employment) GDP EIA Petroleum Status Report FOMC Meeting Announcement Industrial Production CPI Jobless Claims Employment Cost Index Personal Income and Outlays Bloomberg Consumer Comfort Index Chicago PMI (Business Barometer Index - Level) EIA Natural Gas Report Farm Prices Money Supply Money Supply (M2 Weekly Change) Fed Balance Sheet Unemployment Rate (Level) Household Spending (Year over Year) Industrial Production Power generation Motor Vehicle Sales (Domestic Vehicle Sales) Motor Vehicle Sales (Total Vehicle Sales) PMI Manufacturing Index (Level) PMI Manufacturing Index CIPS/PMI Manufacturing Index Construction Spending ISM Mfg Index (ISM Mfg Index - Level)

    Dec, 2012 Jan, 2013 wk1/25, 2013 Dec, 2012 Jan, 2013 wk1/26, 2013 Dec, 2012 wk1/27, 2013 Jan, 2013 wk1/25, 2013 Jan, 2013 wk1/21, 2013 wk1/21, 2013 wk1/30, 2013 Dec, 2012 Dec, 2012 Dec, 2012 Jan Jan, 2013 Jan, 2013 Jan, 2013 Jan, 2013 Jan, 2013 Dec, 2012 Jan, 2013

    Important upcoming Domestic Events


    Date 25/01/2013 29-01-2013 30-01-2013 30-01-2013 30-01-2013 31-01-2013 31-01-2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 02/01/2013 Event IIP Core (YoY Chg) Third Quarter Review of Monetary Policy 91 day T- Bills auction of Rs 50 bn (cut-off yld) Reserve Money (change on wk) 182 days T- Bills auction of Rs 50 bn (cut-off yld) Government finances -fiscal deficit (pct of Budget Estimate) CPI-Industrial Workers Power generation HSBC India manufacturing PMI WMA (ways and means advance) - to central govt WMA (ways and means advance) - to state govts FX reserve (change on wk) Period Dec 2012-13 Wk to Jan 25 Apr-Dec Dec Jan Jan Wk to Jan 25 Wk to Jan 25 Wk to Jan 25 Frequency Monthly Weekly Weekly Fortnightly Monthly Monthly Monthly Monthly Weekly Weekly Weekly

    108, Madhava, Bandra Family Court Lane, BKC, Bandra(E), Mumbai 51

    Page 4

    THE WEEK GONE BY AND THE WEEK AHEAD.

    Technical Based View:


    USD INR range has shifted to 53.20-54.40 from the erstwhile 54.40-55.50 range While there has been good buying interest from oil companies at lower levels, we believe that USD INR remains a good sell in the 54-54.40 zone In the medium term, we remain INR bullish as there are some very credible steps being taken by the government to attract FDI and rein in the fiscal deficit We recommend short USD/INR at current levels, with an immediate target of 53.10-20 and then 52.50 in the next couple of months. The upside should remain pegged at 54.40, violation of which on a daily close should be the stop loss to our trade recommendation

    USD INR remains a good short at close to 54 levels with 53.1020 as immediate target and a good chance to see 52.50 by 31 March. The stop on the trade is advised at a daily close of spot above 54.40

    Daily USD/INR Chart: Reuters

    108, Madhava, Bandra Family Court Lane, BKC, Bandra(E), Mumbai 51

    Page 5

    You might also like